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Bill would require state and local tax revenues to be invested in New Hampshire banks

A Senate bill that has bipartisan support would keep state and local government tax revenues invested in New Hampshire, where proponents say the money could better serve the state’s economy than through a pool that sends hundreds of millions of dollars out of state to chase higher returns.

Senate Bill 553, sponsored by nine Republicans and seven Democrats, would require that funds held by the public deposit investment pool be invested in financial institutions located in New Hampshire.

A report completed in November by Polecon Research economist Brian Gottlob for the New Hampshire Bankers Association examined the impact of public funds leaving the state.

“There are no benefits for local businesses or the local economy when that money is deposited out of state. Nobody is saying that’s something that is promoting economic growth in New Hampshire,” Gottlob said during a discussion about the report at the association offices in December.

Over $1 billion in public funds from state and local governments in New Hampshire are deposited by banks headquartered in the Granite State, but an increasing percentage of those funds are being invested in the New Hampshire Public Deposit Investment Pool, which invests the tax revenues in national and international organizations and financial instruments, the report said.

As of June 30, 2023, over $530 million of public funds were invested through the pool. Keeping those funds in New Hampshire would increase the lending capacity of local banks.

“Importantly, I think, is the impact that it has on business investments, particularly small businesses who struggle more than other businesses to access credit,” said Gottlob, who also is the director of the state’s Economic & Labor Market Information Bureau. “They don’t have the access to the credit that larger businesses have that can go nationally or the credit markets nationally. It’s really important for our local banks, too, and local banks have a strong interest in that because they only succeed when the local economy succeeds.”

Clay Adams, president of Mascoma Bank, said the inflationary environment of the past couple of years, coupled with the Federal Reserve’s moves to raise interest rates, has essentially shrunk the money system.

“So now there are fewer dollars to go around. Banks are trying to lend out as much as they possibly can in our communities to serve the community’s needs,” Adams said.

“But if $600 million is going out of the state, that’s money they cannot lend out in their communities to support small and medium-size businesses.”

As of June 30, 2023, there were 43 banks with a combined 392 branch locations in New Hampshire. Of that number, 19 banks with 136 branch offices in the state are banks that are headquartered here, according to the report.

Regardless of whether a bank in New Hampshire is based here or in another state, deposits received by banks in New Hampshire would be primarily used to make loans to local businesses, individuals and organizations, the report said.

State and local government agencies deposit tax revenues in the New Hampshire Public Deposit Investment Pool to increase earnings on those funds, the report notes, presumably earning a better return than if they invested the funds locally.

“But it’s really not clear how exactly that is, how much better it is, how much higher the yields are,” Gottlob said. “But we do know what would happen if we keep deposits in New Hampshire. It strengthens local banks, who use the funds to lend to businesses and households. And that stimulates economic growth.”

According to the report: Depositing an additional $530 million of public funds in New Hampshire banks that are currently invested through the New Hampshire Public Deposit Investment Pool would support a projected $182 million in business lending and investment in the state, primarily to businesses with fewer than 50 employees.

The impact from additional business lending and investment supported by increasing public deposits in banks in New Hampshire would increase the state’s gross domestic product by as much as $200 million and state and local revenues by as much as $23 million in 2023 and $24 million by 2025.

The Bankers Association has had the Public Deposit Investment Pool in its sights for a few years, said Kristy Merrill, the association’s president. “It’s something the bankers have been aware of for a long time, but most (people) haven’t.”

Sen. Cindy Rosenwald (D-Nashua), one of the bill’s sponsors, would prefer New Hampshire funds stay here rather than be invested in international banks: “New Hampshire taxpayer funds — why shouldn’t they work to grow our economy and help businesses and families?”


Regardless of whether a bank in NH is based here or in another state, deposits received by banks in NH would be used to make loans to local businesses, individuals and organizations.

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