State Treasurer Josh Mandel recently announced that Ohio would become the first state in the nation to offer an innovative new program that will provide safe and competitive returns on cash deposits for Ohio local governments and aims to help keep Ohio public funds in Ohio banks. The STAR Plus program is modeled after established private-sector programs and will allow government funds managers to deposit funds into a carefully-screened network of hundreds of Federal Deposit Insurance Corporation (FDIC) insured banks via a single convenient account. Public funds deposited in the program will be fully secured with no credit or market risk and earn a competitive yield.

STAR Plus was made possible by a new law, HB 209, which was developed and introduced by Representative Richard Adams (R-79th District), supported by Treasurer Mandel, and passed by the state legislature with bipartisan support. The law seeks to help public funds managers deposit cash reserves in Ohio banks in an effort to help keep local taxpayer dollars in the community banks that fuel local economies and small business growth. According to data compiled by the FDIC, community banks hold less than 25% of all deposits in the banking system nationally, but make more than 50% of the small business loans.

 “As a result of this new law, local governments in Ohio will benefit from a new option to earn interest on cash deposits,” said Representative Adams. “In addition, local banks will be able to utilize more funds to loan to small, medium, and even large businesses. This in turn will stimulate the economy and create additional jobs.”

STAR Plus offers local governments a competitive yield compared to investments with similar maturities, such as money market funds, U.S. treasury bills, commercial paper, certificates of deposit, and time deposits. Currently, STAR Plus yields 25 basis points.

“This innovative idea is a win for local governments who are tightening their belts and stretching tax dollars, a win for community banks that fuel local economies, and a win for Ohio families because it will foster an opportunity for job creation across Ohio," said Mandel. "STAR Plus strives to keep Ohio public funds in Ohio community banks, a goal made all the more significant in the aftermath of the Wall Street bank bailouts and era of 'too-big-to-fail' programs at the federal level.”