Committee hears bill to let local units seek higher CD returns beyond local banks; banks and credit unions raise concerns

House Bill 1523, which would relax territorial restrictions on where certain local units of government may place certificate-of-deposit (CD) investments, drew mixed testimony at the House Financial Institutions Committee. Proponents said the change would allow county treasurers, school corporations and libraries to seek higher returns and thereby increase funds available for local services; bankers and credit unions urged preserving the preference for local depositories to keep deposits circulating in the community.

Representative Pierce presented the bill and described the current statutory regime: units such as counties, libraries and school corporations are generally required to deposit public funds with financial institutions that maintain a brick-and-mortar presence within the unit's geographic boundary; if fewer than three local options exist, the unit may expand to statewide options. Pierce said HB 1523 would remove territorial boundaries and also include a remedial provision to protect investments made between 2018 and the present from audit exceptions tied to a 2018 code change.

Supporters said the law is out of date in markets with bank consolidation. Brian Burdick, representing the Indiana County Treasurers Association, said treasurers have a fiduciary duty to taxpayers to seek competitive returns: "If somebody will offer us 5% and I can only get 2% at home, seems like we ought to get the extra 3% for the taxpayers," he said. School finance groups and the Association of Indiana Counties similarly supported the bill, describing situations where limited local bidding left units with only one viable local depository and lower yields.

Opponents argued the territorial preference supports local lending and community reinvestment. Chris Beaumont of the Indiana Credit Union League urged keeping the preference intact, saying local depository deposits are frequently reinvested as loans in the same community. The Indiana Bankers Association similarly opposed the removal of territorial investment preference and said the 2018 remedial carve-out for previously made investments was acceptable but not a substitute for keeping a local preference.

The treasurer's office testified neutral and noted the Indiana Board for Depositories is a quasi-governmental insurer that protects public deposits and educates local officials about compliance and the insurance fund. Witnesses underscored that while the bill could increase portfolio yield for public entities, it also shifts where deposits are held and how they may be used in local lending markets.

Representative Pierce said he intends to pursue technical adjustments and to continue discussions with stakeholders before a committee vote. No vote occurred at the hearing.