The Community Investment Fund: A $1 billion Challenge and a Lesson for Today

The 2003 Herb Wegner award dinner was both celebration and challenge. While almost two decades ago, there are important lessons from that evening for today’s cooperative industry.

In his opening remarks, Foundation Chair Chuck Purvis described the mission of the Community Investment Fund (CIF) which was designed to be a stable revenue source for the National Credit Union Foundation (NCUF.)

In his welcome message, Purvis mentioned the CIF’s current size of $155 million and recounted two projects which embody the spirit of creating financial independence for low- income consumers.  This video is 2.30 minutes.

The $1 Billion Challenge

The current CIF balance of $155 million was just a beginning.  Purvis issued a challenge to raise the CIF to $1 billion in the next two years.  This would create a revenue stream of $10 million for annual Foundation grants at the current level of interest rates.

He noted that this goal is just .5% of the industry’s total investments of $200 billion.  By contrast at June 2021 credit unions hold $700 billion investments.  He described the importance of the goal in this excerpt.

What happened to the CIF and the Billion Dollar Goal?

CIF investments were managed by US Central which was closed by NCUA in 2010.  Other excerpts from this 2003 dinner will show how donations honoring credit union leaders were a critical part of the effort.  In that year this campaign was called the “Ed Fund,” both honoring Ed Callahan and the Foundation’s educational role.   That campaign will be the subject of blog later this week.

The history of the CIF following this dinner is unclear. One participant from this period recalls the CIF situation as follows:

The ED Fund, the Larry Johnson fund in NC and others pushed committed funds to over $300 million. Interest rates had been in a sweet spot around 6% in earlier years, so that after splitting the earnings with the Foundation, credit unions still received a decent return. After the 2003 $1 billion challenge, the CIF investments peaked in the $450-$475 million range.

 Overnight federal fund rates were quite low in 2003, but reached 5.25% in June 2006. That was probably the fund’s highest point. When rates fell to zero during the financial crisis, the CIF was no longer an effective option. With rates since, the 50/50 sharing of interest revenue with the Foundation could never reach an attractive level.

 Several corporates such as CorporateOne still offer these shared-interest CIF certificates.  But unless rates on term CD’s rise to 1.5% or so, credit unions find it easier to donate directly to the Foundation.   When CorporateOne held some CIF investments after the Great Recession, it added .30% to the CD rate as its contribution.

One participant estimates the CIF generated over $100 million in donations to NCUF and the state foundations during this decade.

The CIF’s Lesson for Today’s Cooperative System

The CIF with its fund-raising tributes like the Ed Fund are a premier example of the 3-tiered cooperative system working for common purpose.  The Wegner dinner was a collective celebration of a charitable process that was simple, coordinated and easy for all credit unions to join.

Today this collaborative effort has been replaced by Charitable Donation Accounts (CDA) approved as an incidental power by NCUA in 2013. Multiple credit union organizations including CUNA Mutual, CUES, and Members Trust Company offer programs for managing these accounts.  While limited to 5% of net worth, their advantage is they can invest in securities outside those permitted for credit unions themselves by rule 703. Their only requirement is that 51% of the total return must be donated to 501C3 organizations over a five-year period.

As of June 30, 2021 there were 187 credit unions which have established CDA’s with a total value of $1.084 billion.

There is no total for the charitable contributions made from these accounts.  The CDA option is disaggregated in both fund raising and donations versus the CIF process.  Individual accounts range in size from Pentagon FCU’s $136.4 million to Temple-Inland’s $1,000 balance.

The total in these accounts equals Purvis’s original 2003 goal of $1.0 billion. However today that coordinated system approach has been muted or even lost.  Individual credit unions organize and disburse grants to various 501C3 as they each decide.

Chuck Purvis’ framed his request for support as part of credit union’s “inherent social mission.”  He stated it would send a collective message to Capitol Hill with grants funding low income credit unions with revenue from this $1 billion challenge.  That public benefit is missing in the CDA alternative.

The Wegner Dinners are about more than awards or fund raising.  They are an expression of the collective capabilities of a cooperative system.   Understanding how this vital activity functioned in prior decades can hopefully reaffirm the importance of these common endeavors today.

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