By Michael Fryzel
“We are an independent agency” are the words that have been used by board members as well as staff at the National Credit Union Administration (NCUA). It is the reason that has been given to justify why they should not be subject to any directive of the president of the United States to either maintain salary levels or institute budget cuts.
Some at NCUA believe that their “independent “status does not subject them to an order or request made by the president to executive agencies of the federal government.
The agency has also made the argument that its budget is not funded by taxpayer dollars but rather by federally chartered or federally insured credit unions. They seem to forget that the members of those credit unions are citizens of the United States and that the interest earned on funds they borrow from or deposit in those credit unions pay the fees and assessments NCUA charges those credit unions.
So, the more credit unions pay NCUA, the less the credit unions are able to return to members in dividends. Indirectly, the taxpayer members of credit unions are paying the cost of the agency’s operations.
President Wants 5% Cut
Coincidentally, the same week NCUA held a public hearing on the budget, President Trump instructed every agency secretary in his Cabinet to cut 5% from their budget for next year. The president felt every agency could at least do that and some could do “substantially more.”
According to the Budget in Brief issued by NCUA, the proposed budget for 2019 is $334,774,000. The proposed budget for 2020 is $343,893,000.The chart included in the publication does not show the increase over the current year’s budget, but the information included in the narrative indicates that the 2019 budget is 13.2 million higher than 2018. Based on those numbers, the percentage increase from 2018 to 2019 would be approximately 4.7%, and from 2019 to 2020, 2.7%.
Critics of the budget argue that the reduced number of credit unions should be reflected in a reduced NCUA budget. The agency counters that assertion by saying even though the number has decreased, many of the remaining credit unions have grown in size and complexity. They say that these larger institutions require additional and more sophisticated examinations. Not a bad argument, but it falls short in justifying the size of increase.
A Suggested Compromise
NCUA has for a number of years talked about their technical improvements and the desire to do more off-site examinations and analysis. One would be led to believe that such a change would lead to cost savings. However, that does not seem to be the case when indications are that future budgets will only head in the up direction.
For the NCUA board the challenge becomes whether they follow the direction of our nation’s chief executive officer or they go their “independent” way.
Perhaps a compromise is attainable. Compromise is a word rarely heard in the D.C. corridors but has often been used by the current board members in discussing their ability to get things done. Instead of a 5% cut, how about a budget that maintains the 2018 spending level?
That goal certainly can be achieved with some belt tightening and fiscal constraint. It would not only be a welcomed gesture but also set an excellent example for other “independent” agencies to follow.
Michael Fryzel is a former chairman and board member at NCUA who is now in private practice in Chicago.