Kansas House Bill 2152: A Local Investment Revolution

BY: MORGAN CHILSON – Kansas Reflector

Investing Local: More Than Just A Catchphrase

In the bustling heart of Topeka, Kansas, change is brewing. Residents can soon expect more tax dollars fueling local communities, thanks to some intriguing new rules taking effect at the Kansas state’s investment agency. It’s akin to taking the "Shop Local" idea and transplanting it into the often distant realm of finance. At least, that’s how Alex Orel, spokesperson for the Kansas Bankers Association, portrays it. They were among the lead proponents of the recently passed House Bill 2152.

The Mechanics of Keeping It Local

So, how exactly does this all work? Well, the Pooled Money Investment Board (PMIB) is the entity managing the state’s general fund dollars alongside those tucked with the treasurer’s office. One beacon of their strategy is the Kansas Bank CD Program. This allows Kansas banks to invest in certificates of deposit and use those funds to energize local lending. Banks can determine if they want in based on an interest rate set weekly, explains Mark Schifferdecker, chairman at GNBank.

A Return to Roots with HB 2152

Previously, Kansas had to grab for the highest returns on CDs, often soaring above U.S. treasuries, making local participation less enticing. The result? The Kansas Bank CD Program began slowly vanishing from PMIB’s investment agenda. By March 31, it held a mere 0.48% of PMIB’s hefty $8.5 billion portfolio. Back in the good ol’ days, this figure flirted with 10-15% of the portfolio. But, HB 2152 has flipped the script.

The new regulations kicking in January 1, 2026, will empower PMIB to offer a rate up to 2% lower, luring in more banks and funneling tax dollars home. More local banks participating means more loans available for folks around the corner.

A Win For Counties

Brent Shelton, Sedgwick County’s deputy CFO, says the bill’s implications for counties are substantial. The legislation simplifies how banks hold county money deposits and increases access to capital through the CD program. It’s about giving local banks the first shot at keeping the money local while preserving the ability to get market-fair rates, thus boosting local economic development.

“A great compromise, everybody won,” Shelton stated. Despite initial resistance involving nearly 20 opponents, facilitated talks led to consensus. The Kansas Bankers Association played a vital role in galvanizing banking and county officials to reconcile differences. The cellar-bottom line? Opponents became proponents or chose neutral.

Challenges and Long-term Goals

While the intention is noble, there’s a sober side: potential reductions in investment income worried both county and PMIB officials. The fiscal note on HB 2152 hinted at a revenue dip for the Kansas Bank CD Program. Estimated is a $4.5 million drop in FY 2026, ballooning to $9 million by FY 2027. Yet, these challenges are paired with expected increases in program participation.

For those like Schifferdecker, it’s about the long-term benefits found in local deposits. An illuminating study by Fort Hays State University, funded by the Kansas Bankers Association and conducted by Emily Breit at the Docking Institute of Public Affairs, showcases how community investments create a multiplying effect, where local dollars ripple positively through towns, enhancing economic activity upwards of seven times over.

The Crossroads for Rural Banks

For rural banks, HB 2152 isn’t just beneficial; it’s transformative. Schifferbecker, operating banks across 15 rural Kansas and eastern Colorado markets, sees this as a pivotal development. These local banks often stand alone in smaller towns, essential for community financial health. The potential to redirect a portion of the state’s investments back to local lenders matters — a lot.

Orel highlights the changing banking landscape, pointing out that liquidity essentials have shifted. Rural banks, remarkably vital touchpoints in sparsely populated regions, need such initiatives. From 690 FDIC-insured banks in 1984 down to 204 by 2023, the data from Breit’s study is revealing.

The Bigger Picture

So, why all the noise about keeping money local? As Schifferdecker sees it, locally-invested dollars yield a tax revenue uplift and carry a social return. Farmers and businesses get room to expand, generating dollars that circulate within Kansas’s borders. The multipliers from local loans increase tax revenue and drive community growth. The bill breezed through the Senate 40-0 and the House 117-5, a testament to its broad appeal.

Simply put, HB 2152 is steering Kansas dollars back to Kansas hands, crafting a future where state finances benefit Main Street, not just Wall Street.