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SPRINGFIELD, Ill. – With regulation of credit unions reportedly under siege because of a state budget crisis, the Illinois Credit Union League was marshalling its lobbying forces this week to beat back what it described as a “surprise $4.5 million raid” on operating funds in the Department of Financial Institutions. In a special legislative “action” alert, the League urged members to contact Illinois lawmakers to defeat a Senate-backed bill pushed by the administration of Gov. Rod Blagojevich to transfer funds to a state general fund to help solve the budget crunch. “State credit unions are the victims in this situation and now there is a prospect of state to federal conversions,” warned Keith Sias, the League’s director of state government affairs. Illinois with 400 state charters ranks at the top in that category, but it was unclear how many would actually pursue such a move now given what was characterized as the “fluid” nature of the budget dilemma, impacting scores of other state industries -including banks-with similar regulatory agencies. Lawmakers were working feverishly with the Blagojevich administration to meet a July 1 deadline to craft a budget to keep operating agencies running. Meanwhile, “we are encouraging our members to engage in a dialogue with lawmakers not to approve” bills that could amount to a sharp increase in fees to continue operating the department, said Stephen Olson, the League’s executive vice president and general counsel. “With eight days to go to get this resolved,” observed Olson, “the state has obviously been engaged in a whacking process,” desperate to find needed revenue, but it remains “still very speculative at this stage on what the final impact” might be on the department. Nonetheless, a May 24 League “alert” did warn that the state’s CU fund has an operating balance of $4.7 million, but “the proposed $4.5 million transfer will decimate the fund and imperil DFI’s ability to regulate state-chartered unions and threaten the very existence of the Credit Union Division.” The League said it opposes a Blagojevich proposal “to increase credit union regulatory fees and use the fund for purposes unrelated to the supervision of credit unions.” The proposed transfer would require “additional financial assessments against credit unions despite the fact credit unions have already paid their regulatory fees for the period covered by the state FY 2005 budget,” said the alert. The “raid” on the funds comes as the DFI undergoes a major July 1 consolidation with other state financial agencies, also viewed as a cost cutting move by the Democratic governor. Joan Mitnick, program policy advisor for DFI, said four state agencies including the Office of Banks and the Department of Insurance would be combined into a newly created “Department of Financial and Professional Regulation.” Mitnick declined to comment on the “raid’s” impact on department operations referring a reporter to the governor’s office. “Whatever happens across the department” or on “contingency plans” would have to be answered by aides to the governor, who were not immediately available at press time. Eldon Arnold, president/CEO of the $2.7 billion Citizens Equity First CU of Peoria, the state’s second largest CU, called the transfer of funds “devastating” to the department and said converting to federal “is an obvious alternative although we don’t want to act in a knee jerk fashion” to events. Still, the “raid” on funds to operate the department “is a form of hidden taxation” on state CUs as fees would be increased to pay for the deficits, said Arnold, noting his CU paid one of the highest amounts – $180,000 in examiner fees. Citizens Equity First CU, it was noted, converted from a federal in 2000, and Arnold said that it’s always an option to convert back. It was previously known as Citizens Equity Federal CU. The $4.3 billion Alliant CU in Chicago, the state’s largest and formerly known as United Airlines Employees CU, said it too paid fees in the $180,000-plus range, and said it was adopting “a wait and see attitude on developments.” The CU “is obviously against a raid on funds sworn” to support CU regulation, said Frank Weidner, senior vice president-member services. Weidner noted that CUs “are not alone” in facing the impact of the state’s budget crisis. “Lot of other industries are impacted, too,” he said. -

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