Public Bank: Time For Philadelphia To Invest In Philadelphia
Above Photo: By C. Smyth for Visit Philadelphia
In order to truly be the City of Brotherly Love and Sisterly Affection, we must do more to directly invest in our poorest brothers and sisters.
We must close the skills gap that keeps Philadelphians from finding jobs that will provide them with a living wage, and we must do it in a way that won’t put them in debt. When you help someone find a job that pays well, they not only become less reliant on the social safety net, they begin to positively contribute the local economy.
From what magic bucket of money are we supposed to use to pay for all of this? The Philadelphia Municipal Pension Fund, which covers the pension costs of city workers.
This $4 billion fund is entirely made up tax-payer dollars. It’s invested globally in all sorts of funds, stocks, bonds and securities to generate revenue for the city to cover its obligations, and it doesn’t always do that well: In 2016 fund had a net loss of $149 million (though 2017’s returns surpassed expectations). It’s one of the countries worst funded municipal funds.
One of Philly’s biggest budget expenses is it’s annual contribution to this fund, which comes from tax revenues. A bulk of Philly’s tax revenue comes from wage taxes. If more people worked, and had higher wages for the jobs they did work, the city would have a higher tax revenues as well as increased savings on social safety net services, which would better position the city to cover its pension obligations.
If the pension fund committed just 1 percent or $40 million of its worth into an economic development fund that focused on entrepreneurship, employment and workforce development and spent it down like a foundation at 5 percent per year, that would produce $2 million which could be leveraged to help thousands of Philadelphians get the skills they need earn a living wage — which would in tandem increase tax revenues and relieve pressure on the Philly’s services.
This would generate new tax revenue and free up existing tax revenue to put toward the pension fund, essentially moving individuals and families from being tax-base negative to tax-base positive. This tax revenue swing scaled up would give the city more money to pay down its pension obligations and would likely provide a better ROI than the volatile stock market.
Another way to keep our money local would be to finally launch a public bank here in Philly — that is, a bank “operated in the public interest, through institutions owned by the people through their representative governments.”
Currently Philadelphia uses large commercial banks to handle its nearly-$2 billion in payroll, as well as $621.3 million in deposits and $1.8 billion in various investments. By putting this money in a public bank specifically chartered to only loan money to businesses, nonprofits and individuals in Philadelphia, we would be better suited to drive economic growth in the city.
The Public Banking Institute describes the success of the Public Bank of North Dakota:
“The Bank of North Dakota makes low interest loans to students, existing small businesses and start-ups. As a public bank, the Bank of North Dakota pays its dividend to its only shareholder — the people of the state. In the past decade, despite its small population and modest volume of economic activity, the Bank of North Dakota has returned over $300 million to the state’s general fund, helping to ensure regular annual surpluses and eliminate the need for drastic tax increases or spending cuts for vital public services.”
It’s time we grab hold of our own bootstraps.
I believe that if city could better use even a sliver of the billions it controls to better invest in education, workforce development and entrepreneurship in ways that improve the lives of Philadelphians while also driving up new tax revenue and freeing up existing tax revenue, these funds would be able to lift many of our citizens out of poverty.