WASHINGTON—President Trump is proposing cutting $291 million in discretionary funding for the Community Development Financial Institutions Fund.
Trump’s first budget proposal to Congress seeks to eliminate funding for financial institutions that support economically disadvantaged communities, dismissing the initiative as a “woke” program tied to racial justice and climate change efforts, Politico said.
The proposal was included as part of Trump’s budget framework released on Friday that calls for deep cuts across federal agencies. The plan seeks a more than 20% cut to non-defense discretionary funding, which would bring that spending down to 2017 levels, Politico reported.
Trump’s budget request for the coming fiscal 2026, which begins Oct. 1, seeks a 19% overall reduction to Treasury Department funding.
The agency’s budget would shrink by $2.7 billion from $14.2 billion to $11.5 billion under the proposal. The decrease is largely driven by a nearly $2.5 billion proposed cut to funding for the Internal Revenue Service, Politico said.
The proposal to slash funding for the CDFI Fund program, which is housed at Treasury, comes after Trump earlier this year sparked backlash from both Republicans and Democrats when he sought to dismantle the CDFI Fund programs through an executive order. The Trump administration later backtracked, with the Treasury Department telling the White House that all 11 programs and functions of the CDFI Fund were required by law, Politico said.
The Defense Credit Union Council reacted Friday by sending a letter to Treasury Secretary Scott Bessent sharing its “deep concerns” over the CDFI Fund decision.
“The CDFI Fund has been a lifeline for these communities, enabling our credit unions to expand affordable financial services where they are most needed,” wrote DCUC President and CEO Anthony Hernandez. “We fear that eliminating the CDFI Fund would have a detrimental impact on both defense credit unions and the military families and veterans who depend on them.”
Hernandez pointed out that for more than 30 years the CDFI Fund has “empowered mission-driven lenders – including nearly 500 credit unions – to serve Americans left behind by mainstream finance. This includes many military base communities and veteran populations that benefit from credit union programs funded through CDFI support. Military installations are often located in rural or lower-income regions lacking adequate financial infrastructure, and a large portion of junior enlisted servicemembers meet the CDFI Fund’s ‘Low-Income Targeted Population’ criteria.
“With CDFI grants and awards, defense credit unions have been able to offer products tailored to these populations – opening branches in banking deserts, providing emergency small-dollar loans to military families, offering financial education, and investing in local economic development projects,” continued Hernandez. “Notably, over 80% of military families experience financial stress, underscoring the need for trusted community-based financial partners…Eliminating the CDFI Fund would directly undermine these efforts and harm many working families, servicemembers, and veterans who rely on credit unions for their financial well-being.”
DCUC also sent a letter to every member of the Senate CDFI Caucus, including co-chairs Senator Mike Crapo and Senator Mark Warner. The trade group warned that a drastic cut would severely undermine the financial stability of military families, veterans, and underserved Americans.
The trade association also expressed support for the proposed $100-million Rural Economic Development program to be housed within the CDFI Fund in the FY2026 budget.
“Many of the military communities our credit unions serve are in rural areas, and we agree that investing in rural economic prosperity is vital. The CDFI model has already proven effective in stimulating growth in rural and Native communities. We would like to learn more about this carve out and how this will improve military and veteran communities,” the letter states.
“DCUC is committed to advancing financial readiness and opportunity for those who serve our country,” said Hernandez, “and urge lawmakers to reject harmful funding cuts and uphold the CDFI Fund’s legacy of empowering underserved communities nationwide.”