Legislative Update with Jay Kruse

​A tale of two states: an interesting perspective on how differently the legislative sessions played out in North and South Dakota. 

by Jay Kruse, Chief Advocacy Officer
 
As the North Dakota legislative session begins to wrap up, it has me thinking about how truly differently the legislative sessions played out in North and South Dakota. It really was a tale of two states.
 
Starting with the obvious, the South Dakota legislature convenes every year, while the ND legislature meets every two years. That’s a huge difference. Including commemorations and resolutions, there were 989 “bills” introduced in North Dakota, compared to just 517 in South Dakota. One could argue that all bills don’t receive equal or adequate consideration almost solely due to the huge workload placed on North Dakota legislators. This is why you will often hear many say, “it takes a few sessions to pass good legislation.” This can be true in both Dakotas, however in North Dakota, everyone must wait an extra year before the next session rolls around.
 
Tax Cuts vs “Tax Study”. This session, South Dakota legislators and the Governor Noem were focused on tax cuts. After considering a wide range of sales and property tax cut proposals, the legislature and Governor Noem ultimately agreed to reduce the state’s sales tax down to 4.3% from 4.5%, for the next 3 years. As you can probably guess, a permanent extension is already being discussed. Now, don’t get me wrong, there were also some tax cuts that were discussed and blessed by the North Dakota legislature. However, I would like to focus on a Legislative Management Study analyzing taxation. It wasn’t introduced as its own bill, but instead was attached to a Department sponsored credit union bill after it arrived in the House.
 
To be clear, I’m not opposed to the tax study, I’m actually very confident it will benefit credit unions both locally and nationally. But, when you look at the details and facts surrounding the introduction of the study, one could conclude that it may have been slightly politically motivated. I’m far from a seasoned vet in the lobbying world, but as a general rule I’ve learned if someone introduces legislation directly referencing credit unions without consulting with any individual credit unions or the industry’s association, there’s a good chance it might not be credit union friendly.
 
Let’s consider how it all went down. On March 7, 2023, SB 2092, a credit union “house cleaning” bill sponsored by the ND Department of Financial Institutions was receiving its 2nd hearing in the House IBL Committee. Following DFI Commissioner Lise Kruse’s neutral testimony, the bankers with the help of District 46 Legislator Jim Kasper (who many of you may also recognize as the former plan administrator of our Dakota CU Healthcare Trust,) introduced an amendment instructing legislative management to “consider studying the comparative taxation between federal and state banks and credit unions in North Dakota.” How do I know it was the banker’s amendment? When Committee Chairman Louser was asked where the idea for the study come from, he answered, “the amendment came from bankers.” Interesting, a bankers’ amendment on a credit union bill? Representative Kasper added, “We have another bill coming up to expand the territory for credit unions, which, I think, has a direct impact on their taxation.” Interestingly, linking North Dakota’s extremely unique field of membership statutes dating back to 2005, which apply to just 18 state chartered credit unions and limit membership to those that live within a 75 or 50 mile radius from a credit union office location to a federal tax exemption enacted in 1934, that applies to each and every credit union across the nation.
 
Do I believe this maneuver from the bankers was very well thought out? Not particularly. But who am I to judge? I would just assume that all the state’s Sub-Chapter S banks may not support the beneficial tax treatment they also enjoy, which far outweighs the credit union tax exemption, being closely studied. I don’t believe the study will tell us anything we didn’t already know.
 
The bigger question is, will we see more of these types of political tactics used in North Dakota in the future? For the sake of all North Dakota citizens, I sure hope not. But give them credit, leveraging the DFI to add a bankers’ amendment to a credit union bill would make Nick Naylor proud!
 
While we might not have gained the support of the North Dakota legislature regarding FOM modernization this time around, it remains a fact, that in the wake of the collapse of Silicon Valley Bank, one of the biggest banking collapses in history, many financial resources made the choice to point out and support the benefits of credit union membership. In fact, Fox Business published an article on March 23rd, 2023, stating that credit unions are less vulnerable to bank runs or liquidity issues and are considered safer for depositors than traditional banks, pointing out that recent bank runs have been driven by uninsured deposits, and it is "substantially less likely" for that to happen to a credit union. Similarly, Nerd Wallet recommends its readers “Ride out Fed rate hikes at a credit union,” citing more competitive interest rates than banks. Other sources like Consumer Reports, Investopedia, Mint.com, and Credit Karma also support credit union membership.
 
While the opponents to the credit union mission are few, they unfortunately are mighty with a great deal of political power and authority. As an industry, we must continue to advocate for both our current and future credit union members and working to improve financial well being for all!
 
If we don’t, who will?