Brief (1)
HB 2086 concerns local government deposits and investments of public funds. The current law provides that municipalities shall deposit active and idle funds in state-chartered or federally-chartered banks or savings and loan associations, with a branch or main office in the county or counties in which all or part of the municipal corporation is located. HB 2086 permits deposits in banks or savings and loan associations chartered in other states.
The House Committee amended the bill to require that any bank or financial institution receiving public moneys must have a Community Reinvestment Act rating of satisfactory or above; that the bank or financial institution have a main or branch office in the state; and that idle funds investments of local governments must be re-offered once they mature - rollover investment of such moneys is not permitted.
Background
HB 2086 was supported by the League of Kansas Municipalities, the Kansas Association of Counties, and the Kansas Association of School Boards. Others who supported the bill included: Bank of America, Commerce Bank, Firstar Bank, the Unified Government of Wyandotte County/Kansas City Kansas, Shawnee County, Sedgwick County, and the cities of Salina, Kingman, Wichita, Lenexa, Olathe, and Overland Park.
Proponents argued that HB 2086, which gives municipalities the opportunity to choose deposit and investment services offered by non-state chartered financial institutions, will reintroduce competition into the state banking market and allow local units to maximize the public's tax dollar through higher interest rate and investment returns. Even though municipalities would no longer be required to deposit moneys into banks with branches or main offices in the county or counties in which the municipality is located, the municipality has the option of continuing to use state-chartered banks as the main depository.
Opponents of HB 2086 included the Kansas Bankers Association, Community Bankers Association of Kansas, the Stockgrowers State Bank in Maple Hill, Kansas, and Valley State Bank in Roeland Park, Kansas.
Arguments against HB 2086 were that tax moneys and investments should be used to benefit the people in the taxing unit and the state, and competition between in-state banks is increasing. Many Kansas banks depend on local public funds as a stable base of deposits in order to meet the needs of their communities, and if those funds are not present, funding is not available to lend to farms, businesses, or individual customers.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext.cgi