by J. Mark McWatters, NCUA Board Member
During my tenure, I have come to know that credit unions deeply care about the agency's budget and budget process, and rightly so. Credit unions bear nearly all of the costs of operating NCUA and the National Credit Union Share Insurance Fund.
That is why credit unions and I welcomed Chairman Metsger's recent announcement that he is changing course, and NCUA will hold a public briefing in October on the agency's budget. He stated the briefing will be more thorough than prior agency briefings, with budget information provided in advance, thereby enabling participants to review the proposed budget prior to offering their input.
Since coming to the Board in August 2014, I have yet to vote for an agency budget. One of my most serious concerns, is that credit unions have been shut out of our budget process.
That has not always been the case. Under NCUA Chairman Roger Jepsen briefings were held for stakeholders, but were discontinued until Chairman Dennis Dollar initiated a hearing-type approach in which participants were able to provide public comments on the proposed budget. The hearings were continued under Chairman JoAnn Johnson. More recently, Chairman Mike Fryzel held the last budget briefing in 2008.
The issue of NCUA budget briefings should not be partisan, but unfortunately that has not always been the case.
Regrettably, the politicization and routine increases of the NCUA's budget have drawn the attention of Congress, most notably in a hearing last July before a subcommittee of the House Financial Services Committee. Legislation remains pending in the House (H.R. 2287, which passed the committee) and Senate (S. 924) that would force the agency to hold hearings on its budget, as we should have been doing all along.
In my view, there are two overarching issues with the agency's budget process:
- The lack of transparency and accountability to credit unions and to Congress; and
- Our budget is inefficient, as demonstrated by the regular increases under the past administration. The 2017 budget approved in November is $302.9 million, up from $236.8 million just five years ago in 2012.
In dissenting last fall on the current and 2017 budgets, I again urged the Board to consider a public hearing on the budget and other steps to achieve transparency and cost effectiveness, such as:
- Extend the exam cycle and improve exam efficiencies (A review of these issues is now underway). This must include revamping our exam-appeals process.
- Collaborate more with state regulators to pursue exam goals.
- Employ actual zero-based budgeting, which should result in reduced costs.
- Subject any agency office that received an increase in the last budget of more than 3 percent to more scrutiny.
- Change the way we set the Overhead Transfer Rate (This review is also underway).
- Do not utilize a two-year budget process.
- Disclose all legal fees related to the corporate credit union stabilization litigation and settlements, and how the agency is using those proceeds.
- Reconsider the need for stress testing credit unions with more than $10 billion in assets and the BlackRock methodology employed in such tests.
- Disclose all credit union losses greater than $5 million (instead of the current level of greater than $25 million).
I will continue to press for the best outcome on these matters.
Under the Federal Credit Union Act, Congress established our funding mechanism. It reflects that credit unions are key stakeholders, not only because we regulate them, but also because credit unions provide our resources. It is a workable system, yet it is up to the NCUA Board to exert leadership over the budget and budgetary process. We must ensure our authority is never abused and that we do not keep credit unions in the dark, even as we employ their funds to operate the agency.