Committee weighs expanding local governments' investment options beyond Georgia Fund 1
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Summary
HB 871 would allow local governments to invest in additional liquidity options — including money market funds and additional local government investment pools — a change supporters say would increase diversification; the state treasurer and banking groups warned it risks oversight gaps and could divert local bank deposits. Committee held a hearing and took testimony.
Chairman Anderson introduced House Bill 871, a committee substitute proposing limited additions to the set of investments local governments in Georgia may hold. The substitute would permit three additional liquidity vehicles: money market funds, additional local government investment pools (LGIPs) created through interlocal agreements, and certain repurchase/reinvestment vehicles, and it would create a management board for any trust established under the bill.
State Treasurer Steve McCoy told the committee that Georgia Fund 1 has been in place for decades as a state‑governed liquidity vehicle and that its governance and safeguards have protected public funds. McCoy warned that allowing multiple, potentially unregulated pools "could open the door" to risks and reduce capital and liquidity safeguards built into the statewide pool. "It's not broken," McCoy said of the existing program, and he cited past problems in other states where runs or poor management led to major losses.
Proponents, including Tom Tite of Public Trust Advisors, argued HB 871 would increase diversification and provide local governments more permitted options, not replace Georgia Fund 1. "All we're trying to do with this bill is create diversification and competition," Tite said, arguing many LGIPs are highly regulated and that local finance officers often seek broader choices.
Banking industry witnesses opposed the measure. Tripp Kofield (Georgia Bankers Association) and Lori Godfrey (Community Bankers Association) said new pools could siphon public deposits from local banks, undermining local lending and creating an uneven playing field because banks collateralize public deposits at levels above FDIC insurance while new pools might not be subject to the same rules.
Witnesses debated technical matters: whether added pools would be SEC‑regulated, how money would be custodied, and whether the bill's formula would conceal future liabilities. Committee members asked whether small county plans would be particularly vulnerable to adding older retirees or larger liabilities; ACCG and the Treasurer raised concerns about long‑run neutrality and premium escalation.
The committee took testimony and left HB 871 as a hearing only. No subcommittee vote was recorded at this meeting.