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F I S C A L I M P A C T R E P O R T

SPONSOR Ortiz y Pino

ORIGINAL DATE

LAST UPDATED

2-6-06

HB

SHORT TITLE LOW-INCOME RESIDENT CREDIT UNION

SB 645

ANALYST Hadwiger

APPROPRIATION (dollars in thousands)

Appropriation

Recurring

or Non-Rec

Fund

Affected

FY06

FY07

$200.0

Recurring

General Fund

(Parenthesis ( ) Indicate Expenditure Decreases)

SOURCES OF INFORMATION

LFC Files

Responses Received From

Department of Finance and Administration (DFA)

Regulation and Licensing Department/Financial Institutions Division (RLD/FID)

Human Services Department (HSD)

SUMMARY

Synopsis of Bill

Senate Bill 645 appropriates $200 thousand from the general fund to the Local Government Di-

vision (LGD) of the Department of Finance and Administration (DFA) in FY07 to develop a

credit union for low-income residents of New Mexico.

FISCAL IMPLICATIONS

The appropriation of $200 thousand contained in this bill is a recurring expense to the general

fund. Any unexpended or unencumbered balance remaining at the end of FY07 would revert to

the general fund.

SIGNIFICANT ISSUES

DFA noted that this legislation addresses the need to establish a credit union serving low-income

individuals/groups in New Mexico. One of the primary reasons to create credit unions is to

make credit available to people of modest means. To fulfill this mission the National Credit Un-

Senate Bill 645 – Page 2

ion Association (NCUA) has established special operational policies for federal credit unions

that serve low-income groups and underserved areas. A low-income credit union is defined in

Section 701.34 of the NCUA Rules and Regulations as one where a majority of its members ei-

ther earn less than 80% of the average for all wage earners as established by the Bureau of Labor

Statistics, or whose annual household income falls at or below 80% of the median household in-

come for the nation. The term "low-income" also includes members who are full-time or part-

time students in a college, university, high school or vocational school.

According to DFA, a senior official of the State Employees Credit Union stated that there were

at least two low-income credit unions that were established and doing business in Albuquer-

que—New Mexico Central Credit Union and Rio Grande Credit Union. Existing credit unions

can obtain a designation as a “low-income” credit union by forwarding a request for the designa-

tion to the regional director of the NCUA along with appropriate documentation supporting the

request. An existing credit union can also perform a loan or membership survey for another

credit union to determine if the credit union is primarily serving low-income members.

ADMINISTRATIVE IMPLICATIONS

DFA indicated that DFA/LGD does not administer any type of program related to the operation,

feasibility or establishment of a credit union. Therefore, the LGD could only act within the pro-

curement policy in providing oversight for contractual services. Additionally, this legislation

does not address programmatic goals at LGD/DFA. The LGD would administer the funds with

the responsible party through a grant agreement, request for proposals or a memorandum of un-

derstanding. DFA indicated the appropriation could be managed with existing staff and would

not require additional human resources.

ALTERNATIVES

DFA offered alternatives to the bill. An existing credit union could conduct a low-income sur-

vey to determine if 80 percent of the people served in the area are of low-income. A determina-

tion of low-income would qualify the credit union as a "low-income" credit union by the NCUA.

Also, a request to open a branch could be issued to an existing credit union to serve a specific

underserved area or low-income areas of New Mexico. Low-income individuals can continue to

bank at conventional banks that are required to operate under the “Community Reinvestment

Act” which requires all banks to operate under guidelines to serve the needs of individuals in that

community.

HSD recommended that language should be added to SB645 to specify what is meant by “de-

velop a credit union,” or “low-income residents of New Mexico.”

DH/nt