Since before the turn of the century credit unions have been looking for a legislative win. Something that will not only improve our charter but also show that we can get proactive legislation passed. With the proposed MBL bill, we had the perfect legislation at the perfect time. We pulled out all the stops, lined up our support and were promised a vote before the 112th Congress adjourned on Dec. 31, 2012.
Well, we’re on to the 113thCongress without a new law or even a vote on MBL. Even worse, we are now faced with yet another fiscal showdown over the debt ceiling that has given the bankers the opportunity to bring our tax-exempt status into the fray. Of course, we’ve been assured that credit union taxation is off the table. But, depending on who you listen to, so is Medicare, Social Security, defense spending, Grover Norquist’s pledge, NRA common sense and expanded replay in baseball. Think they’re all safe? How bout at the state level?
Our failure on MBL and the re-emergence of the tax debate has led to much frustration in many circles of the credit union community. The consensus is that we’ve put a great deal of effort and money into this battle and have achieved no meaningful results. In fact, we seem to be slipping backwards. The discussion turns quickly from, How did we lose this one? to What are we going to do differently going forward to change the result? Meanwhile, both CUNA and NAFCU have emphasized that they are focused on preserving our tax exemption. But they don’t appear to be prepared for another run at any meaningful legislative initiatives. And even if they did, it’s hard to imagine that we’ll be any more successful than we have been without some radical changes in substance and approach.
While serving on the CUNA executive committee for six years, I observed firsthand how poorly CUNA and NAFCU cooperate. It was, and remains, apparent that two organizations competing against each other for the same members simply can’t be expected to trust each other. Without trust, effective coordination and compromise are impossible. As a result, the credit union community is wasting precious resources at a time when we have an incredible opportunity to help more consumers than ever before. It’s time to overhaul the trade association structure as it exists today.
Start with things that CUNA (strong local presence, high visibility on Capitol Hill and in many statehouses and a prominent PAC) and NAFCU (good at public relations, compliance and strong direct communication with credit unions) do well. Redesign the current CUNA/league structure to improve accountability, eliminate duplication and reduce competition between the state and national associations and between state associations. Make sure issues are vetted appropriately and speak with one, strong voice at the national level with full support from the state and local level. I understand that this is a huge task. The internal defense systems are powerful and highly resistant to change. Longstanding principles stand in the way. There are deep resentments that would have to be overcome. In fact, this sounds a lot like the fiscal cliff debate that we’re all fed up with and a familiar question arises. Are we finally ready to go after a real fix or do we just kick the can down the road again?
Speaking of radical change, here’s another thought, Since our tax exemption is, once again, under attack, maybe we do what no one else in Washington seems willing to do. Let’s think about a proactive approach that really does take the issue off the table. Let’s propose a tax plan for credit unions. This idea has been floated privately and in small groups on occasion.
The plan created an option for those credit unions that wished to have expanded charter options, including open fields of membership, no MBL cap and access to secondary capital. The tradeoff would be taxation if the credit union’s net worth exceeded a reasonable level. The plan, while thoughtful and praised by many, was never seriously considered mainly due to fear, fear that it would split the credit union community and fear that once you start moving down the path of negotiating taxation you would lose control of the issue and get a bad deal.
And back to the issue of our trade association structure, how do you think NAFCU would react if word got out that CUNA was having meaningful discussions about such a plan (or vice-versa)?
Don’t get me wrong, we can probably continue to get by. We should be able to block taxation and could even have a few more moral victories like the TAG defeat. We lost something, but the banks lost more. Maybe we’ll have another perfect opportunity and maybe this time there will be something that the banks really are willing to trade so our “friends” in Congress can bring themselves to actually vote on a bill. Sound like a plan? Well, until we’re prepared to engage in some serious debate about meaningful changes, however controversial or uncomfortable they are, that seems to be all we’ve got.
Tom Dorety is CEO of Suncoast Schools FCU, Tampa, Fla.
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