Treasurer poses idea of investment pool for local governments

JEFFERSON CITY, Mo. -- Local governments could earn better returns on their money if they could pool their funds in state-run investments, State Treasurer Nancy Farmer said.

The idea promoted Tuesday by Farmer is not new -- 31 states already operate similar investment pools, most through their state treasurer's office.

But given the recession and low interest rates being offered by banks, Farmer said it is high time that Missouri develop an investment pool as an alternative.

"Local government investment pools are a matter of good government anytime, but I think right now it's critical," Farmer said. "Public fund managers should have every tool possible."

Bills have been filed in both the House and Senate authorizing the state treasurer's office to undertake the initiative.

If such legislation is approved, the treasurer's office would use its existing investment staff -- which already manages about $3 billion in state funds -- to also manage the local government funds.

The money would be invested in such things as U.S. Treasury bonds, agency securities, top-rated commercial paper and time deposits in Missouri banks -- the types of investments authorized by the state Constitution.

Cities, counties or other political subdivisions could invest and withdraw money in the state-run pool with as little as a day's notice and would be entitled to their share of interest.

Farmer said the investment pool likely would benefit smaller governments, who may not have their own full-time investment personnel and often deposit money in banks.

The fund likely would need a minimum of $10 million, said Larry Krummen, director of investments for the state treasurer's office.