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June 28, 2001
Budget Proposal Threatens Huge Cut in CDFI Fund
by The Calvert Foundation
House and Senate subcommittees will soon be looking at a Bush budget proposal that cuts CDFI Fund
funding by nearly half.
SocialFunds.com --
Despite campaign assurances of support for community development financial institutions (CDFIs),
President Bush is proposing drastic budget cuts for the CDFI Fund. The CDFI Fund is a government
program that supports CDFIs and encourages banks to invest in distressed communities.
 The proposed budget for the CDFI Fund, which
is now drawing attention from community activists and lawmakers, still needs to be examined by
Congress and the Senate Appropriations subcommittees on VA (Veterans Affairs), HUD (Housing and
Urban Development), and Independent Agencies.
President Bush's budget proposal cuts
funding for the CDFI Fund by 42.4% for fiscal year 2002, from $118 million to $68 million. The
reduced funding includes a decrease of $49.3 million in program award activities and a decrease of
$652,000 in total administrative activities.
The proposal states that the administrative
cuts will be compensated through increased productivity and enhanced information technologies. This
includes the implementation of the CDFI Fund's Electronic Resource Information Center (ERIC) which
will permit the electronic submission of program award applications. Click here to read the proposed budget.
The budget targets $500,000 for technical assistance and training programs for Native
Americans, reduced from $5 million, and up to $7 million for the direct loan program's costs and
administrative expenses, reduced from $19.8 million.
As a response to the proposed budget
cuts, many organizations such as National Community Capital, the CDFI Coalition, National Community
Reinvestment Coalition, and the Calvert Foundation, among many others, are calling for supporters
to contact members of Congress and urge them to defend against cutting the CDFI Fund's budget.
National Community Capital is even asking for support to convince Congress to increase funding of
the CDFI Fund to $125 million for FY2002.
Lori Scott, Loan Officer at the Calvert
Foundation, noted "It is unfortunate that budget cuts to the CDFI Fund were proposed at a time of
slowing economic growth, because this is when assistance from CDFIs is most needed by low-income
communities."
For information about finding and contacting Members of the United States
House of Representatives, go to www.house.gov/writerep
To contact Senators, go to www.senate.gov/contacting/index.cfm
This budget will be appear before Congress appropriation subcommittees for mark-up in early
July, so constituents that want to make their voices heard should do so promptly. To track the
progress of this part of the 2002 Appropriations Bill, click here.
The CDFI Fund was a
bipartisan initiative authorized by the Riegle Community Development and Regulatory Improvement Act
of 1994 and has been key in helping CDFIs leverage their investments and impact nationwide. Over
the past four and a half years, the CDFI Fund has provided more than $400 million in investments,
loans, and capital grants to CDFIs in almost every state.
CDFIs are private-sector
financial intermediaries with a primary mission of community development. Currently, they manage
more than $5.5 billion, predominantly in private capital, that they lend and invest to create
opportunities for economically disadvantaged people and communities.
The objective of
CDFIs is to build private markets and provide the tools to enable low-income individuals and
communities to become self-sufficient. They use capital-led strategies to tackle some of the most
difficult problems facing poor working Americans today, including affordable housing, jobs,
childcare facilities and schools. Among other services, they offer mortgage financing for
first-time homebuyers, commercial loans for small businesses, and other financial services that may
not be provided by more mainstream lenders.
Some specific programs funded under the CDFI
Fund include:
The Bank Enterprise Awards Program (BEA) provides incentives for
regulated banks to invest in CDFIs and to increase their financial services, lending and
investments in distressed communities.
The Native American Programs resulted from a
congressional study on lending and investment practices on Native American reservations that
identified barriers to private financing. The study assessed the impact of accessibility to credit
and capital on Native American populations.
The New Markets Tax Credit Program was
initiated during the FY2001 budget process, so the CDFI Fund created a separate budget activity to
aid implementation and reporting activities. The aim of this program is to encourage investment in
community development entities (CDEs) so that CDEs can increase the amount of investments in
low-income communities.
The Small and Emerging CDFI Assistance (SECA) component is
one of three CDFI Program components designed to assist CDFIs through grants and investments. Under
SECA, CDFIs and institutions seeking to become CDFIs may apply for technical assistance grants to
support identified capacity building needs. They may also apply for a combination of technical and
financial assistance to further an existing business plan.
The Training Program is
designed to increase the supply of training services available to members of the CDFI industry as
well as to community development lenders who are not certified CDFIs. The CDFI Fund has contracts
with four training providers for curriculum development and the delivery of three courses.
The Presidential Awards for Excellence in Microenterprise Development is an initiative
of former President Clinton and is a non-monetary award program aimed at bringing wider attention
to the important role and the successes of domestic microenterprise development. Five
organizations were recognized at a White House ceremony on January 16, 2001.
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