Division of the Budget
Landon State Office Building Phone: (785) 296-2436
900 SW Jackson Street, Room 504 adam.c.proffitt@ks.gov
Topeka, KS 66612 Division of the Budget http://budget.kansas.gov
Adam Proffitt, Director Laura Kelly, Governor


March 3, 2021


The Honorable Jim Kelly, Chairperson
House Committee on Financial Institutions and Rural Development
Statehouse, Room 581A-W
Topeka, Kansas 66612
Dear Representative Kelly:
SUBJECT: Fiscal Note for HB 2429 by House Committee on Appropriations
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2429 is
respectfully submitted to your committee.
HB 2429 would create the City Utility Low-Interest Loan Program for the purpose of
providing loans to cities for extraordinary electric or natural gas costs incurred during the extreme
winter weather event of February 2021. The program would be administered by the State
Treasurer. The bill would allow up to $100.0 million in idle fund balances to be loaned to cities
that could only be used for the amount of extraordinary electric or natural gas costs incurred during
the extreme winter weather event and not for any other utility costs previously budgeted for by the
city. The interest charged would be 2.0 percent below the Pooled Money Investment Board
(PMIB) market rate with a minimum interest rate of 0.25 percent. The interest rate on the loan
would be recalculated on the first business day of January of each year. The term of the loan could
not exceed ten years. The State Treasurer could accept or reject an application based on the State
Treasurer’s evaluation of whether the city meets the requirements of the program. If sufficient
funds are not available for a loan deposit, the applications could be considered in the order received
when funds are once again available.
The State Treasurer would have the authority to write rules and regulations to implement
the program. The rules and regulations would be required to be adopted no later that January 1,
2022; however, there would be a streamlined application process that would be established within
14 days after the effective date. The adoption of rules and regulations would not be requirement
before approving loans by the State Treasurer under this program. The State Treasurer would be
required to provide an annual report to the Governor and the Legislature identifying the cities that
The Honorable Jim Kelly, Chairperson
Page 2—HB 2429

are participating in the program, the aggregate amount of moneys loaned, and the amount of
moneys still available for loan on or before January 1, 2022, and each January thereafter. The
Legislature would be required to review the loan program on or after January 1, 2024. The bill
would take effect upon its publication in the Kansas Register.
The Office of the State Treasurer estimates enactment of the bill would require $33,000 in
FY 2021 and $46,000 in FY 2022 to implement this new loan program and the agency would
request that amount come from the State Treasurer’s Operating Fund or other fee funds within the
agency. The Office estimates enactment of the bill would require the agency to hire at least 0.50
new FTE position to manage this new program. In addition, there would be the need to hire outside
legal counsel to draft loan contracts with cities and to write expedited rules and regulations. The
bill would require the Office to assume full credit risk in administering these loans to cities. If a
city were to default on the loan, the funds, which would otherwise be available to the State of
Kansas would be lost. Since the idle fund balance is used as the funding source for the loans, it is
assumed that State General Fund resources would be needed to backfill idle fund balances if a city
were to default on a loan.
The bill would require the PMIB, at the direction of the State Treasurer, to make deposits
of up to $100.0 million of idle funds to cities qualifying for the City Utility Low-Interest Loan
Program. The PMIB is authorized to make investments in U.S. Treasury and federal agency
securities, highly rated commercial paper and corporate bonds, and repurchase agreements and
certificates of deposit at Kansas banks. Declining balances have required the PMIB to maintain a
highly liquid portfolio, which reduces the amount of return available to the pool. The PMIB
maintains a significant portion of its investments in overnight repurchasing agreements. Rates that
the PMIB could earn in that market fell to near zero after actions from the Federal Reserve in 2020
(and are likely to stay low for the foreseeable future according to the November 2020 Consensus
Revenue Estimate Memo). Recalculating the rate on the loan to cities one time each year has the
potential to lock in a lower or higher interest rate that could be earned in the market; however,
without knowing the timing of future interest rate changes, it is not possible to estimate the bill’s
impact on interest earnings from requiring the loaning of up to $100.0 million of idle funds to
cities compared to other investments that the PMIB might make. The PMIB and the State
Treasurer indicate that sufficient idle fund cash balances currently exist to fund this new program;
however, future balances that would be used to support this program over the course of the next
ten years are unknown. The PMIB indicates that the costs to administer the deposit of idle funds
to cities would be negligible and could be absorbed within existing resources and staff levels.
The League of Kansas Municipalities indicates the bill would allow cities who provide
municipal gas and electric services for their respective cities the ability to apply to the State
Treasurer for loans for extraordinary electric or natural gas costs incurred during the extreme
winter weather event of February 2021. The loan program would allow the extraordinary utility
expenses to be spread out over time to lessen the economic effect of extraordinarily high utility
bills for residents and businesses living and operating in these cities. The League indicates that if
federal money becomes available from aid or other congressional actions, those funds would be
used first to pay off these loans. The League is unable to determine the precise amount of loans
The Honorable Jim Kelly, Chairperson
Page 3—HB 2429

that would be requested by cities, as not all cities have received bills that cover the timeframe of
the extreme winter weather event. Any fiscal effect associated with HB 2429 is not reflected in
The FY 2022 Governor’s Budget Report.


Sincerely,

Adam Proffitt
Director of the Budget

cc: Lauren Tice Miller, Office of the Treasurer
Scott Miller, PMIB
Wendi Stark, League of Municipalities


Statutes affected:
As introduced: 10-308, 75-4237, 75-4232