SACRAMENTO, Calif. – State workers who could soon find themselves without a paycheck due to the California Legislature failing to adopt a budget by the July 1 mandated deadline, are being offered some assistance by Sacramento-area credit unions. No-interest emergency loans are being offered to credit union members from at least four credit unions that serve state workers. "For us, it's a no brainer," said Faith Galati, vice president of marketing for SAFE Credit Union in Sacramento. "It's part of what credit unions do, the people-helping-people component of our responsibility as a credit uinion." Faced with another year in which the state could fail to adopt a budget on time – and complicated this year by the state's $38 billion deficit and a recall campaign of Gov. Gray Davis – credit unions have rolled out the loan programs again to help their members through what could be tough times ahead. The failure of the state to adopt a budget on schedule has become so common that SAFE CU has even incorporated a "state employee emergency loan" program into its handbook. "It's a common occurrence unfortunately in California," Galati said of the budget impasse. "It's not looking good right now," said Julie Ainsworth, marketing manager for First US Community Credit Union in Sacramento, as debate raged one week before the state's budget was supposed to be adopted. "The budget impasse could last for awhile because the parties are pretty far apart," added Mary Robertson, vice president of marketing for Schools Financial Credit Union. "The politics behind it might cause a compromise not to be reached as quickly as it might otherwise be reached." About half of Schools CU's 112,000 members who are employed by educational institutions could see their paychecks shrivel or disappear entirely if the state doesn't soon enact a budget. Although not technically state employees, funding for the schools comes from the state budget. To assist those members, Schools will offer no-interest loans to members with loan amounts varying from 100% of their net paycheck if they utilize direct deposit, 75% if they have a checking account without direct deposit and 50% if they only have a savings account. Loans will be for up to three months or until the budget is passed. Zero percent interest loans are also being offered at The Golden 1 Credit Union, the state's largest with 500,000 members – about 90,000 of them state employees – and about $4.3 billion in assets. "We have done everything we can from the management operational side to gear up and we're ready to roll," said Terry Halleck, president and chief executive officer of The Golden 1. "But we can't do anything until the state announces what it is going to do." The state Senate could vote on a budget as early as June 24. Should a budget not be adopted by July 1, some 40,000 state employees who are members of The Golden 1 and who have checking accounts with direct deposit accounts or payroll deduction will be eligible for the no-interest loans. Other members who do their banking elsewhere will be eligible for loans at 4.99%, Halleck said. "We would also be looking to assist them," she said. "We want to take care of them, too. Of course, we also would prefer at the same time that they switch over to us for checking with direct deposit. Halleck said Golden 1 was going to make it as easy as possible for members to obtain the loans. "What management wanted to do was to make it as easy as we could on the state workers," she explained. "Our plans are to send out loan (applications) to members and all they have to so do is sign it and return it in the provided envelope. It's not that we want to have to do this. We certainly hope the budget gets passed. "In the event they're put in that unfortunate situation, we have geared up to make it as slick as we can for them to literally just have to sign and return (the loan form)," she added. "They don't even have to come in." Halleck, like other credit union leaders in the area, said the no-interest loans weren't simply a ploy to attract new members. Rather, they were designed to help current members who could soon be without a paycheck. Even so, the offers of assistance were catching the public's attention and attracting new members, they said. The Golden 1 has advertised in the local newspaper using the slogan, "We're Here for You." Other credit unions were planning print ads or were notifying members about the loan program through their Web sites, direct mail and through the state payroll department. Galati said most state employees, having gone through past budget crises, were already aware of the loans from the credit unions. "Because this has been going on for a number of years, the state employees know the drill," she said. "They go to the institutions that offer this and as soon as they get notification that they're not going to get their paychecks, they call us. It's almost like they don't have to be advertised to, they already know." "With all the press that this is getting up here, I would imagine a lot of people are going to be looking to join credit unions," predicted Robertson of First US Community CU (11,300 members, $138 million in assets). Members of First US Community with direct deposit will be eligible for no-interest loans for one month and low-interest loans beyond that, according to Ainsworth. Loan amounts will be equal to the member's last direct deposit or last paycheck if the account was opened recently. SAFE CU (104,000 members, $1 billion in assets) will offer zero-percent loans of up to 100% of a member's paycheck that comes to the credit union via direct deposit and up to 50% of the paycheck if direct deposit is not used. The loan program will continue until a budget is passed, Galati said. In addition to the loan program, SAFE CU is also offering to extend existing member loans without interest. "If they have a loan with us we will add months on to it without accruing interest until they begin back on their normal pay period," she said. Credit union leaders said they had not seen or heard of any other financial institutions offering similar programs. "Absolutely not," Galati said. "You wouldn't see a bank doing this." -


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