State Treasurer Clint Zweifel says a minor change in state law will make a major difference in the rewards Missouri reaps from its deposits.
Zweifel championed the "Invest in Missouri" bill during the legislative session that breezed through the legislature, which is likely an understatement. The bill never received a "No" vote; not in committee and not on the floor of the House or the Senate. Governor Nixon has now signed the bill into law. It takes effect at the end of August.
The legislation reinvests the $1 billion in deposits the Treasurer makes in Missouri banks. Zweifel estimates that the change will reap at least $10 million, perhaps as much as $15 million by removing what Zweifel calls an artificial cap on the interest rate earned by state deposits. For the past 50 years, Missouri law has placed a cap on interest earned by tying it to the return of short-term US Treasury securities. The Treasurer’s Office says that yield hit a low of 0.20% this year. The restriction will be phased out over a five-year period.
"I think it’s an unacceptable policy," Zweifel tells the Missourinet. "This is clearly something that taxpayers weren’t getting a fair rate of return."
Zweifel says bi-partisan support was the key to easy passage of measure. Also, a faltering economy might have helped focus the attention of legislators on the weak return the state had been getting.
"I do think it changes the mindset of citizens," Zweifel says, "because families right now are going through tough times in a really tough and brutal economy and they expect government to manage its money and their money to best of its ability. When you’re not getting a fair rate of return, I think that’s unacceptable to any Missouri family."
The bill also expands eligibility to the state Linked Deposit Program, which at present subsidizes interest rates on about $200 million in small business and farm loans. Zweifel believes the changes will help that grow to $720 million, the statutory cap. Changes allow loans to be given to businesses with up to 100 employees, rather than the current 25-employee cap. It also will offered subsidized loans for alternative energy to small businesses and farms.
The program began years ago during a much different economic climate that feature very high interest rates. Though interest rates have fallen to historic lows, Zweifel says there is still a need for the program, especially for businesses needing capital to grow.