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ALEXANDRIA, Va.– NCUA’s proposed 2025-26 budget is simply too high, according to the industry’s two largest trade groups, which offered input and feedback on where they want to see the agency take action on its expenses. And the trade groups were not the only ones concerned during Friday’s budget hearing. NCUA Vice Chairman Kyle Hauptman outlined several issues he sees with the agency’s expenses, delivering some hard questions to staff. The Defense Credit Union Council (DCUC) and America’s Credit Unions advised NCUA that now is the time to end the steady increases in the annual budget—which ACU said are leading to a lack of confidence among credit unions in the agency’s ability to produce a workable and fair budget. The proposed combined 2025 budget is $433 million, a 12.2% increase from the 2024 budget:
The agency has released its draft budget online for review and comment, comments are due by Nov. 27. NCUA Chairman Todd Harper shared that this year’s staff draft budget makes “critical investments” in the following areas:
“The draft budget also illustrates how the NCUA is using its resources more efficiently,” Harper said. “For example, travel is one of the agency’s largest cost elements. In 2025, the agency projects it will spend $22.1 million. Yet, this figure is approximately $4.7 million, or 17.5%, below the pre-pandemic 2019 travel budget of $26.8 million. When coupled with the fact that travel costs have risen considerably in recent years, the staff draft budget demonstrates the agency is completing more of its exam and supervision tasks remotely.” Committed To Reducing Budget Harper said he recognized the concerns already raised by several of Friday’s participants via their written statements about the size of the 2025 budget increase. “I am committed to reducing the budget ultimately approved by the NCUA board in a way that allows the agency to complete its mission of safety and soundness and consumer protection, and to safeguard taxpayers from losses to the Share Insurance Fund,” he said. Hauptman shared concerns about the 12% budget increase, adding he first learned about the hike from credit unions, not the agency. “I was at conferences and people would walk up to me and ask me about the 12% increase,” Hauptman said. “Ten thousand dollars, that is how much per credit union extra, on average, we're asking…That's a fair amount of money.” Hauptman had hard questions for NCUA staff presenting the budget details. The vice chairman first asked the team to tell him how many of the 23 NCUA departments asked for fewer people in 2025. Staff said no department asked for a reduction. “That is the first sign, to me, that this is a government budget,” Hauptman said. Hauptman also asked staff to quantify the additional benefits the agency will deliver in 2025 from the 12% increase, which Hauptman reminded comes to about $10,000, on average, to each CU. “One of the most significant factors driving that $10,000 figure, in this hypothetical, is the draft budget assumed less carryover from the prior year,” staff said. “So, we need to make up that funding to maintain even the same things we were doing last year, if there was no cost change whatsoever. That would be a part of it. As we've discussed in the presentation, pay and benefits are the other significant drivers.” Hauptman also asked one member of the team if he was a millionaire. After the staff member responded his net worth exceeds $1 million, Hauptman eventually remarked, “I wonder whose financial security we’re actually helping at the end of the day.” DCUC Testifies “The proposed 2025 budget reflects a substantial increase compared to prior years, with significant growth in both operational costs and staffing levels,” said DCUC Chief Advocacy Officer Jason Stverak. “While DCUC recognizes that inflationary pressures and regulatory needs necessitate some budget adjustments, the magnitude of the proposed increase raises serious questions about its necessity and sustainability.” Stverak pointed out to the board DCUC is largely concerned with the 12% increase from the 2024 budget, an increase of 14 positions as compared to the 2024 budget, and an increase of $25.9 million in funding for contracted services in the proposed 2025 budget compared to the 2024 budget. “The proposed 2025 budget reflects a substantial increase compared to prior years, with significant growth in both operational costs and staffing levels,” Stverak said. “While DCUC recognizes that inflationary pressures and regulatory needs necessitate some budget adjustments, the magnitude of the proposed increase raises serious questions about its necessity and sustainability.” Steverak said the proposed budget’s operational cost increases appear disproportionate to the growth in the credit union industry and the risks facing credit unions. He also noted the budget includes a substantial increase in staff positions. “While we understand the need for specialized expertise to address emerging risks, such as cybersecurity and financial technology, it is unclear whether these additions represent a prudent use of credit union resources,” Stverak said. “DCUC urges the NCUA to provide a transparent cost-benefit analysis to justify these new positions, particularly