Local government: financial affairs: surplus funds.
The legislative amendments introduced by AB 945 represent a significant shift in the investment parameters of local agencies. The bill raises the allowable percentage of surplus funds that local agencies can invest from 30% to 50% from January 1, 2020, until January 1, 2026, for those that do not pool funds with entities having a different governing body. Post-2026, the cap will return to 30%. This flexibility may enhance the local government's capacity to generate revenue through varied investments while maintaining compliance with state regulations.
Assembly Bill No. 945, authored by Assemblymember McCarty, amends and enhances the investment capabilities of local government agencies regarding their surplus funds. The bill allows local agencies, starting January 1, 2020, to invest their surplus funds not only in certificates of deposit but also in other types of deposits at specified financial institutions. This change is aimed at promoting greater flexibility in local investments, which in turn can benefit the financial management of municipal budgets across the state.
The sentiment surrounding AB 945 is generally positive among legislators who support increased autonomy for local governments in managing their financial resources. Proponents argue that the bill fosters better local financial management and promotes competitive investment strategies, thus encouraging economic growth at the municipal level. However, discussions also included concerns regarding the potential risks associated with broader investment capabilities, including the safeguarding of public funds.
While there is overall support for the bill, some policymakers voiced concerns regarding the implications of allowing local agencies to invest in alternative financial instruments. Skeptics worry about the accountability and transparency of the local agencies in managing these investments, potentially leading to mismanagement or losses of public funds. The balancing act between granting local governments greater financial flexibility and ensuring solid oversight mechanisms remains a point of contention in the debates over AB 945.