110th CONGRESS, LEGISLATIVE ISSUES A - Z
COMMUNITY DEVELOPMENT FINANCIAL INSTITUTIONS (CDFI) FUND
ISSUE: The CDFI Fund was established in 1994 by the Riegle Community Development and Regulatory Improvement Act and is administered by the Treasury Department. It makes capital grants, equity investments and awards for technical assistance to community development financial institutions (CDFIs). Examples of CDFIs include community development banks, community development credit unions, community development loan and venture capital funds, and microenterprise loan funds. CDFIs are required to provide a 1:1 match for most of the awarded funds, which are offered on a competitive basis. CDFIs finance community development initiatives such as small businesses, community facilities, and low-income housing. The CDFI Fund also administers the New Markets Tax Credit program, which provides tax credits to Community Development Entities (CDEs) which in turn provide the tax credits to entities which invest in the CDEs.
CUNA POSITION: CUNA has worked with the National Federation of Community Development Credit Unions and the Coalition of Community Development Financial Institutions to oppose previous attempts to move administration of the Fund and cut its annual appropriation. CUNA supports keeping the Fund under the administration of the Treasury Department.
OPPOSING VIEWS: The Administration has supported cuts to the CDFI Fund because it believes that the CDFIs should have a higher rate of return on their investments and not needing increased taxpayer funding.
IMPACT ON CREDIT UNIONS: CDFIs are financial intermediaries such as certain credit unions, banks, loan funds, venture capital funds, corporation-based lenders and microenterprise development loan funds. They provide a wide-range of services to meet needs of individuals and businesses in underserved communities.
CDFIs such as Community Development Credit Unions (CDCUs) are charged with supplying low-income, distressed communities with traditional banking services such as savings accounts and personal loans, and offering individuals the tools needed to become self-sufficient stakeholders in their own future.
The CDFI Fund uses small amounts of federal dollars to leverage significant amounts of private and non-federal dollars, and has added a tremendous boost to the CDFI industry (which relies heavily upon private sector funds from corporations, individuals, religious institutions, and private foundations).
STATUS/OUTLOOK: In its FY2006 and FY2007 budget proposals, the Administration proposed consolidating the CDFI Fund along with several other community development block grant programs under the “Strengthening America’s Communities Initiative,” to be administered by the Department of Housing and Urban Development (HUD) and the Department of Commerce. This proposal was not enacted into law and was not included in the Administration’s FY2008 budget.
In FY2007, the CDFI fund received an appropriation of $55 million. For FY2008, the Administration requested $28,557,000, far below last year’s appropriation and much less than the CUNA recommended amount of $80 million. The proposed budget directs $12.2 million of the total amount for administrative expenses, including administration of the New Markets Tax Credit. For the cost of direct loans, $2.5 million is suggested and $250,000 to administer the loan program. Also, the 2008 budget proposal does not fund the Bank Enterprise Awards Program.
On June 28, 2007, the House of Representatives passed H.R. 2829, the Financial Services and General Government Appropriations Act for fiscal year 2008. In the legislation, the House funded this program at $100 million, a $46 million increase over fiscal year 2007. On July 12, 2007, the Senate Appropriations Committee passed the House legislation with $90 million for the CDFI fund, a $10 million decrease from the House bill. In late December, the Congress passed an omnibus spending bill that funded the program at $94 million.
CONTACT: John Hildreth, (202) 508-6724, jhildreth@cuna.coop
Related Documents:
June 6, 2006: Letters to Reps Knollenberg, Olver, Lewis Regarding CDFI Fund
July 18, 2006: Letter to Reps Cochran, Bond and Murray Regarding CDFI
