President Donald Trump’s new proposed budget for fiscal 2019 tries again to eliminate the CDFI Fund:
The Budget eliminates funding for the Community Development Financial Institutions (CDFI) Fund’s discretionary grant and direct loan programs, a savings of $234 million from the 2017 enacted level. The CDFI Fund was created more than 20 years ago to jump-start a now mature industry. In addition, private institutions should have ready access to the capital needed to extend credit and provide ﬁnancial services to underserved communities. However, the Budget maintains funding for administrative expenses to support ongoing CDFI Fund program activities, including the New Markets Tax Credit program. The Budget also proposes to extend the CDFI Bond Guarantee Program, which offers CDFIs low-cost, long-term ﬁnancing at no cost to taxpayers, as the program requires no credit subsidy.
As in prior years when Presidents have tried to shut down the Fund, Trump’s effort is likely to meet opposition in Congress.
The White House’s statement that the Fund exists “to jump-start a now mature industry” is half true. In 1994, Congress created the Fund to accelerate growth of the nascent CDFI industry. If “mature” means that the CDFI industry now is serving all the markets that it exists to serve, however, that is not close to true. CDFIs still reach just a sliver of need and demand.
In addition, the statement that “… private institutions should have ready access to the capital needed to extend credit and provide financial services to underserved communities” is ambiguous at best. Does the White House mean that mainstream financial institutions could be doing CDFI-type lending and providing CDFI-type services if they wanted? Or that they have all that they need to meet CDFI demand without CDFIs? Or does the White House mean to leave the issue hanging–as in, they could if they wanted to? Or they should but they don’t?
There is a deceptive glimmer of positive in the budget’s support to keep the CDFI Fund operating in support of New Markets Tax Credits and the Bond Guarantee Program, at the least. Too bad it eliminates funding for that purpose.