If the three largest state-chartered credit unions in Californiawere to convert to federal charters, the state's regulator wouldlose $1.7 million of its $7.2 million budget, leaving small andmidsize state-chartered credit unions to subsidize that loss.

That's the worst case scenario the California Credit Union League wanted to avoid, and thereason the league successfully lobbied the state legislature toapprove Assembly Bill 1282, which establishes a new assessmenttable that provides more parity between state assessments and NCUAoperating fees. The bill was signed into law by Gov. Jerry Brown onAug. 16.

The current table had only four tiers, said Melissa Ameluxen,CCUL's vice president of state government affairs. The new formula,she said, includes a table of 10 asset tiers.

Large state-chartered financial institutions have been paying adisproportionate amount compared to their small and midsizestate-chartered credit unions, the league said.

The issue came up a couple of years ago in the Credit UnionAdvisory Council, which is a council of CEOs appointed by thedivision of credit union in California's Department of BusinessOversight, formerly known as the Department of FinancialInstitutions.

CCUL also said this inequity was causing large state-charteredcredit unions to consider converting to a federal charter, whichwould significantly reduce their assessment.

For example, the $8.1 billion The Golden 1 Credit Union's current state assessment pays$708,419 annually. If the Sacramento-based credit union were toconvert to a federal charter, its assessment would fall to$478,141, according to a state analysis compiled by the committeeon banking and finance in the California Assembly.

CCUL also pointed out to California's legislators that if justthe three largest state credit unions—The Golden 1, the $6.4billion Star One Credit Union of Sunnyvale and the $6.2 billionSan Diego County Credit Union—switched to a federalcharter, the state regulator would lose $1.7 million of its $7.2million budget.

The new law, which takes effect on Jan. 1, is expected toaddress these issues by changing the state's assessment so that allof California's 152 state-chartered credit unions will payassessments that are more aligned with the assessments paid by thestate's 251 federally chartered credit unions.

Next Page: By the Numbers

California's current base assessment rate is 82 cents per $1,000in assets, a number that has been steadily increasing. By law, thisbase assessment rate cannot exceed $2.20 per $1,000 in assets.

Credit unions will pay 85% of the base rate for the first assettier of up to $3 million, and 25% of the base for assets of $3million to $6 million. The state's smallest credit unions will paya minimum $2,000 assessment.

As asset tiers increase, the percentage of base rate paiddecreases. The formula will provide relief for large credit unions;in particular, credit unions with more than $5 billion in assetswill see the largest rate drop.

For the five asset tiers between $6 million to $2 billion, therate doesn't change much, decreasing from 13% to 11.5%.

However, for assets from $2 billion to $5 billion, the ratedrops to 8%. And, from $5 billion to $10 billion, the rate drops tojust 3.5%, and is 3% for assets of more than $10 billion.

Despite the relief provided to the state's largest creditunions, executives at small credit unions said they aren'tconcerned.

Alan Cortum, president/CEO of the $45 million Valley Oak CreditUnion in Three Rivers, Calif., said he understands CCUL's rationalefor the new law.

“If some of the big credit unions decided to go, they would redothe assessment which would make it higher on us that are left,because they will be looking for the same pool of money to run thestate-chartered program,” Cortum said. “And in that scenario, weall lose.”

The new law means 128 state-chartered credit unions will seetheir assessments increase between an estimated 0.11% and 9.7%. Buteven with this increase, the state regulator said state-charteredcredit unions would still pay more—between an estimated 0.11% and112.24%—if they converted to a federal charter.

The remaining 24 state-chartered credit unions will see theirstate assessments stay the same or decline, according to CCUL.

“When I look at it (new assessment) I would say it is anequitable schedule,” said Frank C. Michael, president/CEO of the$22 million Allied Trades Credit Union in Stockton, Calif. “I thinkit works.”

Under the new assessment, Michael said Allied Trades' assessmentwould decline slightly by about $10 to $15, though he understandswhy small and midsize credit unions should pay more.

“I think the smaller credit unions should be paying a little bitmore to cover those exams,” he said. “I think that (the stateassessment) is still a great deal for them compared to what itcould be if they paid for the actual cost of the exam.”

But Cortum, who doesn't yet know how the new assessment willimpact his credit union, said he believes most credit unions don'tgive the assessment much thought as long as it remainsreasonable.

“It's just part of the business,” he said. “It's just a billthat you got to pay. That cost, compared to the bigger things wehave to worry about at the credit union, is probably not going toimpact us.”

Alana L. Golden, public information officer for California'sDepartment of Business Oversight, said the new calculator will beupdated and posted on the regulator's website Jan. 1.

“We calculate the assessment based on the credit union's assetsas of March 31 of each year,” she said. “DBO will send outassessment notices in June with payment due by the end ofJuly.”