Washington State

House of Representatives

Office of Program Research

BILL

ANALYSIS

Business & Financial Services Committee

SB 5265

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

Brief Description: Allowing a public depository to arrange for reciprocal deposits of public funds.

Sponsors: Senators Benton, Mullet, Angel and Keiser.

Brief Summary of Bill

  • Authorizes public funds to be deposited in an out-of-state institution, subject to requirements including that the public funds are initially deposited in an in-state public depositary and that the in-state public depositary receive an equal or greater deposit of funds on the same day the public funds are transferred to the out-of-state institution for deposit.

Hearing Date: 2/24/16

Staff: Peter Clodfelter (786-7127).

Background:

Public funds may be deposited only in banks that the Public Deposit Protection Commission (Commission) has approved as public depositaries, and to a limited extent in approved credit unions. Established in 1969, the Commission is comprised of the Governor, the Lieutenant Governor, and the State Treasurer. The State Treasurer chairs the Commission and provides administrative support.

The Commission approves which banks and credit unions may hold state and local government deposits and monitors banks' collateral to secure uninsured deposits when deposits exceed the amount insured by the federal government, which is currently $250,000 per depositor, per insured bank. Credit unions may not hold deposits of public funds in excess of the amounts insured by the federal government, which is currently $250,000 per depositor, per insured credit union, even if secured by collateral.

Public funds may generally not be deposited in an institution outside of the state. However, there are several exemptions to that general prohibition, including:

Generally, a state or local government entity depositing public funds in a demand account in an out-of-state institution is limited to an aggregate amount of deposits not to exceed $1 million; and no single government entity may hold more than $50,000 in one demand account. However, those limitations do not apply to funds deposited in demand deposit accounts maintained for certain higher education endowment funds to be used for a specified instructional program or research project being performed outside of the state.

Summary of Bill:

A new exemption to the general prohibition on depositing public funds outside of the state is created. Public funds may be deposited in institutions located outside of the state if the following conditions are met:

The requirements that a state or local government depositing public funds in demand accounts in an out-of-state institution be limited to an aggregate amount of deposits not to exceed $1 million and that no single government entity may hold more than $50,000 in one demand account do not apply to the new exemption, just like those requirements do not apply to funds deposited in demand deposit accounts maintained in out-of-state institutions for certain higher education endowment funds under the existing exemption.

Appropriation: None.

Fiscal Note: Available.

Effective Date: The bill takes effect 90 days after adjournment of the session in which the bill is passed.