State Capitol: We go one-on-one with State Treasurer Mike Frerichs to hear his plan on how the state can both earn twice as much interest on its reserve funds while lowering the interest payments the state is currently making on its past due bills.
The state is required to pay approximately 12% on unpaid bills that are over 60 days past due. With the state owing billions of dollars in past-due bills, the interest payments alone can be hundreds of millions of dollars each year.
These interest payments are often paid out to firms that borrow at low-interest rates from banks, pay off the vendors’ bills, and then collect the payment AND the 12% interest due from the state. Treasurer Frerichs looks to have the state use its own reserve funds to pay off bills and then collect a portion of the interest the state now pays out.