The Trump administration’s latest effort to reduce funding for the Community Development Financial Institution (CDFI) Fund would slash approximately two-thirds of the fund’s budget for fiscal year 2027 and impose a new fee on certain small business lenders.
The White House requested that Congress cut $204.5 million from the program’s current $324 million budget. To justify the proposal, the administration accused past administrations of using the fund “to advance a partisan agenda,” which included race-based lending and “immigration, gender and climate radicalism.”
The 92-page proposal includes a list of programs that would be on the chopping block across 18 federal departments and agencies, such as the Treasury Department, the Department of Labor, the Department of Veterans Affairs, the Department of Commerce, the Department of Energy and the Small Business Administration (SBA).
According to the proposal, the proposed cuts are intended to eliminate “redundant” and “wasteful” spending and redirect remaining CDFI Fund awards to rural communities “where the awards are most beneficial.”
“Past awards enabled lender practices in which race was a key determinant in access to loans and provided funds for products and services that advanced immigration, gender, and climate radicalism,” the proposal states. “By refocusing CDFI Fund awards to expand access to capital, finance infrastructure, and bolster Main Street business development in rural America, the budget allocates resources efficiently and prevents taxpayer dollars from again supporting:
- “‘Immigration detention bonds,’ which allow a noncitizen’s release from U.S. Immigration and Customs Enforcement custody while their case proceeds;
- “‘Gender extremism,’ such as lesbian, gay, bisexual, transgender, queer, plus clinics that provide gender-affirming hormone therapy and other services to young patients; and
- “‘Green New Scam’ climate policies, such as wind farms that degrade America’s natural landscape and fail to serve American energy consumers.”
Notably, the proposal would introduce a new administrative fee for lenders participating in SBA’s guaranteed business lending programs. The fee would be meant to address “the long-standing imbalance of taxpayers covering the cost of administering these business lending programs, which offer loan guarantees that reduce the financial risk to participating lenders.”
The administration previously proposed trimming the CDFI Fund budget by roughly the same amount, but that proposal met bipartisan resistance. Lawmakers instead agreed to maintain the program’s budget at $324 million in fiscal year 2026.
Last year, the Treasury Department announced it would modify the fund’s New Market Tax Credits program allocations to ensure compliance with federal anti-discrimination laws. The department also said it would increase monitoring of award recipients.
On April 10, the Treasury Department proposed new rules expressly prohibiting CFDI Fund awards from being used to support individuals who are in the U.S. illegally, while also requiring CDFIs will be required to adopt policies that align with the Trump administration’s anti-discrimination priorities.
The Treasury Department also announced the addition of new CDFI Fund provisions aimed at ensuring certified CDFIs do not engage in practices that violate federal anti-discrimination laws.