In October, Ohio Treasurer of State Robert Sprague announced a new program called the Ohio Gains. This initiative is aimed at putting the state treasury’s balance sheet to work for Ohioans. The proposal centers around three new investment reforms that will help bolster support for the state’s agriculture community, health systems, and institutions of higher education.
Legislation authorizing Ohio Gains is expected to be introduced in the Ohio Senate by Senators Michael Rulli and Jerry Cirino and in the Ohio House by Representatives D.J. Swearingen and Andrea White.
The legislation will make reforms in the following three areas:
1. Modernizing the Ag-LINK Program:
For decades, the Ag-LINK linked deposit program has helped Ohio farmers and agribusinesses drive down the cost of doing business by providing interest rate reductions on new or existing loans. However, Ohio law currently restricts the loans for each borrower to $150,000 per year – deterring many from participating in the program.
The proposed legislation would eliminate the existing program caps, so Ohio’s agriculture community has access to an ample amount of lower-cost capital when they need it most. Eliminating the caps will also align Ag-LINK with the other linked deposit programs available through the Treasurer’s office.
Additionally, agricultural co-ops will become eligible Ag-LINK borrowers for the first time in the program’s history, further recognizing the valuable contributions they make to Ohio’s economy.
2. Reducing Costs for Ohio’s Hospitals:
A Variable Rate Demand Obligation (VRDO) is a borrowing tool commonly used by large institutions – including some of Ohio’s major hospital systems – to finance capital projects. Using a VRDO for debt issuance requires an entity to act as a “buyer of last resort,” effectively agreeing to purchase the debt if the market yields no investors.
While large Wall Street banks typically serve in this capacity, the Ohio Treasury can leverage its strong liquidity position to step into this role on behalf of Ohio’s hospital systems and lower their overall borrowing costs.
The proposed legislation will extend this cost-savings opportunity to more Ohio hospital systems and other large entities that utilize VRDOs.
3. Reducing Costs for Ohio’s Public Universities:
Under current Ohio law, the debt of the state’s four-year public universities is an eligible investment for the Ohio Treasury. The proposed Ohio Gains legislation would allow the institutions to leverage their State Share of Instruction (SSI) when issuing debt to the Treasury.
Doing so automatically enhances the university’s credit rating, thereby making it a more attractive and secure investment for the State of Ohio. Since Ohio provides significant financial support for its universities, the proposal will provide savings for higher education institutions while generating a meaningful return on investment for the Treasury — thus maximizing the value of those state funds like never before.