Bush Budget Would Cut Programs Beneficial to Community Development CUs

WASHINGTON – Unless Congress acts to change the Bush Administration’s budget plans, a federal program which has helped dozens of community development credit unions grow and better serve their low income memberships will effectively end on September 31, 2005. That’s when the Federal Government’s Fiscal Year 2005 ends, and the Bush Administration has not sought any new money to continue the U.S. Treasury Department’s Community Development Financial Institutions Fund. Instead the Administration has proposed moving several parts of the program to the Commerce Department where they would be a part of a new initiative which would be funded by only a very small amount. “This is effectively a way to end the program without coming out and baldly saying `we are eliminating this program’” said Jennifer Vasiloff, executive director of the CDFI Coalition, an organization of financial institutions which the Fund has recognized, and supported, as CDFIs. “So far, after hours of searching, I can find nothing specific in the budget about how the Commerce Department would administer these programs which began in the Treasury Department,” she added. Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions and member of the board of CDFI Coalition, agreed. “We are very suspicious of a stated move for consolidation which will in effect mean the end of the CDFI Fund,” Rosenthal said. “Contrary to some of the criticism I have seen, the CDFI Fund does not duplicate the work of other agencies. It is unique.” The Bush Administration has advanced the idea that the budget proposal would consolidate programs which are redundant and close down programs which have not worked as they should. This is not a perspective shared by John Lawson, manager of the $3.5 million Bushwick Cooperative Credit Union, headquartered in Brooklyn, New York. The four-year old Bushwick CU has been recognized as a CDFI since its inception and has received support from the Fund in three of the last four years, Lawson reported, including $263,000 this year. “It would be difficult to list how many different ways this support has helped us,” Lawson said. “It has really helped us build ourselves up to be a positive financial force in this very economically depressed area.” Lawson said the money has helped the 2,200 member credit union be able to expand its asset base, build up its computer and technology foundation and improve its staff training. “We have a top-notch staff that we have been able to get trained in some very good technology and computer applications for our members and we could not have done that without the help of the CDFI Fund.” Last year the Fund awarded $7 million spread among 10 CDCUs and credit union organizations from its Small and Emerging CDFI component. Credit unions have also been helped under the fund’s Technical Assistance program. The proposed budget included no new money for either part of the program, but only $8 million to meet existing grants and to continue the New Markets Tax Credit program, a part of the CDFI Fund which is authorized until 2007. The New Market Tax Credit program offers tax credits to investors which make investments in qualified CDFIs. In general credit unions have not benefited as much from the NMTC as they have from other parts of the program because they have usually lacked the size and expertise to attract the sorts of investment the NMTC has been meant to encourage. But in recent years both the CDFI Fund and other organizations which work with CDFIs have tried to encourage and train CDCUs in how to build the relationships which can result in NMTC investments. Credit unions, banks, and other sorts of financial institutions like development loan funds and development banks have been recognized by the CDFI Fund, but credit unions were among the institutions which helped found the Fund and have been among its biggest supporters. While the extent of the budget challenge – the proposed move of CDFI programs to Commerce, for example – caught supporters by surprise, they nonetheless predicted the fight which has become routine since the end of the Clinton Administration. Almost every year the Bush Administration has proposed spending less on the program than in previous years and every year Congress has moved to restore the funding that the Administration cut. “In many ways this is a familiar dance,” said Rep. Barney Frank, (D-Mass), “this year they have added some steps but the music is the same.” Frank, who is the ranking minority member on the House Financial Services Committee, said that program supporters cannot assume a victory, but he predicted the Administration’s proposal, which he called severe, would survive. “Essentially, this is an effort to make budget cuts solely at the expense of poor and working class programs,” he said. “Without asking other Americans to make corresponding sacrifices, for example in reduced tax cuts.” Supporters say that the fact that the proposal comes as part of a package which seeks to cut over 100 federal programs primarily used by lower income people is both its greatest strength and weakness. On the one hand such a blanket proposal helps the Administration make an argument that the cuts are needed as part of a broader budget cutting effort. On the other hand, it has also sparked efforts among a broad coalition, including many Republicans, against making the cuts. “I think what will kill this is a broad consensus of opposition,” Rosenthal said, suggesting that the Administration has made too many sweeping statements about programs which have helped too many people to be dismissed easily. “The power of the Presidency is such that when the President proposes something many people react as if it were already reality,” Rosenthal said. “We are stressing that this is only a proposal.” -