Department of Financial Institutions urges continuing appropriation for industry‑funded regulator

The House Industry, Business and Labor Committee heard extensive testimony on Senate Bill 2028, which would move the Department of Financial Institutions (DFI) to a continuing appropriation model in which industry assessments would fund DFI spending and the banking and credit union boards would set the department’s appropriation. Commissioner Lisa Cruz and industry witnesses said the change would give the department flexibility to hire specialist examiners and respond more quickly to supervision needs without using general fund dollars.

Cruz told the committee DFI is fully funded by assessments on banks, credit unions and licensed non‑depository businesses and that the department collects fees and maintains a cash balance the agency cannot currently spend without line‑by‑line appropriation authority. “We have the money,” Cruz said. “We have a big cash balance but we are not able to spend it. I have all the money but I don’t have the appropriations to spend the money we have.” She said the constraints limit the department’s ability to hire examiners with technology and cybersecurity expertise and to retain staff who understand local agricultural lending practices.

Cruz and bankers emphasized the dual‑banking benefits of strong state oversight. Cruz said limited DFI resources had required federal counterparts to step in for certain examinations in the past. Pete Jonner, president of Kirkwood Bank and a banking board member, told lawmakers the state needs local examiners and that bankers do not want federal regulators to be the primary examiners in North Dakota institutions.

Rick Klayberg, president and CEO of the North Dakota Bankers Association, told the committee the association has supported additional DFI flexibility in prior bienniums and encouraged the committee to let the state banking and credit union boards oversee budget decisions because the funds are provided by industry and the boards have technical expertise to weigh staffing needs.

Cruz offered two state comparisons: Texas and Oklahoma operate similar continuing appropriation models for their banking departments, and she reported both states consider the structure successful and useful for hiring technical staff. The bill includes reporting requirements so the legislature receives regular updates; Cruz and witnesses said the legislature can rescind the arrangement at any time.

Concerns and committee requests
Committee members asked Cruz for historical budget data—annual revenues, FTE counts, cash balances and spending—so members can judge whether continuing appropriation is warranted. Representative Ruby and others questioned whether the governor’s office or the legislature would retain adequate oversight over salaries and staffing. Cruz said the commissioner’s own salary remains set by the governor and that the bill retains transparency and reporting obligations to the legislature.

No committee vote occurred at the hearing. Cruz and industry witnesses asked the committee to consider the proposal as a means to protect local supervision capacity and to prevent federal preemption when state regulators lack resources.

Speakers quoted or cited in this article include Department of Financial Institutions Commissioner Lisa Cruz and industry representatives Pete Jonner and Rick Klayberg.