Senate Bill 5913, sponsored by Senators Prentice, Hobbs, and Benton, was approved by the Legislature and will go into law on June 8. The bill, which passed the Senate 43 to 2 and the House 80 to16, increases the amount of funds that governments can deposit in credit unions. I suggested adding this legislation to Seattle’s legislative agenda. Its passage is a modest but gratifying success for those of us who would like to broaden support for cooperatives like credit unions, and who would like to see a financial system that provides more diverse opportunities for public and private investments.
Washington has a long and proud heritage of cooperatives and other alternative institutions. We have the largest percentage of publicly-owned electricity providers of any state, many successful credit unions, and some of the largest and most well-known cooperatives in the country – like Recreational Equipment Incorporated (REI), the Puget Consumers Co-Op (PCC), and Group Health Cooperative (GHC).
Yet, until recently, Washington required that public agencies deposit their funds only in commercial banks, and prohibited them from using credit unions. State law requires that any entity that will hold public funds must be certified as a ‘public depository’ by the Public Deposit Protection Commission, which consists of the Governor, Lieutenant Governor, and the State Treasurer. This Commission can only authorize funds to be deposited in entities which will provide collateral that can be used as part of a pool to ensure that public funds are secure if any institution fails or defaults. These fairly conservative financial policies were designed and have been managed to, appropriately, ensure that public funds are stewarded properly and that the public is not put at risk.
Credit unions don’t quite fit into these standards, so they were not certified to hold public funds. In 2010, the legislature decided that credit unions should be eligible, but that they would provide security in a different way, through their protection as part of the National Credit Union Share Insurance Fund. But the 2010 legislation only allowed the use of state-chartered credit unions (many credit unions hold national charters), and limited deposits to $100,000, even though credit union accounts are insured up to $250,000.
The new legislation adds nationally –chartered credit unions to the list of eligible institutions, and sets the ceiling for public deposits at the maximum deposit insured by the National Credit Union Share Insurance Fund, which now is $250,000 but which could increase in future years.
This is a modest change, but one which contributes to opening up the financial system. Congratulations and thanks to the legislature and the sponsors for making this happen.