Trump Proposes Steep Cuts to Treasury Community Finance Fund (1)

The Trump administration is proposing to cut nearly all discretionary funding from a Treasury Department office supporting community financial institutions.

The Community Development Financial Institutions Fund would be slashed by $291 million in fiscal 2026 under the “skinny budget” released by President Donald Trump on Friday. The cuts would be targeted at the fund’s “discretionary awards” budget that covers grants providing eligible banks, credit unions, and loan funds with operational and other balance-sheet support.

But the budget outline also proposes $100 million for a new Rural Financial Award Program that would require 60% of a CDFI’s loans to go to rural communities.

The budget also proposes allowing the CDFI Fund to continue a certification process for financial institutions and support for New Markets Tax Credit and Bond Guarantee programs the fund oversees.

Congress created the CDFI Fund in 1994 and re-upped its federal funding at $324 million in the fiscal 2025 continuing resolution. Just hours after signing that measure into law, however, Trump issued an executive order calling to eliminate the CDFI Fund’s “non-statutory” functions and significantly reduce its workforce.

Community lenders and their bipartisan supporters in Congress had raised concerns Trump would seek to zero out the CDFI Fund entirely. The “skinny budget” proposes drastic cuts but isn’t the worst-case scenario, said Brett Theodos, a senior fellow at the Urban Institute and director of its Community Economic Development Hub.

“It doesn’t mean the work of CDFIs will stop,” he said. “It means that they won’t be able to fill up their next tank of gas as easily or as well.”

Community Financing

The CDFI Fund’s discretionary awards “made race a determinant” and focused on programs that built “climate resiliency,” the Trump administration said in its budget outline justifying the cuts.

“The CDFI industry has matured beyond the need for ‘seed’ money and should at this point be financially self-sustaining,” the budget document said.

In reality, grants provided under the fund’s discretionary awards were important for small and medium-sized loan funds that put the money on their balance sheets to get investments from banks, Theodos said.

That’s vital for expanding product offerings and markets for smaller funds, he said.

“If you want to expand into a new geographic market or a new product market, there are real costs to do so,” Theodos said.

Banks and credit unions that are certified CDFIs can use deposits to attract investment from larger financial institutions, he said.

Some grants allowed smaller CDFIs to build up loan servicing and other technological platforms and hire employees, Theodos said.

‘Pivotal Moment’

Without further details, it’s difficult to know whether the Trump administration will have sufficient staff in place to help CDFIs maintain their certification and to provide other technical assistance, even though the outline calls for that support to remain in place.

“You need an operational budget for the CDFI Fund for what it does,” said Jesse Van Tol, the president and CEO of the National Community Reinvestment Coalition.

CDFIs have broad support on both sides of the aisle.

Soon after Trump’s March executive order, a bipartisan group of senators sent a letter to Treasury Secretary Scott Bessent urging him to protect the fund. Bessent has publicly said he intends to do so.

The proposed cuts to the CDFI Fund drew a rebuke from a leading credit union trade group.

“We are not aligned with the suggestion to eliminate the Community Development Financial Institutions (CDFI) Fund’s discretionary awards,” Jim Nussle, the president and CEO of America’s Credit Unions, said in a statement.

Credit unions will push for Congress to fully fund the CDFI Fund, he said.

Republicans in Congress may try to hold the line on CDFI funding as budget talks progress, but there remains a chance that programs focusing on underserved communities may get cut in order to fund the president’s desired tax cuts, Van Tol said.

“This is a pivotal moment for Congress,” he said. “Either they’re going to reassert their authority, their control of the purse or they’re not.”