A recent proposal from President Trump’s “skinny budget” has cast a spotlight on the future of the Community Development Financial Institutions (CDFI) Fund, suggesting a significant reduction in its appropriation for 2026. The proposal slashes funding to just $33 million, a mere 10% of its previous level, with the stated purpose of keeping the fund operational to wind down programs and cover reporting requirements. The administration argues that the CDFI industry has matured and should be financially self-sustaining, no longer requiring seed money.
However, this perspective is not without its challengers. CDFI expert Stacy Augustine, president of CU Strategic Planning, argues that this view fails to recognize the significant return on investment that CDFIs provide, leveraging funds 10-fold or more in their communities to make a substantial difference. The proposed cuts, while not eliminating the fund entirely, would significantly impact programs that credit unions actively participate in. It would not affect 2025’s appropriations. The proposal does indicate a desire to retain the new market tax credit program and the bond guarantee program, but these are less utilized by credit unions.
Read Stacy's insights on scenario planning for credit unions here!
Interestingly, the proposal includes a new element not seen in Trump’s previous administrations: the allocation of $100 million toward a new rural financial award program. This program aims to redirect the CDFI Fund’s focus towards providing affordable financing and fostering economic growth in rural areas, aligning with a potential “Main Street America” initiative. This shift acknowledges the critical need in underserved rural communities, often characterized by banking deserts where traditional financial services are scarce.
Despite the proposed reduction and shift in focus, there are reasons for cautious optimism. The appropriation language in the proposal retains the CDFI Fund’s certification authority, indicating continued support for the certification itself. Furthermore, there has been consistent bipartisan support for the CDFI Fund in Congress, with past instances of funding being maintained or even increased despite proposals for cuts. The Treasury Secretary has also voiced support for the fund, affirming that all its programs are statutorily required.
For credit unions already certified or those considering certification, the situation remains fluid. Changes to certification requirements may occur as the administration’s policy objectives are incorporated. Areas of concern for credit unions, such as how overdraft protection is viewed, could see adjustments, though there are indications of a potential softening in the CDFI Fund’s internal handling of these matters. Credit unions are encouraged to advocate for their impact and explain how their policies benefit members.
Staying informed and engaging with members of Congress will be crucial for credit unions navigating this evolving landscape. While a recent news flash indicated a halt on applications for CDE designations, it’s important to note that this is distinct from the CDFI certification process, which remains on track. CDFIs are vital in serving low- to moderate-income individuals and communities across the country, a mission true to the credit union ethos.
For a more in-depth understanding of the proposed changes and their potential impact on credit unions, watch the full interview below.
Disclosure: Transcript below is automatically generated
Sarah Snell Cooke
Hello, welcome everybody to the crane connection. I am Sarah Snell Cooke your host, and I’m here today with Stacey Augustine, welcome
Stacy Augustine
Good morning, Sarah.
Sarah Snell Cooke
And Stacy is the president of CU Strategic Planning, which is now a Callahan company. So why don’t you do a little intro of yourself, and not that people don’t know you, and the organization?
Stacy Augustine
Great. CU Strategic Planning, like you said, we’re a Callahan company partnering with Callahan, and we were in the business of helping credit unions embrace their cooperative roots through CDFI certifications and grants and all the other good things that come with it. Yeah, and so you must be busy these last week or two.
Stacy Augustine
Yeah, we’re always busy. It’s been an interesting year. I knew it would be going into this year, but yeah, it’s a, like many, many different trades out there. It’s a, it’s a year of unexpected surprises from the current administration, even when you expected the unexpected. Yes, yeah.
Sarah Snell Cooke
So explain the latest news on the CDFI Fund, if for those who don’t aren’t aware yet.
Stacy Augustine
Okay, so on Friday, May 2, we got to the President’s proposed budget, his so-called skinny budget. And that skinny budget reduces the CDFI doesn’t eliminate the CDFI fund through the appropriation, but it reduces it to just 90% of its funding, of its 90% of its 2025 funding level, so to just $33 million saying that this money, the money left over, is to keep the CDFI Fund running and to close out programs, Grant, Reporting, that kind of a thing, saying that to the CDFI Fund, the CDFI industry has matured beyond the need for seed money and should be financially self sustaining at this point. But this is really consistent with what we’ve seen in the past, what we saw in the past during the prior Trump administration every year, it was the same kind of language about how the CDFI Fund had had, you know, the CDFI certifications and grants are important, but, you know, the industry has already matured and doesn’t need this grant money anymore. So, what I think that there’s a failure there to see is that this really isn’t about the maturity of the industry. We have some really large, very, very mature CDFIs. It’s about, it’s a good investment from the administration, where those CDFIs leverage those funds tenfold, at least tenfold, into their communities and make a huge difference. So you know, if you’re getting a 1010, 10 time return on your investment, that’s pretty good investment. Yeah, 1,000% ROI,
Sarah Snell Cooke
You disagree with him?
Stacy Augustine
yeah, that’s a given. I do disagree with that. He does mention that he’d like to retain the new market tax credit program and the bond guarantee program, but those aren’t things that credit unions participate over much in. So it would eliminate a lot of the the regular programs that credit unions participate in. And so what does that mean for the CDFIs that are already certified and maybe even applied for grants this year or for funding for this year?
