This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives.
STORAGE NAME: h0987c.SAT
DATE: 4/12/2023
HOUSE OF REPRESENTATIVES STAFF ANALYSIS
BILL #: HB 987 Public Deposits
SPONSOR(S): Botana
TIED BILLS: IDEN./SIM. BILLS: SB 1360
REFERENCE ACTION ANALYST STAFF DIRECTOR or
BUDGET/POLICY CHIEF
1) Insurance & Banking Subcommittee 12 Y, 5 N Fletcher Lloyd
2) State Administration & Technology
Appropriations Subcommittee
11 Y, 4 N Perez Topp
3) Commerce Committee
SUMMARY ANALYSIS
State and local governments are required, unless exempted by law, to deposit public funds in a qualified public
depository (QPD) pursuant to the Florida Security for Public Deposits Act (Act), which is administered by the
Chief Financial Officer (CFO) and the Department of Financial Services (DFS). Before a QPD accepts or
retains a public deposit, it must deposit collateral with an approved custodian in an amount commensurate with
the amount of public deposits held and the financial stability of the QPD. Currently, banks, savings banks, and
savings associations are the only types of financial institutions eligible to be a QPD or a custodian for another
QPD’s pledged collateral.
The bill makes the following amendments to the Act:
Allows state-chartered and federally-chartered credit unions to become QPDs and custodians for
another QPD’s pledged collateral;
Provides criteria a credit union must meet before the CFO can designate the credit union as a QPD;
Creates separate mutual responsibility and contingent liability provisions for credit union QPDs to
prevent banks from sharing liability with credit unions in the event of a credit union QPD’s default or
insolvency, and vice versa; and
Requires the CFO to segregate and separately account for any collateral proceeds, assessments, or
administrative penalties attributable to a credit union from those attributable to any banks, savings
bank, or savings association.
The bill has a significant fiscal impact. See Fiscal Impact on State Government section. Further, the bill does
not include an appropriation to fund DFS’s implementation and ongoing maintenance of credit unions as
QPDs. The bill has an indeterminate fiscal impact on local governments and private sector.
The bill provides an effective date of July 1, 2023.
STORAGE NAME: h0987c.SAT PAGE: 2
DATE: 4/12/2023
FULL ANALYSIS
I. SUBSTANTIVE ANALYSIS
A. EFFECT OF PROPOSED CHANGES:
Current Situation
Public Depositories
Pursuant to the Florida Security for Public Deposits Act (Act),
1
and unless exempted therein, state and
local governments are required to deposit public funds in a qualified public depository (QPD).
2
A QPD is
any bank, savings bank, or savings association that:
is organized and exists under the laws of the United States, the laws of this state, or any other state
or territory of the United States (i.e., state or federally chartered);
has its principal place of business in this state or has a branch office in this state which is
authorized under Florida or federal laws to receive deposits in this state;
has deposit insurance under the provision of the Federal Deposit Insurance Act, as amended
3
;
has procedures and practices for accurate identification, classification, reporting, and
collateralization of public deposits;
meets all the requirements of the Act; and
has been designated by the Chief Financial Officer (CFO) as a QPD.
4
Upon approval from the CFO, these banks, savings banks, and savings associations may accept “public
deposits” from state and local governments. The Act does not permit credit unions to become QPDs, due
to their absence from the definition of “qualified public depository.” As of May 20, 2022, there are 118
active QPDs in this state.
5
Before a QPD can accept or retain a public deposit, the QPD must deposit collateral with an approved
custodian in an amount commensurate with the amount of public deposits held and the financial stability of
the QPD.
6
The Act’s collateral requirements protect public deposits against loss in the event of certain
triggering events, most notably, a QPD’s insolvency or default.
7
Losses are satisfied first through the
standard maximum federal deposit insurance of $250,000,
8
and then through the CFO’s demand for
payment under letters of credit or the sale of collateral pledged or deposited by the defaulting QPD. Any
shortfall would then be covered by the CFO’s authority to impose assessments against the other solvent
QPDs, who must agree to share mutual responsibility and contingent liability as a condition of acting as a
QPD.
