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This week, the President delivered the remainder of his Fiscal Year 2020 budget to Congress. The Administration’s budget is an explanation of its spending priorities and does not have the force of law.
The president’s budget always has a section, as required by law, in which Treasury rescores all tax expenditures, including the ten-year cumulative “cost” of the credit union “tax expenditure.” Basic scoring off the tax expenditure is the credit union movement’s retained earnings multiplied by the corporate income tax rate. In the 2017 tax reform law, the corporate rate was lowered from 35% to 21%. That likely accounts for the drop in the “cost” of the credit union tax expenditure … $1.8 billion in 2019.
The budget sent to Congress recommends the elimination of the Community Development Financial Institutions (CDFI) Fund in FY 2020. This was the same recommendation for FY 2017 and 2018. In FY2019, the President recommended spending $14 million to service then current obligations. His budget again requests $14 million to administer the Fund’s outstanding loan and grant obligations.
CUNA has worked with Congress and our system partners to restore and even increase CDFI funding during this Administration. This fund 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.
CUNA is requesting $300 million for the CDFI Fund in FY 2020, an increase of $50 million over FY2019.
The president’s budget submission also requests the elimination of the NCUA’s Community Development Revolving Loan Fund (CDRLF) and would provide no new funds for FY 2020. The President has attempted to eliminate funding for this program in his budgets for FY 2017, 2018, and 2019. CUNA has worked with Congress and our system partners to restore CDRLF funding during this Administration. The NCUA successfully administers the Community Development Revolving Loan Fund program (CDRLF), which is used to provide low-interest loans and technical assistance grants to low income designated credit unions. It was created in 1979 and transferred to NCUA administration in 1986. The Community Development Revolving Loan Fund (CDRLF) was established by a $6 million appropriation to assist credit unions serving low-income communities to: 1) provide financial services to their communities; 2) stimulate economic activities in their communities, resulting in increased income and employment; and 3) operate more efficiently. CDRLF funds a revolving loan program and a technical assistance program. Since FY 2001, Congress has recognized the importance of CDRLF, and has provided annual appropriations for the program. The CDRLF usually receives requests that greatly exceed available funds and CUNA is concerned that an elimination of this fund will result in fewer low-income credit unions having access to needed capital to provide critical services to low income credit union members.
As of September 30, 2018, the CDRLF had outstanding loans of $9.7 million (26 loans outstanding to 26 credit unions). In October 2018, the NCUA awarded $2 million in technical assistance grants to help 203 low-income credit unions improve digital services and security, increase outreach to underserved communities, and train employees.
CUNA is requesting $3 million for the CDRLF in FY 2020, an increase of $1 million over FY2019.
The Small Business Administration’s (SBA) 7(a) loan program allows the agency to guarantee up to 85% of a loan. For credit unions, this means the SBA-guaranteed portion of a member business loan does not count against the statutory cap of 12.25% of assets. The SBA’s 504 loan program provides long-term, fixed-rate financing for major fixed assets, such as equipment and real estate. For FY 2020, the Administration’s budget proposes an SBA Section 7(a) loan program maximum loan limit of $30 billion, $1 billion less than FY2019. The budget also proposes an SBA Section 504 Loan Program maximum loan limit of $7.5 billion, the same as FY 2019.
The Cooperative Development Program (CDP) is essential to furthering the worldwide development programs at the World Council of Credit Unions (WOCCU). In FY 2019, the program received $12 million in funding. In the FY 2020 Presidential request, the document states, “The Budget proposes to consolidate, realign, and reduce economic and development assistance across budget accounts, countries, and sectors to better advance U.S. interests, target the challenges of a new era of great power competition, support reliable strategic and diplomatic partners and allies, and ensure efficiency, effectiveness, and accountability to the U.S. taxpayer.”
The president’s budget also proposes that the Congress establish funding levels for the Office of Financial Research (OFR) and the Financial Stability Oversight Council (FSOC) through annual appropriations bills.
The FY 2020 Budget request proposes a restructure the Consumer Financial Protection Bureau. The budget would limit its mandatory funding in FY 2020, and provide discretionary appropriations beginning in FY 2021. This move is designed to “ensure appropriate congressional oversight by subjecting the CFPB to discretionary appropriations starting in 2021.” The proposal would also cap transfers by the Federal Reserve Board to the CFPB during FY 2020 to $485 million.
The Administration’s budget request proposes an increase and extension of guarantee fees charged by Government Sponsored Enterprises. It proposes increasing the guarantee fee charged by Fannie Mae and Freddie Mac from 0.10 to 0.20 percentage points from 2020 through 2021, and extending the 0.20 percentage point fee through 2024. CUNA opposes this provision.
Finally, the president’s proposed FY 2020 budget proposes the elimination of funding for the Capital Magnet Fund, a federal program that provides Federal funding for affordable low-income housing. The Fund, managed by the Department of the Treasury's Community Development Financial Institutions (CDFI) Fund, provides grants to CDFIs and nonprofit housing organizations that are leveraged to finance affordable housing and related economic development activities. CUNA opposes the elimination of the Capital Magnet Fund.
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© 2019 Credit Union National Association
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© 2019 Credit Union National Association
ADA Compliance Notice & Legal