State Budget Gap In Illinois Leads To Big Fee Increase

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A plan to close a $5-billion gap in the state budget being debated by the legislature last week would cost state-chartered credit unions an estimated $1.9 million in increased supervisory fees.

The fee hike, amounting to a 50% rise, is being viewed as a "back-door" tax, because, unlike the current system where credit union fees are earmarked for the credit union program, the new revenues would be commingled with the state's general fund to help balance the budget.

"While they're not calling this a tax on credit unions, it's a regulatory fee that's not being used on credit unions," said Keith Sias, chief lobbyist for the Illinois CU League.

The additional fees, which will be assessed the state's 400 state-chartered credit unions, will amount to tens of thousands of dollars for some credit unions, prompting discussions of conversions to federal charters. Even with the increase, supervisory fees for state-chartered credit unions in Illinois would still be less than those charged by NCUA for federal charters, but it could encourage credit unions to start looking at converting, Sias suggested.

"We are concerned that a large number of our state charters are going to start looking at a federal charter," he said. "It's going to make it more difficult for us to hold on to our state charters."

Several state-chartered banks, which will see a doubling in state supervisory fees under the program, are already looking at converting charters. Illinois' 500 state-chartered banks will see their examination fees rise by more than $5 million for next year.

The credit union lobby is also lamenting another aspect of the budget-balancing plan that would assess a 5% annual administrative fee on the 600 special purpose funds run by the state. That would cost the $3.8-million CU Fund, which holds fees dedicated to credit union supervision, as much as $190,000 a year.

Since the state is required under its constitution to have a balanced budget, credit unions were almost certain to be assessed to help close the fiscal gap in the governor's $52.4 billion spending proposal, asserted Sias. "Unfortunately, we're going to be part of a bigger budget package, so there's not much we can do about it," he said.

Lobbyists were working last week to limit the bite of the budget proposal but were resigned to a major financial hit whatever the legislature agreed to in the days leading up to its May 31 adjournment. "We're working behind the scenes to see if we can't get the fees reduced, somehow," said Sias.

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