Report - 2021 01 28 A28327 D225691 Bill Report 5106 Sbr Bfst Ta 21

Summary

A Senate Bill Report on SB 5106, an act relating to municipal access to local financial services, as of January 21, 2021, prepared by nonpartisan staff of the Senate Committee on Business, Financial Services & Trade. The bill, sponsored by Senators Liias, Rivers and Wilson, removes the limit on credit unions accepting public deposits above the maximum insured amount from a county with a population greater than 300,000. The background section describes public depositaries designated by the Washington Public Deposit Protection Commission and the 2018 amendment adding credit unions. The report lists no appropriation and an effective date ninety days after adjournment. It summarizes public testimony for the bill from credit union representatives and a county treasurer, and against it from bankers' associations.

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                             SENATE BILL REPORT
                                   SB 5106

                                      As of January 21, 2021

Title: An act relating to municipal access to local financial services.

Brief Description: Concerning municipal access to local financial services.

Sponsors: Senators Liias, Rivers and Wilson, C..

Brief History:
     Committee Activity: Business, Financial Services & Trade: 1/21/21.


                                      Brief Summary of Bill
           • Removes the requirement that limits credit unions from accepting public
             deposits greater than the maximum insured amount from a county with a
             population greater than 300,000, or from public funds depositors located
             in a county with a population greater than 300,000 persons.


SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES & TRADE

     Staff: Clinton McCarthy (786-7319)

     Background: Public funds may be deposited in a bank or trust company, savings bank,
     savings association, or a credit union under certain circumstances, that has been designated
     as a public depositary by the Washington Public Deposit Protection Commission
     (commission). "Public funds" means money, including money held in trust, belonging to or
     held for the state, its political subdivisions, municipal corporations, agencies, courts, boards,
     commissions, or committees.

     To be approved as a public depositary, a bank, credit union, or thrift must meet minimum
     requirements of the commission and must pledge securities as collateral to protect public
     funds on deposit above the amounts insured under the Federal Deposit Insurance
     Corporation. If the deposit insurance and the collateral pledged by a failed institution are



     This analysis was prepared by non-partisan legislative staff for the use of legislative
     members in their deliberations. This analysis is not part of the legislation nor does it
     constitute a statement of legislative intent.

Senate Bill Report                              -1-                                             SB 5106
     insufficient to reimburse, all public depositors, the other public depositaries, as part of the
     public depositary pool, are each assessed a proportionate share of the shortfall.

     The commission may request a public depositary to furnish information on its financial
     condition, public deposits, and on the exact status of its net worth. The commission may
     take any action deemed advisable for the protection of public funds and to establish
     procedures for collection or settlement of claims arising from the failure of a public
     depositary.

     In 2018, statute was amended to include credit unions in the definition of public
     depositories. Credit unions are allowed to accept public deposits greater than the maximum
     insured amount from a county with a population of 300,000 persons or less, or from public
     funds depositors located in a county with a population of 300,000 persons or less. Credit
     unions that receive public deposits must meet all of the minimum requirements of the
     commission, must pledge securities as collateral to protect public funds on deposit, and
     must participate in the public depository pool. The Department of Financial Institutions is
     permitted to rely on information from the National Credit Union Association regarding
     credit unions when investigating or examining public depositories.

     Summary of Bill: The condition that limits credit unions from accepting public deposits
     greater than the maximum insured amount from a county with a population greater than
     300,000, or from public funds depositors located in a county with a population greater than
     300,000 persons is eliminated.

     Appropriation: None.

     Fiscal Note: Available.

     Creates Committee/Commission/Task Force that includes Legislative members: No.

     Effective Date: Ninety days after adjournment of session in which bill is passed.

     Staff Summary of Public Testimony: PRO: This is follow-on legislation to a bill that the
     Legislature passed in 2018. This bill provides local governments with one more option for
     where they can spread their public deposits to. Credit unions would be allowed to partner
     with the five largest counties in the state. This is not an uncommon practice in our
     country—two-thirds ofstates in the country can already do this. The current policy is based
     on a century old framework that is dated because it was developed prior to the rise of credit
     unions. Banks and credit unions have seen significant increases in public deposits over the
     past few years. In 2018, 34 of the 39 counties were able to access credit unions. The next
     census is likely to have Thurston and Kitsap Counties exceed the population threshold of
     300,000. This bill provides for more competition, which means this is better for local
     governments. This is not a “shall” bill, it is a “may” bill—it permits all counties to consider
     using credit unions. Credit unions have not disadvantaged banks over the past three years.


Senate Bill Report                              -2-                                         SB 5106
     Public deposits are being taken out of state and being loaned out as corporate debt.

     CON: Prior to 2010, credit unions were not allowed to accept public depositories, but only
     to the $250,000 FDIC insured amount. Only a select few credit unions are participating in
     the program. The experience does not match the talking points on this bill. Total equity in
     credit unions in 2009 has increased 201 percent. This bill could have the impact of
     diverting tax funds away from the state. In 2018, banks were paying $400 million in B&O
     taxes and credit unions were paying $0.

     Persons Testifying: PRO: Senator Marko Liias, Prime Sponsor; Lars Gilberts, citizen; Joe
     Adamack, Northwest Credit Union Association; Jeff Gadman, citizen; Arthur Whitten,
     Treasurer of Spokane County; Ezra Eckhardt, Spokane Teachers Credit Union; Barney
     Herrera, Seattle Credit Union; Lynn Ciani, Numerica Credit Union; Brian Sullivan, citizen.

     CON: Brad Tower, Community Bankers of Washington; Trent House, Washington Bankers
     Association.

     Persons Signed In To Testify But Not Testifying: No one.




Senate Bill Report                             -3-                                          SB 5106


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