Credit unions want to hold Colorado’s public money, but banks are putting up a fight

Kevin J. Beaty
Security Service Federal Credit Union, South Broadway. (Kevin J. Beaty/Denverite)

Banks and credit unions are battling in the state Capitol for government business.

Currently, banks hold the greatest share of Colorado’s public funds. HB22-1277 would instead allow state and local governments to invest their money in credit unions — which is currently illegal.

“Public entities and local governments have said, ‘Wait a minute, why can't I choose?’” said Daniel Diorio, policy director for the Mountain West Credit Union Association.

Credit unions are nonprofit financial institutions owned by members. They sometimes are able to offer more competitive rates, or their philosophical values may align better with a local government’s.

But state law only allows public money to be placed in institutions backed by the FDIC; credit unions are backed by a different institution. The proposal would bring credit unions under the same state regulation that banks face, including requirements for how they safeguard investments, Diorio said.

Banks oppose the change. A representative for the Colorado Bankers Association did not respond to a request for comment. But the organization’s president, Jenifer Waller, told the Denver Business Journal that if government money moves away from banks, it could hurt banks’ services to small businesses and nonprofits.

“We’re not anti-credit union. We really feel credit unions serve their role. Banks serve our role,” Waller told DBJ. “We just feel we need to stay in our lane.”

Waller also pointed out that nonprofit credit unions do not pay all the same taxes as banks, and argued that credit unions face less stringent state regulations.

Diorio said the state bill would require credit unions to protect investments by backing them up with other assets in the same way that banks do.

“We would follow those same requirements. We all want to be on the same playing field for public deposits,” he said.

The bill is sponsored by Rep. Patrick Neville, a Republican, and two Democrats, Rep. Kyle Mullica and Sen. Julie Gonzales.

Neville describes the bill as a common-sense change that would put Colorado in line with the financial rules in many other states.

“I just think that the localities should have more options to be the best stewards for the taxpayer money,” Neville said. “If there's a good local credit union that the municipality wants to use to hold their taxpayer money, then I think they should be allowed to.”

The bill is scheduled for a committee hearing Thursday.