(Nov. 20, 2020) NASCUS’ Lucy Ito expects to present the state credit union system view on the next NCUA budget – particularly its impact for the overhead transfer rate (OTR) – when the agency holds its annual budget briefing Dec. 2.
Late last week, the agency published its 2021-22 draft budget – totaling $342.5 million in 2021 and $364.2 million in 2022 – which will be the subject of the Dec. 2 briefing. The agency’s final budget is slated for approval during the NCUA Board’s Dec. 17 open meeting.
The agency primarily funds its operations through two sources: fees charged to federal credit unions (the FCU “operating fee”), and through funds transferred from the National Credit Union Share Insurance Fund (NCUSIF) to pay for “insurance-related costs” of the agency.
Budget documents posted on the agency’s website late last week show a total proposed 2021 budget of $342.5 million –down about $4.9 million, or 1.4%, from the approved budget of $347.4 million for 2020.
But that reduction would be more than made up in 2022, when the agency projects a 6.3% increase in its total budget, for a total of $364.2 million. That figure includes a $341.8 million operating budget (up $26.2 million); a $14.6 million capital budget (up $4.3 million); and $7.9 million NCUSIF administrative budget (down $218,000).
To fund its 2021 budget, the agency is estimating an OTR of 62.3% — one percentage point higher than in 2020 – with the remaining 37.7% of the budget to be paid largely by FCU operating fees. In its published budget, NCUA states that the primary driver of the increase in the estimated 2021 OTR is the rise in examination and supervision time for federally insured state-chartered credit unions.
“Calendar year 2021 marks the end of the first, five-year cycle associated with the Exam Flexibility Initiative that extended the NCUA exam time for eligible institutions,” the budget states. “The increase in budgeted time for FISCU examination and supervision for 2021 is due to program obligations associated with examination scheduling and scope requirements.”
NASCUS has voiced its concern over the years that the operations of the agency not be funded primarily by the insurance fund. In fact, in a comment letter to the agency earlier this month, NASCUS pointed out the “incontrovertible truth” that doing so means the insurance fund has less resources to face financial troubles for credit unions, unless an insurance fund premium is assessed, which is not outlined in the 2021 budget.
In fact, the 2021 budget proposal is already facing some headwinds: At the NCUA Board meeting Thursday, Board Member Mark McWatters said he does not support the proposal put forth by the staff. He said the budget proposal inappropriately omits some items, and funds other items that are not necessary for ensuring the safety and soundness of credit unions.
He did not outline the specific items in either case. However, last year, McWatters said he intended to pursue a “collegial, collaborative” path for adding consumer protection resources at the agency for the 2021 budget (such as additional staff). That, apparently, did not happen and is at least partly responsible for McWatters’ stated opposition.
The Dec. 2 budget briefing is scheduled to last one hour; it gets underway at 10 a.m. and will be live-streamed via the Internet.