HCS HB 468 -- DUTIES OF THE STATE TREASURER AND THE LINKED
DEPOSIT PROGRAM

SPONSOR:  Cunningham, 145 (Richard)

COMMITTEE ACTION:  Voted "do pass" by the Committee on Financial
Institutions by a vote of 17 to 0.

This substitute changes the laws regarding the duties of the
State Treasurer and the Linked Deposit Program.  In its main
provisions, the substitute:

(1)  Defines the terms "market rate," "unencumbered," and "well
capitalized";

(2)  Specifies that any written contract between the State
Treasurer and a depositary of state funds is limited to five
years or less.  Due consideration will be given when investing
state funds as to the benefits to the economy and welfare of the
people of Missouri and to the aggregate return in earnings and
taxes on these deposits;

(3)  Allows the State Treasurer to include as acceptable
securities for state deposits mortgage securities, including
qualified individual loans secured by deeds of trust on
residential, commercial, or farm real estate.  These loans
underwritten and offered by financial institutions will conform
with standards established by the State Treasurer and the Federal
Home Loan Bank of Des Moines, Iowa.  All financial institutions
pledging securities will report monthly to the State Treasurer
ensuring that they meet collateral requirements.  Acceptable
securities also include any investment in which the State
Treasurer may invest.  These two additions are not authorized for
political subdivisions;

(4)  Allows the State Treasurer to enter into agreements with
private entities to provide services relating to his or her
duties;

(5)  Allows state funds to be deposited in any banking
institution where the State Treasurer, the Governor, or the State
Auditor owns stock or is an officer or employee of the bank if
the state official discloses the ownership of the stock or
employment;

(6)  Changes the definition of "eligible agribusiness" and
"eligible beginning farmer";

(7)  Adds the definition of an "eligible facility borrower" which
is a borrower qualified for a reduced rate linked deposit loan;

(8)  Raises from $360 million to $720 million the amount that the
State Treasurer may invest of aggregate deposits for linked
deposits to eligible farming operations, agribusinesses,
beginning farmers, and livestock operations; doubles the current
individual amounts which can be invested in linked deposits; and
removes language that limits the State Treasurer's ability to
commingle allocations among the types of linked deposits;

(9)  Allows the State Treasurer to determine the dollar amount of
deposits made to certain eligible agribusinesses.  Beginning
August 28, 2005, lending institutions will give consideration to
eligible borrowers who have not previously received linked
deposits; however, nothing prohibits a lending institution from
making a linked deposit loan to any entity that has previously
received a linked deposit;

(10)  Authorizes the State Treasurer to place linked deposits
with a lending institution at certain below-market rates, but not
below 1%.  All linked deposit rates are determined by the State
Treasurer.  The deposit agreement will specify that the original
deposit plus renewals will not exceed five years.  The lending
institution must repay the State Treasurer any linked deposit
principal received from the borrower in the previous year.  If
the linked deposit is tied to a revolving line of credit
agreement, it will be excluded from the repayment provisions of
this section;

(11)  Prohibits the State Treasurer from investing in any new
linked deposit with any new eligible facility borrower after
January 1, 2020;

(12)  Creates two new categories of eligible facility borrowers
that can participate in the linked deposit program.  The new
categories are a development facility which produces goods
derived from an agricultural commodity or product and a renewable
fuel production facility which produces an energy source derived
from a renewable domestically grown organic compound capable of
powering machinery; and

(13)  Removes Section 30.247, RSMo, which requires any bank
account with an average daily balance of $10,000 or more to be
obtained through an open and competitive bid process.

FISCAL NOTE:  Estimated Effect on General Revenue Fund of an
Income of $0 in FY 2006, a Cost of $72,798 to $92,798 in FY 2007,
and a Cost of $73,654 to $93,654 in FY 2008.  No impact on Other
State Funds in FY 2006, FY 2007, and FY 2008.

PROPONENTS:  Supporters say that the bill will help economic
development in the state by creating jobs and increasing revenues
and income.  More individuals will be eligible for these loans.
Because of low interest rates in the past few years, banks have
not been willing to provide these low-cost loans.  The bill will
help fix that problem.  Both rural and urban economies of the
state will benefit, especially small businesses.  This program
will not affect state funds because the loans are backed with at
least 100% collateral, and the banks underwrite these loans as
they would any type of loan.

Testifying for the bill were Representatives Richard, Hobbs, and
Myers; State Treasurer; Tony Robertson, First National Bank of
Audrain County; Missouri Bankers Association; Farm Credit
Services of Missouri; Missouri Corn Growers Association; Missouri
Credit Union Association; and Department of Agriculture.

OPPONENTS:  There was no opposition voiced to the committee.

Marc Webb, Legislative Analyst

Missouri House of Representatives
93rd General Assembly, 1st Regular Session
Last Updated August 25, 2005 at 1:19 pm