Shutting Down Members’ Financial Woes

As of press time for this article, we had just entered day 27 of the longest-ever (partial) government shutdown. During the steady stream of media coverage on the shutdown over the past few weeks, some interesting/alarming reports have emerged, including:

• Nearly half of the Food and Drug Administration’s workforce has been furloughed, pausing some domestic food inspections and putting Americans at risk of food-borne illnesses like E. coli, salmonella and norovirus. (Source: Time)
• Also on furlough, Transportation Security Administration agents – already some of the lowest-paid federal government employees with annual salaries of approximately $37,000 – are calling out sick at twice the usual rate at airports across the country, according to Bloomberg, leading to security lane consolidations in some locations. In Atlanta, Ga., on Jan. 3, a passenger bypassed airport security with a firearm in her carry-on bag, sparking concerns about a decrease in overall air travel safety amid the shutdown.
• With staffing cut at the national parks, which have remained open during the shutdown, trash and waste has been accumulating. The parks have also been impacted by off-road vehicles, vandalism and hikers in restricted areas; soil, plants and animals in these areas are also at risk of long-term damage. (Source: National Geographic).

Speculations about worst-case-scenario outcomes of the shutdown – if it were to continue until late in the year, for example – have also been in the news, which include the grounding of flights due to mass TSA agent resignations, the halting of city bus services and dire impacts on the U.S. economy.

And one pre-existing issue it has brought to light is just how common it is for Americans to be living paycheck to paycheck. So far, furloughed employees have only missed one or two paydays, and that’s put many of them in a position of financial panic, having to choose between buying basic necessities such as food and medication. According to CNN, 1,500 GoFundMe pages have been set up by furloughed government employees seeking financial assistance.

Helping members achieve financial stability is a mission that many credit unions successfully live up to. But now is also a good time for CUs to ask themselves whether they’re doing enough to educate members about basic money management, because it’s clear that far too many Americans are not prepared to cover their essential expenses after missing just one paycheck. Credit union members who rely on government assistance for food stamps or rent payments are certainly in crisis mode – and should be the targets of credit unions’ relief programs, along with furloughed government employees. Offering financial relief in times of crisis is important, but in addition, credit unions should consider ways to address the root problem for members who have steady jobs yet need help after one missed paycheck: Their inability to save enough money to stay afloat during an emergency.

As noted by EPL, Inc. COO Rhiannon Stone in her Op-Ed in this week’s issue, only 39% of American households would cover an unexpected $1,000 financial blow with savings, and four in 10 adults, if faced with an unexpected expense of $400, would either not be able to cover it or would cover it by selling something or borrowing money, according to Bankrate and the Federal Reserve Board, respectively. So why is so difficult for Americans to save?

One theory, as explained by the University of California, Berkeley’s Robert Reich, a former secretary of labor for the Clinton Administration, in an article in The Guardian last summer, is that America has a “good jobs crisis.” “Although the U.S. economy continues to grow, most of the gains have been going to a relatively few top executives of large companies, financiers, and inventors and owners of digital devices … Not even the current low rate of unemployment is forcing employers to raise wages,” he wrote, adding, “Simply put, the vast majority of American workers have lost just about all their bargaining power.”

Credit unions can’t make other employers, including the federal government, raise their wages so workers can comfortably cover their monthly expenses and have enough left over to pad a savings account in case of an emergency like a government shutdown. They also can’t force members who are terrible at managing their money to change their ways, even when given all the right tools. What they can do is maintain their status as trusted financial partners that offer the best value to consumers for financial products and services, and serve as resources for financial education in their communities. And many credit unions are doing just that – San Diego County Credit Union, for example, just announced an educational partnership with the San Diego County Library System; through March, the credit union will host Financial Wellness Wednesdays at local libraries on a variety of topics aimed at improving financial health, SDCCU said.

Credit unions have also been stepping up in incredible ways to help those who have been affected by the government shutdown. Since Dec. 17, around 20 credit unions and leagues have reached out to us with announcements of their financial relief programs. These include both credit unions that serve federal government employees and those with community charters, and their offerings include emergency loans, fee and early withdrawal penalty waivers, skip payment programs and financial coaching.

We’ll be continuing to monitor the ways the shutdown is affecting the industry and posting the latest news and responses from credit unions on cutimes.com. To those of you who shared how you’re doing your part to help, thank you. In a time of uncertainty, that type of good news is what keeps us all moving forward.

Natasha Chilingerian is managing editor for CU Times. She can be reached at nchilingerian@cutimes.com.