WASHINGTON – Fallout has continued to roll in from the Administration's proposed cuts to the U.S. Treasury's CDFI Fund. On February 7 the Administration proposed, as part of its budget for fiscal year 2006, to eliminate the Fund and roll money which would have been used by that program into a block grant program administered by the U.S. Commerce Department. The Administration maintained that taking this approach will allow the federal government to consolidate its different community development efforts under one roof and will introduce greater local control and accountability, but CDCUs and other CDFIs said the proposal misses the mark when it comes to their work and in the end would only hurt their efforts. In 2004, the Fund spread $7 million among 10 CDCUs and credit union organizations from its Small and Emerging CDFI component. Credit unions have also been helped under the funds Technical Assistance program and were instrumental in helping the Fund get started and growing. Both sides of the funding issue question were on display in Washington on February 10 and 11 at the annual CDFI Institute, a meeting which has been held at roughly the same time every year, but the timing made it a hot ticket. In previous years the Institute has provided an opportunity for the leaders to share common experiences among themselves and interact with CDFI Fund leaders, as well as to lobby Congress in support of the Fund. This year it provided Art Garcia, the Director of the Fund the opportunity to try to explain the Administration's decision to eliminate the Fund and to thank the CDFIs for the hard work they do. Garcia spoke on Feb. 11 and did his best, in his words, "to include good news as well as bad." He started his talk by emphasizing that, no matter what happened with the Fund next year, it would strive to get as much of the $55 million allocated for this year out the door as possible. "We are open for business," Garcia told the glum group of CDFI executives assembled for his talk. "We don't plan to leave a dime on the table" from 2004′s budget allocation, he said. Garcia announced that the Fund will give CDCUs and other CDFIs who missed previous opportunities to apply for a grant under the agency's Technical Assistance program, "another bite of the apple." Then Garcia poignantly took a few minutes to highlight the work of CDFIs, including CDCUs, and to mention how much their work has affected him. He described how he would go to visit a CDFI or CDCU and tour to see their work and return almost physically touched by their efforts. "Some nights I have just felt grateful to have been a part of the sorts of work that I have seen CDFIs do," he said. To illustrate why the Administration had decided to cut the CDFI Fund, Garcia used the example from the Colonias part of his native Texas. The border area has suffered under endemic and crushing poverty for many years and current poverty elimination efforts have not been able to eradicate it, he said. To counter these deep-seated problems, Garcia explained, the Administration had decided to adopt the block grant approach which will better allow local leaders to set the agenda for their development dollars on their own. The NCUA also revealed that it had been consulted about the proposed budget changes and that it hoped CDCUs could continue to receive funds in the program. NCUA Board Chairman JoAnn Johnson said that NCUA has worked closely with the CDFI to promote the Fund to credit unions, and the CDFI has assisted some credit unions whose primary focus is community development. "We expect our efforts to continue should this responsibility be shifted to the Department of Commerce," Johnson said. "Folks should realize bringing together a myriad of programs and grant assistance to one portfolio will provide opportunities for credit unions to benefit from other programs, not just a CDFI Fund." But CDCUs and other CDFIs have countered that the Administration's position has merely insured that CDCUs will now face additional layers of competition for already scarce federal resources. Currently, CDCUs have to compete with other CDCUs and other small CDFIs for resources from the Fund's Small and Emerging CDFI program. But under a block grant program administered by the Commerce Department, CDCUs will have to first compete with other local development initiatives to be part of a local block grant request and then hope their community's block grant request is sufficiently strong to compete with requests from other local areas. Other CDFI speakers at the institute noted that the proposed consolidation did not provide one-to-one funding. In fiscal year 2005, the 18 programs which had been proposed to be consolidated were allocated $5.31 billion. The same programs as part of the Strengthening America's Communities Initiative are proposed to be funded to only $3.71 billion. "If the Administration really sought to help people in targeted areas, why not use incentives to existing efforts to direct resources to those areas," asked Carol Wayman, policy director of the National Congress for Economic Development. "And don't cut the work that is being done already." But CDCUs and CDFIs left the meeting noting that the Administration's proposed cuts remains only a proposal for now. "It's a long road from making a budget proposal to seeing it enacted," said Cliff Rosenthal, executive director of the National Federation of Community Development Credit Unions and past chairman of the CDFI Coalition. "I am not discouraged." -

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