Division of the Budget
Landon State Office Building
Phone: (785) 296-2436
900 SW Jackson Street, Room 504
Topeka, KS 66612
http://budget.kansas.gov
Adam C. Proffitt, Director
Laura Kelly, Governor
Division of the Budget
April 29, 2025
The Honorable Nick Hoheisel, Chairperson
House Committee on Financial Institutions and Pensions
300 SW 10th Avenue, Room 582-N
Topeka, Kansas 66612
Dear Representative Hoheisel:
SUBJECT:
Fiscal Note for HB 2281 by House Committee on Financial Institutions and
Pensions
In accordance with KSA 75-3715a, the following fiscal note concerning HB 2281 is
respectfully submitted to your committee.
HB 2281 would establish the Kanbucks Program which would provide an incentive for
banks, credit unions, and farm credit institutions to make loans to eligible borrowers. The State
Treasurer would direct the Pooled Money Investment Board (PMIB) to deposit up to 5.0 percent
of the Pooled Money Investment Portfolio to invest in linked deposits with eligible financial
institutions, which then provide loans to qualified borrowers at an interest rate that is 2.0 percent
below the market rate with a minimum interest rate of 0.25 percent. No single linked deposit loan
to an eligible borrower for agricultural production or business purposes would exceed $2.5 million.
The interest rate on the deposit would be recalculated on the first business day of January and July
of each year. Housing loans are required to be amortized for a period within 15 years. The linked
deposit loans would be used to support agricultural production, housing and adult care home
construction or development, business purposes, and the extraordinary natural gas costs incurred
during the extreme winter weather event of February 2021. Eligible borrowers include farmers,
housing developers, developers of not-for-profit adult care homes, commercial or agricultural
businesses with not more than 200 full-time employees maintaining offices or operating facilities,
and certain wholesale natural gas customers.
Eligible lenders would then make linked deposit loans with an interest rate that cannot be
greater than 3.0 percent above the interest rate earned on the state’s deposit of funds. The interest
rate on the loan would also be recalculated on the first business day of January of each year and
the term of the loan could not exceed ten years. The eligible lender would be required to apply all
The Honorable Nick Hoheisel, Chairperson
Page 2—HB 2281
usual lending standards to determine the creditworthiness of eligible borrowers. Eligible
borrowers would be required to certify on the loan application that the reduced rate loan would be
used for an eligible purpose. Prior to completing the loan request, the State Treasurer would
evaluate each loan to determine if it qualifies for this program. If sufficient funds are not available
for this program, then the applications would be considered in the order received when funds are
once again available. The State of Kansas and the State Treasurer would not be liable to any
eligible lending institution in any manner for payment of the principal or interest on any loan. The
State Treasurer would have the authority to adopt rules and regulations to implement this program.
The State Treasurer would be required to submit an annual report to the Governor and the
Legislature identifying the status of the Kanbucks Program. The bill would repeal previous linked
deposit programs and eliminate statutory references to these programs. Any outstanding linked
deposit loans in existence on July 1, 2025, would be continued under the original terms of that
linked deposit loan program.
The PMIB indicates that HB 2281 has the potential to decrease revenues earned in the
Pooled Money Investment Portfolio by $5.4 million in FY 2026 and by $8.1 million in FY 2027.
This would reduce the interest earned from state funds that are allowed to retain interest, including
the State General Fund, State Highway Fund, Budget Stabilization Fund, etc. The bill would
reduce the rate earned on investments which would reduce the state’s earning potential. Currently,
the rate earned on investments is a market rate based on allowable investments for the PMIB. The
bill would allow a reduction of this rate to be 2.0 percent below the current rate on an annual basis.
The PMIB assumes the lower rate offered would increase the demand for linked loans which would
result in more of the PMIB’s assets being invested at rates that are lower than what could otherwise
be invested in the market. In its analysis, the PMIB assumes it would achieve an average of 3.0
percent of its portfolio invested in linked loans in FY 2026 and 4.5 percent in FY 2027. A constant
portfolio balance of $9.0 billion is estimated to result in an increase linked loan balance of $270.0
million in FY 2026 ($9.0 billion x 3.0 percent) and $405.0 million in FY 2027 ($9.0 billion x 4.5
percent). It is estimated the bill would reduce revenues by $5.4 million in FY 2026 ($270.0 million
x 2.0 percent) and by $8.1 million in FY 2027 ($405.0 million x 2.0 percent). This analysis only
details the impact on the PMIB and does not consider any potential benefits that may be realized
from money deposited in local financial institutions.
The bill would require the State Treasurer to review and approve loan deposit applications
from financial institutions and to coordinate with the PMIB to place approved linked deposits.
Similar linked loan deposit programs exist under current law; however, with the incentive that
state’s investment would earn 2.0 percent below the market rate, and the removal of some existing
eligibility qualifications applicable to current loan deposit programs, it is estimated that additional
financial institutions would participate in these retooled programs. The State Treasurer indicates
that, in general, the same processes and procedures that are currently in place for the existing link
deposit programs would be used to administer these retooled programs. The security of idle fund
balances deposited at eligible financial institutions would be maintained by requiring that the
lending institution underwrite these loans. In addition, the State of Kansas and the State Treasurer
would not be liable if any borrower defaults on a loan. Implementing the bill would require
resolution of a number of technical issues and required clarifications, which would impose an
initial administrative and rule-making burden; however, the State Treasurer anticipates that the
The Honorable Nick Hoheisel, Chairperson
Page 3—HB 2281
initial implementation work would be accommodated using existing resources. On an ongoing
basis, the bill would require the State Treasurer to hire 1.00 new FTE position to coordinate with
an increased number of potential and actual financial institution participants, and to assist with the
administration of the new Kanbucks program. The State Treasurer estimates that ongoing
expenses for salaries and wages for the 1.00 FTE position and overhead expenses would total
$114,200 from the State Treasurer Operating Fund in FY 2026. Any fiscal effect associated with
HB 2281 is not reflected in
The FY 2026 Governor’s Budget Report
.
Sincerely,
Adam C. Proffitt
Director of the Budget
cc: John Hedges, Office of the State Treasurer
Joel Oliver, Pooled Money Investment Board