Two NCUA Board members indicate proposed 2021 budget a no-go without changes; 2020 reprogramming OK’d

Two members of the three-member National Credit Union Administration (NCUA) Board on Thursday in open session took issue with the agency’s budget proposal as drafted and said they would be seeking changes – including the addition of more resources to fund consumer protection and other oversight – before signing off.

The 2021 budget was not up for consideration during the board’s open meeting Thursday, but the agency’s 2020 reprogramming was discussed and served as a neat segue for Board Members Todd Harper and J. Mark McWatters to reiterate the need for more consumer protection resources.

The reprograming approved Thursday reallocates approximately $4.3 million from the agency’s unspent 2020 travel budgets for agency coronavirus response activities and central office renovations. After all the calculations, including funds previously allocated, the agency will be left with about $10.4 million in unspent funds.

The board approved this reprogramming 3-0, but before it did so, Harper and McWatters had their say about the projected 2021 budget and its omissions.

During last December’s open board meeting, Harper voted against the 2020 budget because it did not include an agreement negotiated among the board members to add two positions to the agency’s consumer compliance operation. McWatters, during that meeting, said he also supported the addition and that he planned to pursue a “collegial, collaborative” path forward to make it happen.

NCUA in recent weeks published a draft 2021 budget, totaling $342.5 million, that is 1.4% smaller than the approved 2020 budget; the board is scheduled to act on the plan during its Dec. 17 open meeting.

On Thursday, b\efore the board’s vote on the 2020 reprogramming, Harper aired doubts about the 2021 budget reduction and said he would need to see changes before he could support the plan. “We know” credit unions with higher risk profiles are going to need more examiner attention and closer supervision in the coming year, Harper said. “We must engage in a comprehensive discussion at the board level about the supervisory priorities and field program expectations for 2021.” More specifically, he said the agency will likely need to budget for more examiner and specialist positions than are provided in the draft budget.

Harper also reminded that the NCUA – unlike federal banking regulators and some state credit union supervisors – does not assign a separate consumer compliance rating in its examinations of credit unions. “We need to provide resources to create an effective dedicated program for supervising compliance with consumer financial protection laws,” he said. “That will require more resources than are envisioned in the current staff draft budget for 2021 and 2022.”

McWatters said he agreed with Harper’s comments. “I simply cannot and will not support the staff budget as presently drafted,” he said.

Without citing specifics, McWatters said he’s noticed “a number of expenditures” in the budget that he said are “simply not necessary or appropriate” for safety and soundness. He encouraged credit unions to review the draft budget and give the board their comments and questions prior to the agency’s planned Dec. 2 budget briefing. “In the interim, and as long as I remain on the board, I will continue to carefully review the proposed budgets and identify those items that are not truly important to the operations and mission of the NCUA … (and) let me repeat as well, … the inappropriately omitted items that are truly important.”

McWatters, whose term on the NCUA Board has expired, is serving in a holdover capacity. Meanwhile, Kyle Hauptman’s nomination to succeed him still awaits action by the Senate.

Republican Rodney Hood, the NCUA’s current board chairman, is expected to lose the chairmanship next year under a President Joe Biden, who will likely name Harper, the lone Democrat on the board now, to the chairman’s post.

Memorandum, 2020 budget reprogramming

Slide presentation

RR: NCUA draft 2021 budget, at $342.5 million, is down 1.4% from current but could jump 6.3% in 2022; Dec. 2 public budget briefing slated (Nov. 13, 2020)