Bankers Happy To Point To CUs As States Face Budget Problems

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The seemingly endless demands by the banking lobby to revoke the credit union tax exemption has partnered with a new challenge for credit unions in most states: state budget deficits.

How credit unions are going about stressing the value of the credit union tax status was the subject of considerable discussion during the American Association of Credit Union Leagues' annual meeting here.

Rick Pillow of Virginia, Pat Jury of Iowa and David Dick of Kansas discussed what measures they have taken in their respective states and offered advice to those state leagues that may be facing the threat of CU taxation legislation in the future.

Ensuring that a lawmaker's constituents are CU advocates is an important step, the panelists agreed. The Kansas Credit Union League has used Project Zip Code-which identifies the number of credit union members in a given lawmaker's constituency-to call attention to the importance of being good to credit unions-to good effect.

In fact, one of the league's goals is to help credit unions increase their member penetration as a means of showing legislators just how big and important the CU constituency is.

The Virginia CU League has also seen the benefit of Project Zip Code, according to Pillow Pillow.

"The other day I saw [a Virginia state legislator] and the first thing he said to me was, 'I know, Rick. I have 249,143 credit union members in my district,' " Pillow related.

Pillow suggested a four-pronged approach to credit union political advocacy:

Education. "You must educate your lawmakers or you will allow banks to define the problem and the solution," he exhorted. The Virginia league is funding a study to provide fact-based information to counter banker arguments, for example.

Funding. "Gene Farley always told me, 'Never try to raise money while you're trying to implement strategy,'" he recalled, "That's why you have to develop a credit union defense fund." The Virginia league did an analysis to determine how much money it would take to wage a campaign on the same level that Utah's credit unions have had to do in the last few years. "We realized we need about $20 per million in assets. That's $2 million we would need, and we didn't have it."

Know Thy Legislator. "You have to visit with your legislators," Pillow advised. "There were 40 visits done by league lobbyists in 30 days, and let me tell you, those visits were very eye opening for me."

Electioneering. "You have to work legislative campaigns," he counseled. "We worked on 20 key campaigns, in five of which the Speaker of the House asked for our help, and we were happy to oblige. We know they remember who helped them get elected."

Talking Points

Pillow, Jury and Dick offered up a number of strategies and arguments they have used to good effect. Among the talking points, factoids and strategies that were discussed:

* Remind lawmakers that the dual chartering system means imposing a tax on state charters could trigger conversions to the federal charter, which could mean a greater loss to the state than the potential revenue gain.

* Some leagues may be able to demonstrate that the amount of money a CU tax would bring in is so paltry as to be meaningless to the state budget, so doing such an analysis could offer a powerful fact to provide to legislators.

* Show elected officials how banks in the state are able to skirt their own share of taxes through Subchapter S status.

* Create a quick alert/response system to notify credit unions and key contacts for "calls to action."

* Survey members and nonmembers to determine what CU arguments resonate so as to craft an awareness campaign; do another survey after the campaign to determine effectiveness.

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