Proposed NCUA budget shrinks slightly for 2021

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The National Credit Union Administration is forecasting a lower budget for 2021, due in part to changes at the agency as a result of the coronavirus.

A draft of the agency’s 2021-2022 budget, released Friday, shows next year’s operating budget topping out at $315.6 million, a 0.1% decrease from the approved 2020 budget. Much of that is the result of a 24.8% reduction in the agency’s capital budget that came as a result of surplus travel funds from this year and reductions in the 2021 travel budget due to expected travel restrictions from the pandemic. Further completion of the MERIT examination program also contributed to the reduction, NCUA said.

Along with the budget for the National Credit Union Share Insurance Fund, the agency’s three budgets top out at $342.5 million for next year, which a budget justification document notes is 4.9% lower than the 2021 funding level the board approved last year as part of its 2020-2021 budget.

“As we consider the draft staff budget for 2021–2022, the NCUA remains firm in its commitment to be a sound and prudent steward of the funds we collect from credit unions and any other resources entrusted to us,” NCUA Chairman Rodney Hood said in a press release Friday. “This responsibility includes holding ourselves accountable by maximizing our resources and upholding transparency by inviting the public to comment on our proposed budget. Through this process, stakeholders are aware of how and why we allocate resources in the service of our safety and soundness mission.”

The agency has proposed a $341.8 million operating budget for 2022, an 8.3% increase, though again the capital budget is forecasted to drop by more than 22%. The number of full-time employees at the agency is not expected to change significantly in the years ahead, adding five staffers for a total of 1,191. Even with that addition, the agency’s staff remains lower than it has been at any time since 2017.

Employee pay and benefits make up more than three-quarters of the 2021 operating budget, at $240.9 million. Contracted services ($47.8 million, or 15.1%) make up the next largest category, with administration, travel, and rent, services and utility costs rounding out the rest of it.

Pay and benefits for NCUA staff are expected to rise by 4.1% ($9.6 million) next year and, as in the past, some of that growth is the result of mandatory employer contributions to the Federal Employee Retirement System, which covers nearly all NCUA staff members.

NCUA’s rent, communications and utilities budget is expected to decline by just over $1 million, or 12.6%, due to termination of an Alexandria, Va., leased office space and other savings gained by through the use of surplus travel funds.

Administrative expenses and contracted services, however, are both expected to increase by a total of $5.1 million, or 9.8% and 10.3%, respectively.

NCUA noted that the relative size of the budget “continues to decline when compared to balance sheets at federally insured credit unions. This trend illustrates the greater operating efficiencies the NCUA has attained in the last several years relative to the size of the credit union system.” The agency also said it has moved more aggressively to improve operating efficiencies when compared with other federal banking regulators.

Credit unions have consistently bemoaned NCUA’s increasing budgets, particularly as some other federal regulators have been able to shrink their budgets in recent years.

In a statement on Friday, Dan Berger, president and CEO of the National Association of Federally-Insured Credit Unions, commended the agency’s “continued commitment to an open and transparent budgeting process,” but added that because of the challenges the industry faces from the pandemic, “it is as important as ever that we ensure the agency’s budget remains strong yet cost-effective.”

The NCUA board is expected to discuss the budget proposal as part of its Nov. 19 open board meeting. A public budget briefing is also scheduled for 10:00 A.M. on Dec. 2.

This story has been updated with corrected information on public hearings regarding the budget proposal.

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