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How to Grow Your Tax Dollars (Rodney Showmar Commentary)

3 min read

THIS IS AN OPINION

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Your tax dollars are not earning the maximum rate of return they could be. That’s because current Arkansas law allows public entities to deposit funds only in banks insured by the Federal Deposit Insurance Corp. and excludes deposits in credit unions insured by the National Credit Union Administration. Both are backed by the full faith and credit of the United States government.

But a bill before the Arkansas Legislature would allow public entities to have more options when choosing where to deposit their funds. Senate Bill 257 will eliminate the monopoly banks enjoy as the only legal depository of city, county and state funds, as well as of school district and public utility accounts.

Who would be against such common-sense legislation? Well, banks want you to believe that since credit unions are not-for-profit 501(c)1 organizations they should not be allowed to bid on deposits from the state and other public entities. Banks know that credit unions pay higher rates on deposits. If SB 257 passes, then banks would be forced to increase the rates they currently pay for public funds or risk losing those deposits to credit unions.

Twenty-five other states specifically allow public funds to be deposited in NCUA-insured credit unions. Those states believe in maximizing the return on their investments in a free market, competition-based, capitalistic economy — unlike Arkansas, which limits access to public funds to banks only.

The proof is in the numbers.

A teammate of mine recently opened a 90-day CD at a local bank that opposes this bill. Her return is a 0.1 percent annual percentage yield on her $1,000 deposit. That same $1,000 deposited in a credit union would receive 0.90 percent APY for the same period. After 90 days the bank will return $1,000.25, while the credit union will return $1,002.22.

While the difference is not large, apply that same math to the $390 million the state had invested in CDs at the end of 2016. That difference is $3.12 million additional investment returned to the state of Arkansas every year. Imagine if the state or your county or your city received a 9 times greater rate of return on its investment.

I know the governor, the state and our legislators are not anti-nonprofit or against all 501(c) organizations. The state gives millions of dollars to other 501(c) organizations every year — gives mind you, not invests. Discrimination against 501(c) organizations in the financial sector is archaic and financially irresponsible. If a credit union offers the highest deposit rate, then the citizens of Arkansas win because they will receive a higher rate of return on their state, county and city funds.

What will credit unions do with those public deposits? In addition to paying a higher rate of return than banks, we will do what we do best: make loans to Arkansans to purchase or remodel a home, start or run a small business, replace a water heater or purchase or repair a vehicle. Those public deposits will be reinvested back into the Arkansas economy and communities to help Arkansans.

In a conservative, capitalist state like Arkansas whose residents believe in the American dream of entrepreneurship, fair competition and free enterprise, there is no reason to limit competition, purposefully exclude credit unions, continue discriminatory practices against financial 501(c) organizations and sacrifice a guaranteed greater return on investments.

If you agree, then contact your state senator and representative and tell them you want the greatest return on your money. Allow public entities the opportunity to choose credit unions as a deposit option by supporting SB 257.

Rodney Showmar is CEO of Arkansas Federal Credit Union of Jacksonville, the largest credit union chartered in Arkansas. Email him at RShowmar@AFCU.org.
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