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Agency to Scrap Funding Method : Smaller State S&Ls Face a 400% Increase in Assessments

May 08, 1986|JAMES S. GRANELLI | Times Staff Writer

The controversial method now used to fund the state Department of Savings and Loans is likely to be phased out in the next three years, William J. Crawford, the commissioner of savings and loans, said Wednesday.

Crawford said his department, now funded by the 154 state-chartered savings and loans under a complicated assessment formula, will probably follow federal practice of charging institutions by the hour for required examinations and audits. There are 65 federally chartered S&Ls in the state.

"There will probably be a three-year phase-in period to eventual direct billing," the commissioner said in a telephone interview. "And that's always a big bone of contention. If you want 154 fights, go to direct billing--nobody thinks the bill they get (from federal regulators) is fair."

Meantime, though, state-chartered savings institutions will have to pay hefty increases in assessments to support the 118-staff-member department's $8.8-million fiscal budget next year, according to a new order issued by the state agency--and the burden will fall most heavily on the smaller S&Ls.

The assessment for institutions with less than $100 million in assets will rise from $5,000 a year to $20,000. The fourfold increase is the result of a compromise reached after Crawford proposed a fivefold raise last fall.

Large S&Ls pay proportionately less than small ones, a system that will be continued with the increased assessments. The assessments for S&Ls in the $100-million to $200-million category will be doubled, while the fee of a $10-billion S&L will go up by only 28%.

A $10-billion S&L will have to pay at least $516,000 under the rate structure that goes into effect July 1; a $3-billion institution will pay $232,000, a $1-billion company will pay $105,000, and one with $500 million in assets will pay $62,000.

Smaller institutions have complained that the annual assessments, on top of the cost of required independent audits and federal examinations, unfairly burden them and hinder their earnings and growth.

"We're still looking at a fair way to have this assessment made," said Charles Terrill, chairman of the California League of Savings Institutions' smaller associations committee. For a small S&L, including the assessment, federal examinations and outside audits, "you're pushing $75,000 to $80,000 in expenses," he said.

Crawford has said the smaller institutions generally present more problems for his department than the larger ones do: "There are more of them; they are more inexperienced; they don't keep books as well as larger ones do, and they don't understand things the first time we explain them."

Of the 154 state-chartered savings and loan institutions, 106 have less than $200 million in assets--and 81 of those have less than $100 million in assets.

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