Credit Unions Could Provide Cost-Free Mandate Relief
Governor Cuomo traveled to God’s Country yesterday, aka Long Island, to highlight his push to require county executives and local municipal leaders to jointly develop a package of cost-saving measures that would be put before local voters in November. The hope is to spur innovative ideas to reduce property taxes, which in places like Long Island, are making it impossible for the middle class to live and start a family. You won’t find a politician who is against mandate relief in concept.
As luck would have it, I have a simple proposal that would save taxpayer money without decreasing local budgets or making the state Legislature pay more cost: Give localities in NYS the option of placing municipal deposits in credit unions. Doing so has the potential to accomplish real savings for taxpayers while insuring that localities maximize funds available for public services.
Town boards, school districts and other such government entities have an obligation to spend taxpayer money in the most efficient way possible. Unfortunately, these same entities aren’t allowed to deposit public funds in credit unions, even if a credit union could offer a better rate of return on taxpayer funds. That’s right; New York’s law has the effect of prohibiting local leaders from getting the most bang for their buck.
Allowing municipalities to work with credit unions would even help towns that decide to keep their taxpayer funds in a commercial bank. Competition can only help drive down the cost of depositing funds. Currently, the banks have a monopoly on public funds and last I checked, monopolies do not create much of an incentive to provide cost-effective services.
By allowing credit unions to compete for public funds, the Legislature would simply be correcting a historical quirk. Albany insisted that public funds be put in banks before Municipal Credit Union became New York’s first credit union, a little more than 100 years ago. Today, it borders on illogical that New York authorizes teachers and state workers to form credit unions while denying those same credit unions the authority to accept funds from local governments and school districts.
And the prohibition has nothing to do with safety and soundness. Today credit unions have the same share insurance requirements and protections as banks. The only difference is that credit unions are back-stopped by the National Credit Union Share Insurance Fund, while banks are overseen by the FDIC. By giving municipalities the option of placing funds with credit unions, New York would simply be doing what a little more than half the states in the nation already allow.
According to Newsday, the governor’s proposal is intended to spur county and local leaders. He is hopeful, for example, that local leaders will work together and come up with cost-saving ideas, such as shared storage facilities and joint equipment purchases. As someone who proudly believes that government should not be able to take a single dollar out of my pocket unless it has a darn good reason to do so, I think all of these are ideas worth considering.
The problem is one person’s mandate is another person’s cherished government program.
If New York really wants to help taxpayers get more bang for their buck, it is time to end the banking monopoly on municipal deposits.
Entry filed under: General.