About 55 industrial banks, commonly known as thrift and loans, cannot accept deposits from California government agencies because they are not specifically mentioned in the state Constitution along with commercial banks, savings and loans and credit unions.
Proposition 88 would add the no-frill thrift banks to the list, and we urge a Yes vote for a simple reason: Public funds could earn slightly more interest. Agencies would not get rich, but, as one thrift executive put it, the difference in rates might let a school district hire one more teacher.
Banks do not kick down doors to get at the state government’s business because the state imposes such strict conditions on its deposits. Only four of California’s 440 commercial banks have state accounts, which probably explains why Proposition 88 has no opposition.
The initiative also has some educational value. While marking the ballot on Proposition 88, voters might also give some thought to asking Sacramento to take another crack at simplifying a system that requires an amendment to the Constitution to achieve a simple thing like letting government agencies take advantage of higher interest rates.
This is the second time in two years that Californians have been asked to change the Constitution so that government can shop around for the best deal on deposits of surplus funds. In 1986 they had to add credit unions to the list of approved financial institutions.
But simplification of the system is a task for the future. For this election, we simply urge a Yes vote on Proposition 88 to correct the oversight involving the thrifts and to let public agencies earn a little extra for tight budgets.