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House of Representatives
Session of 2015 - 2016 Regular Session

MEMORANDUM

Posted:	May 13, 2015 02:53 PM
From:	Representative Kate Harper
To:	All House members
Subject:	Local Government Investments

In the near future, I plan to introduce legislation to authorize local governments increased flexibility in investing local funds while not permitting risky investments. These new investment options address the reduction that municipalities, school districts and municipal authorities are earning on their current authorized investments due to the slow economic recovery. This legislation enables, but does not mandate, new investment types for operating funds of counties, cities, boroughs, townships, school districts and municipal authorities to deal with the impact of low yields, the decreased availability of GSE debt securities and lower bank deposit rates. It also incorporates important safeguards such as credit quality and maturity criteria, the most valuable risk management tools, as well as high credit standards and relatively short maturity standards. Although interest rates on money market type investments are at historic lows, there are some securities not currently permitted as investments for Pennsylvania local governments that have higher relative rates of return. These higher yielding securities do not represent high risk investments, but the national mainstream of permitted investments for local governments. Specifically, my legislation would add high quality money market instruments including repurchase agreements, commercial paper, negotiable certificates of deposit and bankers’ acceptances to the authorized list of investments for local governments. By expanding the list of permitted investments, and establishing reasonable criteria and constraints on the use of these investments, local governments can increase returns, become aligned with national best practices for public funds investment, allow their investment officers the same tools as their counterparts in most other states, and institutionalize appropriate risk-management strategies to protect public funds. Since many communities like to invest in their local banks, I note that this legislation is supported by the PA Association of Community Bankers. Please join me by cosponsoring this important legislation.

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