Stacy Augustine
I don’t think it means a lot right now. Right now we’re fully appropriated for this year, so it shouldn’t make any difference to anyone who has applied for a grant this year where it might make a difference is going into next year. This is a proposal for 2026, now, I think what’s really, really important to take away from this conversation, though, is that this is a proposal, and this is really consistent with passive proposals, but in all of the past proposals, we saw Congress continue to show bipartisan support for the program and to continue to fund it, and to actually increase the funding for the program during Trump’s last sent in office. So I think that we we’ve seen really good bipartisan support for it, yeah, yeah. And also the treasury secretary had mentioned that he is supportive of the CDFI Fund as well. Yeah
Sarah Snell Cooke
From what you were saying, it sounds like this is more of the same. It’s more of the same.
Stacy Augustine
For Trump, it’s more of the same, but it has an interesting new twist to it that we haven’t seen before. Because, you know, in a private conversation a couple of weeks ago, we had heard that someone from within the administration say that President Trump actually liked CDFIs and saw them as part of his Main Street America program. So immediately I went out and looked what? What is this? Something I missed in his proposals, so it really helps to shed some light on what he meant by that. His proposal, while it does cut a lot of the programs that are currently in place, actually appropriates $100 million towards the creation of a new program called the Rural Financial Award Program. And the idea behind that is to shift the CDFI funds focus from its current focus to providing affordable financing and spring economic growth in rural America. So I think that’s what he meant by mainstream America. So it’s a shift of focus, but never before in his prior administration did we see him actually create a new grant program delivered through the CDFI Fund.
Sarah Snell Cooke
And those rural areas are it’s so needed. There’s so many banking deserts out there, just because it doesn’t financially make sense to serve people who are 100 miles from your nearest branch.
Stacy Augustine
Do I mean, can you give an example of some of your credit unions? Like, I know, we recently, uh, featured, uh, Fort Randall, for example. That’s a good one. Yeah, that’s a great example. Yeah, yeah. And that is definitely needed. There’s so many banking deserts out there, like we recently focused on Fort Randall that’s serving, you know, members across six counties where the population is less than that of most of the states.
Sarah Snell Cooke
So, you know, credit unions doing great work in rural areas that are often poverty stricken, or, you know, right at that borderline there, and we need to help them, as well as the urban areas. So what does this mean for credit unions that are looking to become certified in 2026 or 2025?
Stacy Augustine
We’ll have to see. Basically, I will say that the appropriation language in his proposal calls for retaining the certification authority of the CDFI funds. So clearly, there’s a support for that.
Stacy Augustine
I do think that there were some things in the certification proposal that came out about two years ago that folks are, you know, still winding their way through right now, with a September deadline for most credit union CDFIs, most depositories, and, you know, every administration comes to their office with their own policy objectives, and this proposal, I think, creates some greater clarity over what Trump’s priorities will be. And it takes a while for agencies for that trickle down effect to happen and for those that policy objectives to be incorporated in how each agency is run. I do think that we will probably see some effect from his policy objectives, in the certification requirements. And there’s some of the areas that credit unions have been concerned about, like overdraft protection, I think we could see changes to some of that. I think we’ve already seen a softening internally in how the CDFI Fund is is handling those?
Sarah Snell Cooke
Yeah, and there were a lot of new requirements that that possibly could go away,
Stacy Augustine
or they could just be softened. For example, it’s very fair to ask about how a CDFI is administering these kind of policies, because they could be predatory in in an organization, they could be administered in a predatory way. Do I think credit unions are doing that? No, I don’t think credit unions are doing that. So it gives us an opportunity to state our case. This is how we’re administering it. It’s in a it’s in a way that benefits our members, and so as long as they’re letting us make the case for it and explain how the credit union is administering those policies, and listening to the arguments that it should be funded.
Sarah Snell Cooke
Then, what are you guys doing behind the scenes to to help push or advocate for credit unions in the CDFI Fund?
Stacy Augustine
Yeah, we’re trying to keep people up to date. We’re trying to make sure that they know that this is not this is a proposal. This is the proposal that comes out from the president every year. This is part of the budget-making process, but it is a proposal, not it’s Congress who makes the budget, and Congress, Congress has been very supportive of this, the CDFI fund in the past, and both Republicans and Democrats and we saw that recently when the President put out his. Executive Order asking various different organizations to show you know, are they doing things that are statutory or not? We saw the Treasury Secretary come back with a report saying, yeah, all the CDFI fund programs are statutory. They are all part of our enabling statutes, and a lot of great support from the Secretary of Treasury. So I I hope that we will be able to continue just doing the good work we do. And so, you know, while we’ve been doing this interview, the there was a news flash came across that CDFIs have or the CDFI Fund has halted applications for CDEs now explain the difference. What that okay? So, okay. CDE designation is different than a CDFI designation. Credit unions are familiar with the CDFI designation. A CDE is required if you have to become a you have to have a community development entity designation, a CDE designation to participate in some of the Tax Credit Allocation under the new market tax credit program. So this is, there’s, there’s nothing. These are not the droids you’re looking for. These are, these are not, this is not the CDFI certification which is still still far on track to be required by the end of September for most depository Well, I’m going to allow you the last word.
Sarah Snell Cooke
What would you like to leave the credit union audience with, whether it’s, you know, advocating for CDFI applications, or anything else for that matter? Well, I think we’re going to be watching this closely. There will be opportunities for credit unions to weigh in with their members of Congress, and I think that’s important. We have a lot to advocate on these days, but please don’t forget this important niche out there. I think CDFIs do tremendous things for their communities. They’re all over the country, and they’re serving low to moderate income people out there that wouldn’t otherwise get served, which is just true to the Credit Union Mission Absolutely. Thank you so much. Appreciate your time today. Stacy, you.