Morgan Chilson
TOPEKA — Kansans can expect to see more of their tax dollars at work within local communities when new rules go into effect next year at the agency in charge of investing state funds.
It’s a version of the “Shop Local” concept in the investment world, said Alex Orel, spokesman for the Kansas Bankers Association, one of the major backers of House Bill 2152, which makes multiple changes affecting banks statewide.
“I think long-term, this is going to be a proposal that’s going to benefit the local governments, our local communities and the state,” Orel said. “Our taxes should be invested here, or as much of them as we can anyway.”
The Pooled Money Investment Board is responsible for investing state general fund dollars and other money deposited with the state treasurer’s office. Among its programs is the Kansas Bank CD Program, which offers Kansas banks the opportunity to invest in certificates of deposit. Depending on the interest rate, which is set weekly, banks can determine whether they want to buy a CD and use those dollars to make loans in their local communities, said Mark Schifferdecker, chairman, president and CEO of GNBank in Girard.
PMIB has been required to get the highest rate of return possible for its CDs, Orel said.
While that makes good investment sense for state dollars, the CD rate was typically set using high-yielding investments, which are above U.S. treasuries, he said. That left Kansas banks no incentive to participate when they could get lower rates elsewhere.
As a result, the Kansas Bank CD Program began to disappear from PMIB’s investment portfolio. As of March 31, it was only 0.48% of the $8.5 billion invested by PMIB, meaning that most of the state’s funds are being invested outside the state.
Schifferdecker said a decade ago, the CD program investment was 10 to 15% of the portfolio.
New regulations included in HB 2152, in effect Jan. 1, 2026, will allow PMIB to offer a more competitive rate, as much as 2% lower, which is expected to increase program participation and bring tax dollars to local banks, which will then distribute them through loans to their customers.
Brent Shelton, Sedgwick County’s deputy chief financial officer, said HB 2152 has an impact on counties.
Portions of the bill addressed ways to make it easier for banks to hold deposits of county money, along with the increased access to capital through the CD program, he said.
“We give our local banks the first opportunity to keep that money local,” Shelton said. “It also preserves our ability to get a market rate on that money. That helps economic development efforts, makes more money available for lending to local business. All in all, (HB 2152) was a great compromise. Everybody won.”
The “compromise” Shelton referred to was disagreement between county officials and the banking industry on the first version of the bill. In fact, there were about 20 opponents when it was first presented.
Schifferdecker said the Kansas Bankers Association led the charge to draw all the parties to the table and work out the issues. The result was that opponents either switched to becoming proponents or took a neutral stance, he said.
“How often do you see that at the federal and state government anymore?” Schifferdecker said. “I think we made it better. We didn’t everything we wanted — Kansas Bankers Association and me as a banker. They didn’t get everything they wanted. We met in the middle.”
Both county officials and PMIB officials were concerned the bill could potentially decrease their investment income. The fiscal note on the bill once it was amended points to decreased revenue for the Kansas Bank CD Program, adding that increased participation in the program is expected.
State General Fund revenues are estimated to decrease by $4.5 million in FY 2026 and by $9 million in FY 2027.
“This analysis only details the impact to the PMIB and does not consider any potential benefits that may be realized from money deposited,” the supplemental note said.
Such longer-term benefits that bankers like Schifferdecker are excited about. A Fort Hays State study, funded by the Kansas Bankers Association, explained the ripple effect seen in communities when banks invest locally.
Specifically, this study considered that when dollars are deposited in a local bank, which can then loan them out repeatedly, their impact on the community will multiply by as much as seven times through increased economic activities.
The study, completed by Emily Breit, policy fellow at the Docking Institute of Public Affairs, found that with the impact of increased income, property and other taxes earned when investments are made in Kansas, out-of-state investments would need to offer rates 3.15% higher than local rates to make the state better off. For example, if a local bank is offering a rate of 5%, then the decision to invest outside the state instead would only generate more value if the outside investment was 8.15% or higher.
“As a community bank, we can loan that money back out to businesses and farmers and consumers,” Schifferdecker said. “We’re not looking at 80% of Kansas money going to be invested in CDs — just to get that back to 10% would be respectable.”
Additional money being invested through rural banks like Schifferbecker’s is another important factor for the state, he said.
“It’s a game changer. Our little bank, we’re in 15 rural markets across Kansas and eastern Colorado. In some of those we’re the only bank in town,” he said. “We can take that money and loan that money back out. We’ve got lots of loan demand, particularly in this ag economy right now, and it’s really critical for us in order for us to grow. There’s only a certain amount of deposits in our little communities. The counties and school districts, they keep quite a bit of money on hand, and if we can attract more of that money, 100% of that money is going to be lent back out to the community.”
Schifferbecker understands why the state invests money outside of its borders to get a higher rate of return. Still, he was glad Kansas lawmakers recognized that long-term benefits will build from what they want to accomplish with HB 2152.
“Money invested locally truly has the multiplier effect; it’s going to raise your tax revenues. Farmers, businesses can expand and grow,” he said. “You make more money and that’s going to create tax revenue.”
Orel at KBA said the banking landscape has changed. This type of support is meaningful for all banks, but especially those in more sparsely populated areas.
“Our community banks don’t have the necessary liquidity they used to have,” he said. “This bill will allow them another liquidity option.”
The banking challenges are reflected in the data from Breit’s study. In 1984, there were 690 FDIC-insured banks and thrifts in Kansas, a number that dropped to 204 by the end of 2023. Number of bank locations grew from 216 to 1,100 in that same time period. Community banks play an important role, Breit’s research said, by maintaining banking services in rural areas where larger banking businesses don’t typically locate.
“We’re so happy,” Schifferdecker said. “I was just tickled when it passed the Senate overwhelmingly and then the House.”
The bill passed the Senate 40-0 and the House 117-5.
