The NCUA board approved its 2017 budget Thursday without the verbal fisticuffs that marked budget meetings in recent years.
At its monthly meeting, the board also was warned that a premium assessment for the National Credit Union Share Insurance Fund might be needed next year, since the fund’s equity ratio is expected to dip below the standard set by the agency.
NCUA staff recommended a share insurance premium range of 3 to 6 basis points in 2017. That premium will not take effect until the board votes on an actual proposal.
The agency’s 2017 spending plan stands at $298.2 million—an increase of about $7.2 million, but $1 million less than the budget the board was presented with at its meeting last month.
And the estimated 2018 budget estimate stands at $312.3 million, some $1 million less than the budget presented last month.
Board member J. Mark McWatters praised the budget process—a sea change from his opposition to budgets during the past two years.
“We have a much more collegial board right now,” he said. He acknowledged that that his previous comments amounted to “somewhat strident opposition.”
That vocal opposition last year resulted in then-Chairman Debbie Matz telling McWatters, “There’s so much misinformation in that statement, I won’t even attempt to refute all of it.”
McWatters said this year’s budget process was much more transparent than in past years and he praised Chairman Rick Metsger for re-instituting the annual budget briefings.
McWatters also said he wanted to ensure that a quorum of the board passed the budget, since there is uncertainty whether the board will even have a quorum in the near future.
McWatters has been nominated for a seat on the Export-Import Bank, but his nomination is stalled in the Senate.
And John Herrera, senior vice president for Latino and Hispanic Affairs at the Self-Help Credit Union has been nominated to fill Matz’s seat, but that nomination also is stalled in the Senate.
For his part, Metsger said the budget was presented earlier than in past years and called the document “non-partisan.”
He lamented the fact that few people submitted comments on the proposed budget during the past month, adding that it lends credence to his feelings that credit union trade groups simply like to use the budget as a punching bag.
The budget, as approved, reflects a decrease in spending as a result of the agency’s Exam Flexibility Initiative, which will decrease the frequency of some financial institution examinations. The board gave final approval to that initiative as well.
However, some of that decrease is offset by costs associated with the agency’s Enterprise Solutions Modernization program
In explaining the budget, NCUA CFO Rendell Jones said that 83% of the agency’s budget goes to “human capital.”
NCUA staff reported that the growth in insured shares in credit unions, coupled with continuing low interest rates is causing a decline in the NCUSIF’s equity ratio.
Federal law requires the normal operating level for the NCUSIF to fall between 1.20% and 1.50%. The NCUA board has set its acceptable level at 1.30%.
Under current projections, the equity ratio is expected to drop to between 1.24% and 1.27% next year.
NCUA Director of the Office of Examination and Insurance Larry Fazio said the board, if it wished, could decide it was comfortable with a ratio of 1.27 percent.
Metsger said that the agency has pushed Congress to allow it to use a risk-based formula, but that legislation has not been enacted.
McWatters appeared resigned to the drop in the ratio. “There’s not much we can do up here to change it,” he said.
The board also was told that the Overhead Transfer Rate will be 67.7%, down 73.1%.
Board staff also reported that the number of problem credit unions has dropped from 409 in December 2011 to 201 at the end of September.
