Legislators question Bessent about reductions in Community Development Financial Institution funding
In the ongoing discussions about the Fiscal Year 2026 budget, the future of Community Development Financial Institutions (CDFIs) remains uncertain.
Current Status
The House has proposed a Fiscal Year 2026 appropriation of $276.6 million for the CDFI Fund, which is an increase from the presidential budget request of $134 million but a decrease from the FY 2025 level of $324 million. The majority of core CDFI Fund programs are being funded, but some initiatives like the Healthy Food Financing Initiative and the Economic Mobility Corps are facing elimination. A separate allocation of up to $33.6 million is provided for administrative expenses within the CDFI Fund and related programs.
Future Outlook
The CDFI Fund's future funding is uncertain and will depend on negotiations between the House and Senate. Advocacy groups like the Opportunity Finance Network (OFN) are pushing for higher funding levels. Given the slow progress in appropriations, there's a likelihood of a continuing resolution to maintain current funding levels temporarily until a final agreement is reached.
The CDFI Fund continues to evolve with updates to its certification application process and guidance documents, reflecting ongoing efforts to support mission-driven financial institutions.
New Developments
The Trump administration's proposed "skinny budget" for the next fiscal year proposed cutting $291 million in CDFI fund discretionary awards. However, the Biden administration's budget request states that remaining CDFI funding would support oversight and closeout of prior awards, maintaining CDFI certification, and support for New Markets Tax Credit administration and the zerocost Bond Guarantee Program.
The administration's budget also includes a new $100 million award program providing access to affordable financing, primarily in rural America. The new program requires 60% of CDFI loans and investments to go to rural areas, aiming to increase access to capital, infrastructure financing, and main street business development.
Controversy and Advocacy
Rep. Maxine Waters, D-CA, worked with Steve Mnuchin, Treasury secretary during Trump's first term, to secure $12 billion in capital investments and grants for CDFIs and minority depository institutions. However, in March, President Donald Trump issued an executive order that named the CDFI fund among the government entities targeted for cuts.
The controversy surrounding the CDFI fund continued into the Biden administration, with Rep. Al Green, D-TX, questioning the "woke" label in Trump's budget for the CDFI fund. Bank trade groups have written to Treasury Secretary Scott Bessent and Congress urging support for the CDFI fund, stating its public-private partnership model aligns with the Trump administration's goals. More than 90% of congressional districts have at least one CDFI serving their communities, the trade group said.
Rep. Young Kim, R-CA, urged Treasury Secretary Scott Bessent to support the CDFI fund, citing its role in promoting the local economy in her Orange County district. Treasury Secretary Scott Bessent replied that CDFIs can be important institutions if they follow their statutory obligations and do not stray into more ideological boundaries.
The House Financial Services Committee held a hearing on Wednesday to discuss the fate of funding for community development financial institutions (CDFIs). The hearing aimed to address the concerns and advocacy efforts surrounding the CDFI fund and its role in economic development.
As of this year, there are roughly 1,432 certified CDFIs, including 359 banks, according to the Independent Community Bankers of America. The future of these institutions will be decided through ongoing budget negotiations and policy developments.
[1] Source: Opportunity Finance Network (OFN) [2] Source: Independent Community Bankers of America (ICBA)
The uncertain future of Community Development Financial Institutions (CDFIs) is being determined by negotiations between the House and Senate, with advocacy groups like the Opportunity Finance Network (OFN) pushing for higher funding levels. Despite the proposed $276.6 million appropriation for the CDFI Fund in the Fiscal Year 2026 budget, some initiatives like the Healthy Food Financing Initiative and the Economic Mobility Corps are facing elimination, creating a controversial atmosphere in the general-news and business world, especially as politics plays a significant role in the funding decisions.
