Cash-strapped states struggling to balance their budgets are exploring untapped revenue sources, which has put the credit union tax exemption back into discussion in several capitals.
"There are approximately 48 states where revenue is down, and unlike here in Washington, by law, nearly every state-with the exception of Vermont-has to balance its budget," said Colleen Kelly, CUNA VP-state governmental affairs. "States are struggling with shortfalls, but they also have increased expenses related to homeland security and other issues like Medicare costs. And as people are laid off, they're using more government assistance. They have to look for revenue."
It was no surprise, Kelly said, when states started looking at some of the tax exemptions they currently have in place. Kevin Callahan, NASCUS' communications director agreed. "When a state needs revenue, it's only natural that they will look to where they're not collecting taxes," he suggested. "A couple of states have put together lists of those exemptions, and of course, credit unions are on that list. But we have a long history of that exemption and plenty of precedent that shows it's good public policy to maintain that exemption."
Kelly noted that, "Many states are looking at rainy day funds, which they established the last time they had problems with shortfalls like this. Some are looking tobacco funds and they're looking at spending cuts, as well. The credit union tax exemption isn't being targeted, but when we hear things like that, we do prick up our ears. The leagues are keeping track of this."
NASCUS has contacted its regulator members to ask them what they may be hearing on this topic, Callahan added.
In Texas, there has been some local news coverage of the tax exemption list put together for the Interim Select Committee on Public School Finance. According to the Texas league, the CU tax exemption is worth about $3.6 million and was included on a list of tax exemptions that, if eliminated, could help generate funds for public schools.
The league said it is already working to educate lawmakers about how detrimental removing the CU exemption would be, both for the credit unions themselves, and their 6.5 million members.