in light of current economic uncertainties affecting credit unions and their members.” Stverak pointed out credit unions have successfully navigated the challenges of the pandemic by balancing flexibility with a commitment to in-person collaboration. “DCUC encourages the NCUA to adopt similar practices by facilitating a gradual return to the office for its employees,” he told the board. “This will enhance efficiency, communication, and oversight capabilities, aligning with how the credit union industry has managed its workforce.” Stverak concluded by saying DCUC supports the NCUA’s mission and recognizes the critical role it plays in maintaining the health and stability of the credit union system. “However, the proposed 2025 budget raises concerns about fiscal prudence and its potential impact on credit unions and their members,” he said. “By addressing these concerns and committing to efficiency and transparency, the NCUA can ensure that its operations remain aligned with the needs of the credit union community.” ACU Testifies America’s Credit Unions shared similar concerns. “The 2025 proposal represents a 12% increase over 2024, and the 2026 proposed budget grows another 7.5%. These spending increases come at a time when inflation is subsiding,” said ACU Head of Emerging Issues and Deputy Chief Economist Curt Long, noting that until 2023, NCUA’s operating budget increases were tied closely with the Consumer Price Index. “The 2024 budget was a notable departure, as agency spending grew well in excess of inflation,” he added. “That gap is poised to widen through 2026, assuming inflation aligns with Federal Reserve expectations. This spending path is unsustainable.” Breaking down expenses, Long stated in his written testimony, “While estimates of benefits are vague and unquantified, we ask the board to consider providing periodic updates on those areas with material spending increases to allow stakeholders to assess the degree to which the agency is maximizing value for its investment.” One possible approach, Long proposed, is for the agency to require heads of any agency department seeking significant year-over-year budget increases to present to the board during an open board meeting the following year to detail what the actual impact of that spending has been, and whether that impact has met expectations. “This would not only provide for true accountability and facilitate ongoing cost-benefit analysis, but would also provide an opportunity for the board to assess its spending outside of the budget setting process,” he said. Long said feedback ACU has received from credit unions on its proposed budget indicate a “lack of confidence” in NCUA management given the continual, significant increases in the agency’s budget. “The board has the ability to right the ship, and we urge it to do so. It is critical that the credit union industry have confidence in its prudential regulator,” Long said. Long’s written testimony shared a chart (below) that showed how the NCUA budget impacts the median federal credit union and federally-insured state-chartered credit union, respectively, noting that the median FISCU is over twice as large as the median FCU. “The median FCU, which manages $42 million in assets, would be saddled with a $9,000 operating fee and a $5,300 SIF allocation,” he said. “We estimate the latter value based on the median FCU’s pro-rata share of total insured shares. Taken together, the total burden for 2025 is roughly 7% of the median FCU’s bottom line. That burden has risen 47% since 2022. If the NCUA is truly concerned about the long-term survival of all but the largest credit unions, it must rein in spending.” For the median FISCU, which has $97 million in assets, the burden is also sizable at $11,700, he said. Long turned to NCU’s supervision/examination budget, pointing out this is the largest functional area of NCUA’s operating budget. “Comprising the Regions, the Office of National Examination and Supervision, Examination and Insurance, and the Office of Consumer Financial Protection, the proposed supervision budget for 2025 totals $222 million,” Long stated in his written testimony. “The dramatic increases in recent years in NCUA spending has been broad-based, and the supervisory function is no exception. Where supervision expenditures were virtually unchanged between 2016 and 2022, they are poised to rise 24% in the four-year period ending 2026 if the NCUA makes no changes to its proposed budget.” To better achieve its goal of reducing burdens on credit unions during the exam process, Long recommended that future virtual exams should be deployed on an 18-month or longer extended cycle for all low-risk, well-run credit unions, regardless of their size. “At a minimum, the agency should seek to maintain parity with the extended exam threshold for banks by raising its threshold to $3 billion,” he said. “Notably, since the $1 billion asset threshold for the extended exam cycle was established in 2016, the median asset size of a FICU has doubled and the average size has grown by 125%.” Also testifying Friday were representatives from the GoWest CU Association and the National Community Reinvestment Coalition. Read the full article >>> Comments are closed.
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