NCUA Vice Chairman Kyle S. Hauptman during a meeting of the NCUA Board.
As Prepared for Delivery on December 14, 2023
We all appreciate getting the draft budget early enough for a productive public hearing. The format of this year’s hearing allowed for candid and fruitful exchanges between stakeholders and the agency. The input truly helped shape this budget – especially when it came to the details.
While we cannot give everyone all that they want, we found enough common ground for the Board offices to work together to achieve today’s budget. The give-and-take between Board offices was healthy, and I believe it produced a better work product. Although the devil is always in the details, the details are also where we found many of our solutions. I’d like to thank my fellow Board Members for their willingness to work together cooperatively on the budget.
None of us at the NCUA are completely happy about the budget, but that’s a good thing. If everyone in government is happy with the budget, regular Americans know what that means: watch your wallet.
Today is my third anniversary with the NCUA and although I’ve learned a great deal since that first Board Meeting, my views on the budget have largely remained unchanged. Every dollar in this budget comes from credit union members. Many of them are under greater financial stress than this time last year and find themselves having to prioritize the basics like buying gas or making a car payment. Our own data show a dramatic increase in delinquencies in the third quarter, especially for credit card debt and auto loans.
Credit unions must prioritize their scarce resources for serving members while at the same time budgeting to pay for our priorities. We owe it to them to ensure our priorities are worthy of the hard choices credit unions and members are making today.
Agency budgets are written by those receiving the money and not by those paying the money. In any discussion of the cost of anything, you can be sure that those receiving the cash think it’s a more reasonable amount than those paying it. It’s human nature, obviously not unique to this agency. And while the NCUA Board is a fiduciary of the Share Insurance Fund, we don’t control some of the bad things that wind up hurting the Fund, like mortgage delinquencies, and spikes in interest rates. But we do have control over how much we take from the Fund. So that’s my general view on budgetary matters.
Now to the specifics: The 2024 combined budget, based on last year’s 2023–2024 budget, started out with 11.9 percent growth for 2024 compared to our 2023 spending. We were grateful the staff brought that down to 9.5 percent, but it needed further trimming. Today, we are voting on a budget with a 7.0 percent increase over 2023’s budget.
Once again, the major focus is on deploying resources where they will do the most good — in the field, closer to the credit unions. In this budget, Regional Directors have the flexibility to deploy their resources where and how they are needed. After some give-and-take, hiring in the field is being managed to ensure we have the generalists in place to address the myriad of challenges credit unions are facing.
The travel budget was reduced by $2 million, reflecting expectations for some examination work to continue to be conducted off-site by NCUA examiners. It is also in response to input from stakeholders.
As someone who believes that incentives affect behavior, I am pleased that we will be increasing the time between examinations for well-run credit unions. While the NCUA will still complete examinations within the outer limits of existing policy, CAMELS 1 and 2 credit unions will have the ability to "earn" up to two months more in time between exams. This extension frees up thousands of examiner hours, which will be better utilized at credit unions that truly need more attention.
The 2024 recommended final budget includes assistance for small, low-income, and MDI credit unions. Support for small credit unions has been a priority of mine since day one on the job. My fellow Board Members share this priority and with good reason. Out of 4,712 credit unions, roughly 2,900 are under $100 million in assets. Small credit unions aren’t a niche in the industry; they essentially are the industry. It has been a priority for the NCUA in past budget cycles and will continue to be a focus of the agency.
The $45 million in contracts for technology-related investments are far and away the largest piece of the capital budget. The size of our technology spending overall demands more Board oversight and better communication with stakeholders. Complete transparency may not be possible for spending related to cybersecurity for confidentiality reasons, but it should not be a black box either.
Over the past few years, each Board office, at various stakeholder meetings, has recognized the need for more insight into the agency’s technology investments, including MERIT and cybersecurity. I think we all can agree regular updates, including an annual or bi-annual update at a Board Meeting, would be appreciated by interested parties.
This agency’s main assets are the people who work here. Salaries and benefits represent the majority of the agency’s budget. I know Board Member Hood shares my belief that through attrition we can keep or reduce headcount. I ask that we actively consider ways in which we can use attrition to utilize our human resources more efficiently. To be clear, when I mention using attrition to our advantage, this doesn’t always mean reduced headcount. When an employee leaves any organization, it’s often a way to reallocate resources including hiring in other areas.
Again, I’d like to thank the staff, management, and my fellow Board Members for their willingness to work together on this budget. Thank you to the stakeholders who took the time to digest the initial budget and offer ideas on how to improve it.