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Committee approves HB 1038 to let state treasurer buy down ESOP loan rates through linked deposits
Summary
The committee passed HB 1038 as amended to allow the state treasurer to use linked deposits (certificates of deposit) to reduce interest rates on loans used by employees to buy their employer through an employee stock ownership plan (ESOP); the amendment extends loan maturities to 10 years and removes a $1 million cap.
Representative Jake Teschka presented House Bill 1038 and said the measure creates a linked‑deposit financing tool intended to lower the cost of loans used in employee‑stock‑ownership plan transactions. Under the bill, a lender that makes a loan to an ESOP purchaser may receive a state treasurer deposit (a certificate of deposit placed with the lender's institution) at a below‑market rate; the reduced rate is passed through to the ESOP loan, lowering borrower costs.
Teschka said the amended bill aligns the CD rate with the loan rate, increases permissible loan maturities up to 10 years, and removes a $1,000,000 cap so otherwise‑qualified companies are not excluded by a hard ceiling. Abhi Reddy, representing the state treasurer's office, testified the treasurer's office supports standing up the program and estimated administrative needs would be far lower than a cited Colorado figure that recommended multiple hires and a large budget; Reddy said the office has prior linked‑deposit experience and bank partners.
Richard (Rick) Bandole of the Indiana Center for Employee Ownership and witnesses from the Indiana Chamber of Commerce described ESOP benefits, citing state figures: approximately 189 ESOP companies in Indiana, roughly 182,000 participant accounts, about $22 billion in ESOP assets and an average participant account balance near $120,000. Supporters argued the program would help keep companies and jobs local when owners retire and make selling to employees feasible where financing costs otherwise block transactions.
Banking groups, including the Indiana Bankers Association, endorsed the bill as a way to provide low‑cost financing and partner with the treasurer. Committee members asked about the fiscal note and whether the treasurer's office would need additional staff; Reddy said any incremental staffing needs would likely be modest and the office would work with Ways & Means on appropriate implementation language. Representative Andrade requested that guideline development include collaboration with existing state entities that oversee public funds; staff said the precise shall/may language would be worked on in subsequent drafting.
The committee adopted an amendment to change guideline language and then voted to pass the bill as amended; the roll call reported 10 yes votes, 0 no votes and 3 excused members.
Supporters said the program is intended as a financing mechanism with the lender bearing loan risk; the state’s role is to provide a lower‑yield deposit to reduce borrowing costs and encourage ESOP transitions.
