A bill that would have allowed cities, counties, school districts and community colleges to invest their funds in the State Treasury Money Management Trust will be sent for an interim study over the next two years after it failed to make it out of committee, the bill's sponsor said Wednesday.
Senate Bill 390 also would have turned the interest from the investments back to the state's Long Term Reserve Fund, potentially earning the state about $3.5 million annually and affecting the state's bond rating, said Sen. Kim Hammer, R-Benton, the bill's sponsor.
"Regardless of the amount, you have a steady flow of money into the Long Term Reserve Fund much like a stream that keeps a steady flow into a pond or like a steady flow of money into your retirement account," Hammer told legislators in Tuesday's Senate Committee on State Agencies and Governmental Affairs. But no one made a motion to send the bill to the full Senate.
Ed Garner, senior investment manager with the treasurer's office, said SB390 would product more funds for the state. "Hundreds of million of dollars" are going to out-of-state banks for investment, Garner said.
Changing state law -- which prohibits state trust funds from investing in the State Treasury Money Management Trust -- would open the door for entities such as municipalities and school districts to earn more money for their investments, Hammer said.
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"What we're about is leaving the control at the local level," Hammer said. "Why should we interfere with a school district or any of these other trust funds? Why would we not want to put another tool in their toolbox so that taxpayer dollars can be used to work harder and to work longer?"
Sen. Will Bond, D-Little Rock, questioned the requirement in the bill that those entities choosing not to invest their money in the State Treasury Money Management Trust must submit quarterly reports -- detailing where the funds are deposited, the balance at each financial institution, rate of return and interest earned -- to the Legislative Council or to the Joint Budget Committee if the General Assembly is in session.
Hammer replied that as a legislator, "In my mind, you come down here [to the Legislature] and ask us for more money, the first thing I'm going to say is, 'Well, where is your money now and how hard is it working? What should you do to get more before we have to raise taxes to get more?'"
Cathy Owen, chairman of the Arkansas Bankers Association and chairman of Eagle Bank & Trust, said the reporting requirement would burden the non-participating entities "with onerous accounting requirements designated to coerce participation and creating a potential harassment."
"Will the treasury be providing the same style of reporting about their trust management that they are asking and requiring of these agencies that are not utilizing the trust?" Owen asked.
SB390 also would take away local banking options for communities, Owen said.
"I also want to make sure all of you all understand how important local deposit relationships are to our local communities and the school districts," Owen said. "The people in our rural communities will tell you that having a local school and having a local bank are the most important things that allow their communities to thrive and even survive."
A Section on 03/14/2019