9
A “custodian” can be the CFO or any state or federally chartered bank, savings association, or trust
company approved by the CFO to hold collateral pledged by QPDs to secure public deposits.
10
Collateral
may be pledged, deposited or issued using the following collateral agreements as approved the CFO to
meet the requisite collateral:
regular custody arrangement for collateral pledged to the CFO, subject to certain requirements;
11
1
Ch. 280, F.S.
2
S. 280.03(1)(b), F.S.
3
12 U.S.C. ss. 1811 et seq.
4
S. 280.02(26), F.S.
5
Florida Department of Financial Services, List of Active QPDs, https://myfloridacfo.com/docs-sf/treasury-
libraries/treasury-documents/listofactiveqpds.pdf (last visited Mar. 9, 2023).
6
S. 280.04, F.S. See also ch. 69C-2, F.A.C.
7
S. 280.041(6), F.S.
8
12 U.S.C. § 1821(a)(1)(E).
9
S. 280.07, F.S.
10
Ss. 280.02(10) and 280.041(1)(a), F.S.
11
S. 280.041(1)(a), F.S. STORAGE NAME: h0987c.SAT PAGE: 3
DATE: 4/12/2023
Federal Reserve Bank custody arrangement for collateral pledged to the CFO, subject to certain
requirements;
12
CFO’s custody arrangement for collateral deposited in the CFO’s name, subject to certain
requirements;
13
Federal Home Loan Bank letter of credit arrangement for collateral issued with the CFO as
beneficiary, subject to certain requirements.
14
DFS oversees the Act’s reporting and collateral pledging requirements through its public deposits program
and Bureau of Collateral Management.
15
The CFO has authority to act against noncompliant QPDs, as well
as financial institutions that accept public deposits without a certificate of qualification from the CFO.
16
In
the event of loss to public depositors, the CFO has the authority to oversee the payment of losses.
17
Regulation of Credit Unions
Like banks, savings banks, and savings associations, credit union accept deposits and make loans, and
can be state-chartered or federally-chartered:
State-chartered credit unions may be formed under the Florida Credit Union Act (FCUA), which
became law in 1980.
18
The FCUA provides that “[a] credit union is a cooperative, nonprofit
association, organized . . . for the purposes of encouraging thrift among its members, creating
sources of credit at fair and reasonable rates of interest, and providing an opportunity for its
members to use and control their resources on a democratic basis in order to improve their
economic and social condition.”
19
State-chartered credit unions have both a state regulator, the
Office of Financial Regulation, and a federal regulator, the National Credit Union Association
(NCUA).
Federally-chartered credit unions are chartered under the Federal Credit Union Act of 1934
20
and
are regulated by the NCUA.
In addition to regulating both state-chartered and federally-chartered credit unions, the NCUA also
operates and manages the National Credit Union Share Insurance Fund (NCUSIF), which insures share
(deposit) accounts for members of all federally-chartered credit unions and most state-chartered credit
unions.
21
All state-chartered credit unions operating in Florida must carry NCUSIF insurance.
22
The
standard maximum share insurance amount is $250,000.
23
Effect of the Bill
The bill makes state-chartered and federally-chartered credit unions eligible to become QPDs and
custodian for another QPD’s pledged collateral.
The bill creates s. 280.042, F.S., to provide criteria that a credit union must meet before the CFO can
designate a credit union as a QPD. These provisions are designed to protect public deposits. The credit
union is required to submit its agreement of contingent liability and its collateral agreement to the CFO and
meet the following requirements:
12
S. 280.041(1)(b), F.S.
13
S. 280.041(1)(c), F.S.
14
S. 280.041(1)(d), F.S.
15
Ch. 80-258, Laws of Fla.; codified at ch. 657, F.S.
16
S. 280.05, F.S.
17
Id. at (10).
18
Ch. 80-258, Laws of Fla.; codified at ch. 657, F.S.
