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Committee weighs allowing counties, schools and libraries to seek higher CD rates beyond local banks; stakeholders split
Summary
House Bill 1523 would remove a territorial restriction that generally requires counties, most school corporations and library districts to invest public deposits at banks with a brick-and-mortar presence inside their jurisdiction and would add a retroactive safe harbor for investments made since 2018.
House Bill 1523, heard Thursday by the House Financial Institutions Committee, would remove a territorial restriction that generally requires counties, most school corporations and library districts to invest public deposit certificates (CDs) at financial institutions with a brick-and-mortar presence inside the governmental unit’s boundaries. The bill also contains a retroactive safe harbor provision to protect investments made since 2018.
Representative Pierce, the bill sponsor, said the provision is intended to give local fiscal officers broader access to competitive CD rates statewide in markets where consolidation has left few local options. "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," said Brian Burdick, counsel for the Indiana County Treasurers Association, who testified in support.
Supporters' arguments: County treasurers, school business officials and library representatives said the territorial limits can force units into lower-yield local bids when better statewide rates are available, reducing investment income available to offset property tax burdens or fund services. Scott Bowling of the Indiana Association of School Business Officials told the panel some school districts have reported multi-year lost interest in the hundreds of thousands of dollars due to less-competitive local CD rates. Multiple local-government witnesses urged parity with cities and towns, which are already exempt from the restriction.
Opposition and local-investment rationale: The Indiana Credit Union League and the Indiana Bankers Association urged caution. Chris Beaumont of the Credit Union League said the territorial preference keeps deposits—and the loan activity they support—rooted in the local community and helps credit unions and banks fund local lending. Dax Denton for the Indiana Bankers Association said local deposits are a key source of funds for community lending and economic development and warned that eroding territorial preferences could reduce local lending capacity.
Treasurer's office and technical matters: Mike Neil, special assistant to the State Treasurer and executive director of the Indiana Board for Depositories (the quasi-government insurer of public deposits), said the treasurer's office is neutral and provides education and oversight; the Board for Depositories insures public deposits beyond FDIC coverage in its statutory role. A second part of the bill extends a safe-harbor to investments made since a 2018 clarifying change to statute so units that acted under that reading would not incur audit exceptions.
Committee disposition: Representative Pierce said he expects to work with stakeholders over the coming week to find a compromise that preserves local investing where appropriate while allowing broader competition in markets with few local options. The committee did not record a final vote during the hearing and the sponsor said he would return with amendments.
