No, we are not aware of a minimum interest rate that must be paid on CDs purchased with public funds, but the answer may depend on an individual public agency’s investment policy and written agreement with your financial institution.

The Illinois State Treasurer is required to “enter into deposit agreements with financial institutions specifying the manner of interest calculation and compounding and the frequency of interest collection regarding moneys deposited” under the Deposit of State Moneys Act. Additionally, all public agencies in Illinois are required to adopt written investment policies under the Public Funds Investment Act.

The Treasurer has posted its own Investment Policy along with a template Investment Policy for State Agencies (which is provided as a reference for local governments’ optional use) on its website. These policies state that the Treasurer and State Agencies “shall purchase certificates of deposit on the basis of a qualified financial institution’s ability to pay a required rate of interest to the [Treasurer or State Agency]. Such rate is generally determined on the basis of Treasury or other appropriate market rates for a comparable term.” However, the Treasurer’s policies do not state a minimum interest rate. It is possible that a local government entity has established a minimum interest rate for CDs in an investment policy, and we recommend requesting such information from any depositors of public funds.

For resources related to our guidance, please see:

• Deposit of State Moneys Act, 15 ILCS 520/2 (“All financial institutions in which any such money is deposited shall be required to pay interest. All interest received or paid on account of money in the State Treasury belonging to or for the use of the State so deposited in financial institutions shall be the property of the State of Illinois. If any moneys held by the State Treasurer shall be deposited in financial institutions pursuant to the provisions of this Act, the interest received thereon shall be credited as provided in Section 4.1 of the State Finance Act.”)

• Deposit of State Moneys Act, 15 ILCS 520/14 (“The State Treasurer shall enter into deposit agreements with financial institutions specifying the manner of interest calculation and compounding and the frequency of interest collection regarding moneys deposited under this Act.”)

• Deposit of State Moneys Act, 15 ILCS 520/22.5 (“The State Treasurer may, with the approval of the Governor, invest or reinvest any State money in the Treasury that is not needed for current expenditure, due or about to become due, or any money in the State Treasury that has been set aside and held for the payment of the principal of and the interest on any State bonds, in any of the following: . . . (3) Interest-bearing savings accounts, interest-bearing certificates of deposit, interest-bearing time deposits, or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act.”)

• Public Funds Investment Act, 30 ILCS 235/2(a) (“Any public agency may invest any public funds as follows: . . . 3) in interest-bearing savings accounts, interest-bearing certificates of deposit or interest-bearing time deposits or any other investments constituting direct obligations of any bank as defined by the Illinois Banking Act;”)

• Public Funds Investment Act, 30 ILCS 235/2.5(a) (“Investment of public funds by a public agency shall be governed by a written investment policy adopted by the public agency. The level of detail and complexity of the investment policy shall be appropriate to the nature of the funds, the purpose for the funds, and the amount of the public funds within the investment portfolio. The policy shall address safety of principal, liquidity of funds, and return on investment and shall require that the investment portfolio be structured in such manner as to provide sufficient liquidity to pay obligations as they come due. . . .”)

• Illinois State Treasurer, Sample Investment Policy

• Illinois State Treasurer’s Investment Policy (June 24, 2020), pages 11–12 (“The Treasurer and the Chief Investment Officer, with the assistance of the Investment Policy Committee, shall establish a system of internal controls and written operational procedures that shall be documented and filed with the Treasurer’s Chief Internal Auditor for review. The controls shall be designed to prevent the loss of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by authorized investment officers. . . . c) Certificates of Deposit: Authorized investment officers shall purchase certificates of deposit on the basis of a qualified financial institution’s ability to pay a required rate of interest to the Treasurer. Such rate is generally determined on the basis of Treasury or other appropriate market rates for a comparable term.”)

• Illinois State Treasurer’s Investment Policy (for Investments not under the Stewardship of the Illinois State Treasurer) (April 21, 2021), page 12 (“The State Agency shall establish a system of internal controls and written operational procedures that shall be documented and filed with the State Agency’s Chief Internal Auditor for review. The controls shall be designed to prevent the loss of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by authorized investment officers. . . . c) Certificates of Deposit: Authorized investment officers shall purchase certificates of deposit on the basis of a qualified financial institution’s ability to pay a required rate of interest to the State Agency. Such rate is generally determined on the basis of Treasury or other appropriate market rates for a comparable term.”)