19
S. 657.003, F.S.
20
Public Law 73-467, codified at 12 U.S.C. § 1751 et seq.
21
Federally-chartered credit unions must be insured through NCUSIF, and state-chartered credit unions may be insured
through NCUSIF, though some state-chartered credit unions may be insured by private insurance or guaranty
corporations. See NCUA, How Your Accounts Are Federally Insured, available at
https://www.ncua.gov/files/publications/guides-manuals/NCUAHowYourAcctInsured.pdf (last visited Mar. 10, 2023).
22
Ss. 657.005(7), 657.008(5)(a)2., and 657.033(9), F.S.
23
NCUA, supra note 21. STORAGE NAME: h0987c.SAT PAGE: 4
DATE: 4/12/2023
The credit union must submit a signed statement from a public depositor (i.e., a state or local
government) indicating that, if the credit union is designated as a QPD, the public depositor intends
to deposit public funds with the credit union; and
There are at least four other credit unions that are designated as QPDs or have applied to be
designated as QPDs and have submitted an agreement of contingent liability, a collateral
agreement, and a signed statement from a public depositor of intent to deposit public funds with the
credit union.
The CFO must withdraw from a collateral agreement previously entered into with a credit union if, during
any 90 calendar days, the combined total of the number of credit unions designated as QPDs and the
number of eligible credit unions applying to be designated as QPDs is less than five. As a result of the
CFO’s withdrawal, the credit union loses its designation as a QPD, and must within 10 days after the
CFO’s notification of such withdrawal, return all public deposits that the credit union holds to the public
depositor who deposited the funds. Additionally, the CFO may limit the amount of public deposits any one
credit union may hold in order to make sure that no single credit union holds an amount of public deposits
that might adversely affect the integrity of the public deposits program.
In order to prevent credit unions from sharing contingent liability with banks, and vice versa, the bill creates
separate mutual responsibility and contingent liability provisions for credit unions. Any credit union that is
designated as a QPD and that is not insolvent must guarantee public depositors against loss caused by the
default or insolvency of other credit unions that are designated as QPDs. In the event of a default or
insolvency of a credit union QPD, any loss to public depositors would be satisfied through any applicable
share insurance and then through demanding payment under letters of credit or the sale of collateral
pledged or deposited by the defaulting depository. The CFO may assess QPDs, subject to the segregation
of contingent liability provided in s. 280.07, F.S., for the total loss if the demand for payment or sale of
collateral cannot be accomplished within 7 business days.
The bill requires the CFO to segregate and separately account for any collateral proceeds, assessments,
or administrative penalties attributable to a credit union from those attributable to any bank, savings bank,
or savings association. Subject to this segregation of funds requirement, the CFO is authorized to pay any
losses to public depositors from the Public Deposits Trust Fund.
Lastly, the bill makes conforming changes to allow credit unions to participate in the public deposit program
and to subject credit union QPDs to the regulatory oversight of the CFO.
B. SECTION DIRECTORY:
Section 1. Amends s. 17.68, F.S., relating to Financial Literacy Program for Individuals with
Developmental Disabilities.
Section 2. Amends s. 280.02, F.S., relating to definitions.
Section 3. Amends s. 280.03, F.S., relating to public deposits to be secured; prohibitions;
exemptions.
Section 4. Creates s. 280.042, F.S., relating to credit union designations as qualified public
depositories; withdrawal by the Chief Financial Officer from collateral agreements;
limits on public deposits.
Section 5. Amends s. 280.05, F.S., relating to powers and duties of the Chief Financial Officer.
Section 6. Amends s. 280.052, F.S., relating to order of suspension or disqualification;
procedure.
Section 7. Amends s. 280.053, F.S., relating to period of suspension or disqualification;
obligations during period; reinstatement.
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DATE: 4/12/2023
Section 8. Amends s. 280.055, F.S., relating to cease and desist order; corrective order;
administrative penalty.
Section 9. Amends s. 280.07, F.S., relating to mutual responsibility and contingent liability.
