HARRISBURG, Penn. – The Pennsylvania CU Association is opposing a proposal to help whip the state’s budget into shape by reducing or eliminating tax exemptions for non-profit entities, including credit unions.
State Auditor General Jack Wagner sent a list of recommendations to Gov. Ed Rendell and the General Assembly to consider as alternatives to raising state income taxes – which Rendell favors – to resolve the state’s budget impasse that has been in effect since July 1. Wagner offered seven suggestions that could raise at least $1.3 billion in revenue to close the budget gap. They included reducing eligibility errors in the state's Medicaid program, increasing efforts to recoup $3.2 billion in uncollected taxes, offering an early retirement incentive to state employees, tapping into the state's Rainy Day Fund, adding table games to Pennsylvania's slots casinos, asking the General Assembly to return half of its own $200 million budget surplus, and reviewing all tax credits and tax exemptions and closing tax loopholes provided to select individuals and organizations.
PCUA president Jim McCormack sent a letter to Wagner dated Aug. 14. In the letter McCormack stated the league’s “strong opposition” to Wagner’s suggestion to evaluate tax-exempt entities as a funding source for the state budget crisis. McCormack emphasized the CU movement’s long history of helping consumers, and pointed to the role they recently played in supporting state workers through payless paydays.
Indeed, credit unions have assisted state workers who had not been getting paid for more than a month, providing 0% or low-interest loans [CU Journal, Aug. 7], before a temporary bridge budget was passed last week that is allowing workers to get paid and receive their back pay. But the temporary budget was aimed at fixing only the problem of state workers’ payless paydays, and a $1.3-billion hole still exists.
McCormack letter also noted: “consumers receive a ‘better deal’ in lower interest rates on loans and higher rates in savings due to the credit unions’ cooperative structure. Credit unions focus on service to members, rather than squeezing the last dime from each and every transaction. Changing the tax status of credit unions would change the dynamics of the credit union business model . . . Creating a tax on credit unions would disrupt the balance of market competition, but more importantly would endanger the services that they are able to provide to members and their communities.”
What makes Wagner’s recommendation so “dangerous” now, said Diane Powell, PCUA director of communications, is they come during a tough economy when the threat of increased state income tax looms as the alternative to address the budget deficit. “We have had budget impasses in the past, but this is one of the most ugly in recent years,” she said. “Now you have this list of alternatives Wagner is proposing in lieu of raising taxes.”
