New state investment rules go into effect

An effort by Missouri State Treasurer Clint Zweifel to get better returns on state investments took effect Friday.

The General Assembly unanimously passed the Invest in Missouri legislation last summer. That legislation gradually phases out requirements related to state time deposits, which are similar to certificates of deposit.

The state can now invest taxpayer money in Missouri banks without the return on those investments having to match the return on short-term U.S. Treasury securities. A news release from Zweifel’s office said the U.S. Treasury yield dropped as low as 0.2 percent in 2009.

The legislation gradually removes the yield restriction on time deposits. In 2010, the first $7 million of time deposits held by a financial institution are still subject to the Treasury yield limit, but deposits beyond that amount are set at the market rate. The cap will shrink to $5 million in 2011, $3 million in 2012, $1 million in 2013 and will be eliminated in 2014.

Zweifel said once the cap is gone, taxpayer investments will bring in an additional $10 to $15 million per year, adding that he plans to put an additional $250 million of taxpayer money in Missouri community financial institutions once the cap is removed.

"These will be funds that not only provide a better return for taxpayers, but can then be loaned out in communities to be reinvested," Zweifel said in the release. "This is a foundation for creating jobs and growing our economy."

Zweifel told Springfield Business Journal in July that the previous rules capping yield rates essentially amounted to giving away money.

"Banks would come to us and say they wanted to give us 2 percent, and we’d say, ’Thanks, but no thanks. We can only take the Treasury yield,’" Zweifel said. "It went against every free-market principle."