Stimulus Funds Create Jump In Public Deposits
This article was sent to us by our colleagues at the Ohio Bankers League
Ohio’s governmental entities received just over $11 billion in funds from the recently passed American Rescue Plan. The text of the stimulus bill gave state and local governments flexible guidelines, allowing them to spend those funds on the pandemic’s “negative economic impacts.” According to the language of the new law, funds can go toward increased pay for essential workers, preventing cuts to government services, and making investments in water, sewer, or broadband infrastructure. Unlike the 2020 CARES Act, it covers costs incurred through 2024. In addition, Ohio’s school districts received $4.4 billion in funds from the stimulus bill in order to help them reopen safely.
In order to allow OBL members to plan for the increase in public deposits, the OBL has provided a list that breaks down how much each city, village, or county is receiving in stimulus funds. As always, staff encourages open communication between government entities and members to ensure a smooth collateralization process for the influx of funds.
In order to make sure members have all the tools they need to serve their government customers, OBL has been in contact with Ohio Treasurer of State Robert Sprague’s office to ensure that they are also communicating with banks and public entities participating in Ohio’s Pooled Collateral System. OBL has also made sure to set expectations that, with the large influx of public deposits, there could potentially be a brief period of undercollateralization and a rush for banks to acquire the necessary collateral to pledge. However, open lines of communication between banks and public entities should reduce the likelihood of that happening. OBL will also be reaching out to the associations representing public entities to make sure their members are also thinking through these issues.