Authorizing governmental units to utilize a public moneys pooled method of securities to secure the deposit of public moneys in excess of the amount insured or guaranteed by the federal deposit insurance corporation and requiring the state treasurer to establish procedures therefor and banks, savings and loan associations and savings banks to make certain reports upon the request of a governmental unit.
House Bill 2840 seeks to enhance the security of public moneys deposited by governmental units in Kansas by permitting the use of a public moneys pooled method of securities. This method allows governmental entities to secure deposits exceeding the amounts insured by federal deposit insurance through the establishment of a pool of eligible securities. The bill mandates that the state treasurer establish precise procedures for implementing this pooled method, ensuring that the public funds are safeguarded adequately.
One significant change proposed in HB2840 is the introduction of a pooled securities method which would provide an alternative to traditional deposit security measures. Currently, governmental units must obtain security through corporate surety bonds or specific types of deposits. By allowing for pooled securities, banks and savings institutions can utilize a system that may offer greater flexibility and security when handling large sums of public money, which is especially useful in times of financial instability.
The bill delineates the roles of the state treasurer and financial institutions in administering this pooled method. It requires designated banks and savings associations to report their holdings of public funds that exceed federally insured amounts. This will enhance transparency and oversight, ensuring that public entities are aware of their financial exposure in case of bank defaults. Moreover, it aims to institute safeguards that require the aggregate market value of the securities in the pool to be at least 102% of the deposits that surpass federal insurance limits.
Controversy may arise surrounding the implications of relying on pooled securities. Critics may argue that this could shift financial burdens or liabilities to the state in cases of default or that it might lead to a complex web of financial liabilities that could be hard to oversee effectively. Supporters, however, contend that this shift represents a proactive approach to managing public funds in a manner that could enhance fiscal responsibility and security. Moreover, the bill includes provisions for the liquidation process in the event a bank fails, detailing how public moneys would be distributed among the affected governmental units, thereby addressing concerns about the financial protection of public funds.