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Ada County treasurer warns likely Fed rate cut will reduce investment income by millions
Summary
Ada County Treasurer reported the county is on track to meet FY25 interest estimates but forecasted a drop in investment income for FY26 to about $9.3 million if the Federal Reserve lowers rates as expected, reducing county portfolio yields by roughly $3 million compared with current year receipts.
BOISE, Idaho — Ada County Treasurer (Pittman) told the Board of Commissioners on Sept. 9 that while the county is close to meeting this fiscal year’s interest-income estimate, an anticipated Federal Reserve cut could reduce next year’s investment income by several million dollars.
The treasurer said the county has recorded roughly $11.3 million in investment interest 11 months into the fiscal year and expects to reach about $12 million for FY25. For FY26, the treasurer and staff independently forecast approximately $9.3 million in interest income, an estimated drop of roughly $3 million driven primarily by an expected 25-basis-point cut at the Fed’s next meeting.
Why it matters: Interest earnings fund operations and reduce pressure on property taxes and other revenue sources. A multi-million-dollar drop in investment revenue can affect budget planning and discretionary spending for county departments.
What the treasurer told commissioners
- Portfolio performance: The treasurer reported no maturities or new purchases in the report month and noted the portfolio is “right on target” for the current fiscal year. The county’s money-market holdings — chiefly a Vanguard money-market fund — yielded about 4.2% in the month cited; that rate was as high as about 5.22% in August 2024 ahead of Fed cuts.
- Fed sensitivity: The treasurer said market consensus strongly favors a rate reduction at the Fed’s next meeting and that such a move would reduce short-term yields and overall portfolio income. The county’s FY26 forecast of $9.3 million assumes lower short-term yields and reflects independent estimates prepared by the treasurer and staff.
- Management steps: County staff said they are monitoring money-market balances (about $11–15 million during the month) and expect to redeploy some funds into fixed-income instruments to lock in yields before rates fall further. The treasurer noted that falling yields can raise the market value of existing bonds (increasing present value), which provides optionality if the county needs to access cash by selling securities.
Commissioner context and questions
Commissioners asked about monthly variation in interest receipts, and the treasurer explained that differences reflect timing of bond coupon payments (monthly, quarterly, semiannual) and large tax-collection inflows that are temporarily redeployed into higher-yield accounts. The treasurer observed that certain months show lower receipts simply because no portfolio instruments had a scheduled payout in those months.
Ending: The treasurer advised the board that staff will continue to look for opportunities to redeploy short-term funds into longer-dated instruments to stabilize yield as the Fed’s policy path becomes clearer.