Section 10. Amends s. 280.08, F.S., relating to procedure for payment of losses.
Section 11. Amends s. 280.085, F.S., relating to notice to claimants.
Section 12. Amends s. 280.09, F.S., relating to Public Deposits Trust Fund.
Section 13. Amends s. 280.10, F.S., relating to effect of merger, acquisition, or consolidation;
change of name or address.
Section 14. Amends s. 280.13, F.S., relating to eligible collateral.
Section 15. Amends s. 280.17, F.S., relating to requirements for public depositors; notice to public
depositors and governmental units; loss of protection.
Sections 16-33. Reenacts various sections of statutes to incorporate amendments to ch. 280, F.S.
Section 34. Provides an effective date of July 1, 2023.
II. FISCAL ANALYSIS & ECONOMIC IMPACT STATEMENT
A. FISCAL IMPACT ON STATE GOVERNMENT:
1. Revenues:
None.
2. Expenditures:
According to DFS, allowing credit unions to be QPDs will require $269,828 for workload and
programming costs:
24
$188,650 in non-recurring expenditures for DFS’s Office of Information Technology (OIT) to
make:
o Significant programming changes to the Collateral Administration Program (CAP), a
computer application used to administer Florida’s public deposits program.
o Modifications to the Florida Planning Accounting, and Ledger Management (PALM)
system to accommodate the required segregated accounting of collateral proceeds,
assessments, or administrative penalties attributable to credit unions.
$5,728 in recurring expenditures for independent ranking service data on credit unions.
$75,450 in recurring expenditures for one additional Financial Examiner/Analyst II FTE, class
code 1564, pay grade 023.
B. FISCAL IMPACT ON LOCAL GOVERNMENTS:
1. Revenues:
The bill’s impact on local government revenues is indeterminate. However, a 2014 study by the
Office of Program Policy Analysis and Government Accountability explained the potential positive
impact to local government public depositors:
24
Email from Austin Stowers, Director of Legislative Affairs, Florida Department of Financial Services, RE: HB 987 –
Public Deposits (Mar. 23, 2023). STORAGE NAME: h0987c.SAT PAGE: 6
DATE: 4/12/2023
Federal and state tax differences between credit unions and banks may allow credit unions a
competitive advantage when bidding for local government public deposits. Credit unions may
also benefit from lower overhead costs since these institutions may use office space belonging
to a sponsoring organization. The combined effect of lower taxes and overhead may allow credit
unions to pay higher interest rates for public deposits and to provide other business services to
local governments at a lower cost than banks.
25
2. Expenditures:
None.
C. DIRECT ECONOMIC IMPACT ON PRIVATE SECTOR:
Allowing credit unions to accept public deposits may generate additional income for the credit unions
and provide more options for the public depositors. It is unclear what impact the bill will have on existing
QPDs (banks, savings banks, or savings associations). The bill’s impact on the private sector is
indeterminate due to the number of variables involved in determining such impact.
D. FISCAL COMMENTS:
None.
III. COMMENTS
A. CONSTITUTIONAL ISSUES:
1. Applicability of Municipality/County Mandates Provision:
Not Applicable. This bill does not appear to require counties or municipalities to spend funds or take
action requiring the expenditures of funds; reduce the authority that counties or municipalities have
to raise revenues in the aggregate; or reduce the percentage of state tax shared with counties or
municipalities.
2. Other:
None.
B. RULE-MAKING AUTHORITY:
The CFO has rulemaking authority to administer ch. 280, F.S. In order to add credit unions as QPDs,
rulemaking is necessary to amend ch. 69C-2, F.A.C., and several forms incorporated by reference in
the rules.
C. DRAFTING ISSUES OR OTHER COMMENTS:
None.
IV. AMENDMENTS/COMMITTEE SUBSTITUTE CHANGES
25
Office of Program Policy Analysis and Government Accountability, Issues Related to Credit Unions Operating as
Qualified Public Depositories, Nov. 13, 2014, at 5.