Kansas legislators close hearing on HB 2152 after deal on municipal collateral pool

The House committee recessed and then closed its multiweek hearing on HB 2152 on Tuesday after proponents and opponents told lawmakers they had reached a working compromise on changes to law governing municipal public-funds deposits.

Committee members were told negotiators had agreed to drop several contested provisions, add new reporting and enforcement tied to the state treasurer’s office, and adopt operational limits on how pooled collateral would be handled.

The compromise, as described by Kansas Bankers Association representatives and municipal officials, removes proposed changes to bond-proceeds language and withdraws a separate change to the bank statutory investment rate that proponents said had produced the largest fiscal concern. The parties also agreed to require governmental units to give financial institutions two business days to respond to bids for public deposits; adopt a reporting mechanism to the treasurer's office for alleged statutory violations; and add collateral-pool administration rules that clarify liquidation authority and conflict-of-interest limits.

"Over the last couple weeks, there's been a significant amount of work that you all have asked us to do on your behalf ... and over the last two weeks ... I believe we are there," said Alex Sorrell, senior vice president for government relations at the Kansas Bankers Association, summarizing the bankers' position on the negotiations.

Kelly Manswal of the Kansas Bankers Association outlined the specific changes negotiators agreed to, saying, "We agreed to remove the language on changing bond proceeds. We agree ... that issue wasn't ready ... We agreed to remove the change on the bank statutory investment rate." Manswal added the two-business-day response window was a concession in negotiations, down from an initial request for three business days.

Amanda Stanley, who identified herself as representing the city of Topeka, said municipal officials across the state also supported adding an education-first response for initial statutory violations and explicit rulemaking authority for the treasurer to oversee collateral sufficiency. "A lot of times these issues are education pieces ... maybe step one should be let's educate on it rather than jumping to civil penalties," Stanley said.

Under the described agreement, an institution that believes a governmental unit violated the law would report the matter to the treasurer's office. The treasurer's office would investigate; a first confirmed violation would result in an educational course on public funds law for the governmental unit, and subsequent violations could carry a civil penalty, proponents said. Negotiators also inserted language intended to require the pool administrator not to bid on public funds it administers and to permit the administrator to liquidate securities in the event of a default or failure.

State Treasurer Johnson, who participated remotely, said both sides had communicated with the treasurer's office and that the office believes the single-bank collateral-pool approach described in the agreement will be simpler to implement than a multi-bank approach. "Both sides have been good at communicating with me ... As we go forward, we'll figure out those other details," Johnson said, and he agreed to produce an updated fiscal note after the amendment is finalized.

Mark Schifferdecker, a banker with experience in Colorado and other states, told the committee the original intent had been a single-bank collateral pool, in which each bank aggregates collateral for its own deposits rather than commingling collateral across multiple banks. "It's a single bank, collateral pool ... No collateral would be commingled," he said.

Committee Chair (name not specified in the transcript) said the bill would be worked with a balloon amendment at the committee's next meeting and that staff would post the amendment to the shared drive once both sides approved its language. The chair also said it was the committee's intention to take up HB 2152 on Monday with the amendment and that the treasurer would be asked for an updated fiscal note in light of the single-pool approach.

The committee closed the hearing without taking a final vote on HB 2152. Members approved unrelated committee meeting minutes by voice vote during the same session; a motion to approve minutes was moved by the vice chair and seconded by Representative Roser and was recorded as passing.

The chair said the committee plans to hear two noncontroversial Senate bills the following Wednesday and will hear the state insurance commissioner at a later date.

What happened in the hearing is primarily a negotiation update: parties said they had agreed on the principal operational text and would finalize a balloon amendment to be filed before Monday's meeting. No statutory changes are final until the legislature acts on the bill and any amendment presented to the committee and the full House.

Votes at a glance: the only formal recorded committee action during the session was approval of the committee minutes (motion moved by the vice chair; seconded by Representative Roser; outcome: approved by voice vote).