By Jason Stverak
Washington often treats the federal budget as another annual exercise in numbers, priorities, and political messaging. This year is different.
The President’s Fiscal Year 2027 budget is not just a policy document. It is a signal flare. And for credit unions, especially those serving servicemembers, veterans, and their families, it should be read as an early warning of what’s coming next.
At its core, the budget proposes a significant increase in defense spending paired with deep reductions across a range of non-defense programs. That dynamic alone sets the stage for conflict. When policymakers increase spending in one area by that magnitude, the system inevitably looks elsewhere for savings.
That is where credit unions need to pay attention.
Because when Congress starts looking for offsets, nothing is off the table for long including the credit union tax status.
We have already seen this playbook before. Lists of potential “pay-fors” circulating on Capitol Hill have included the credit union tax exemption alongside other major revenue options. Those ideas do not disappear. They wait for the right legislative vehicle.
And reconciliation, especially multiple rounds of reconciliation, is exactly that kind of vehicle.
Right now, Congress appears to be moving toward at least one reconciliation package tied to border funding. There is growing discussion of a second, much larger reconciliation effort tied to defense spending. But what should concern credit unions most is what could come after the election.
If Congress is unable to resolve these priorities in the coming months, a third reconciliation effort in a post-election, lame-duck session becomes a very real possibility.
That is where risk compounds.
Lame-Duck Reconciliation Bill
A lame-duck reconciliation bill would likely be large, complex, and under intense time pressure. It would also be the moment when lawmakers, facing fiscal constraints and political realities, are most aggressively searching for offsets.
That is precisely the environment where longstanding threats to credit unions, especially the tax status can resurface and move quickly.
Hope is not a strategy here. Vigilance is.
At the same time, the budget itself signals additional pressure points for credit unions.
The proposed elimination or redirection of Community Development Financial Institution (CDFI) funding is one example. For many credit unions operating in underserved communities, CDFI support is not supplemental, it is foundational. Weakening that ecosystem doesn’t just affect institutions; it affects the communities and members who rely on access to affordable credit and financial services.
The same is true for housing. The proposed elimination of housing counseling and reductions in community development programs like HOME would reduce the support systems that help families become mortgage ready. That doesn’t eliminate demand, shifts the burden. And often, that burden falls on local lenders, including credit unions.
There are also implications for small business lending. Proposed changes to how SBA programs are funded, particularly the introduction of new costs for participating lenders could alter the economics of small business lending for credit unions. That, in turn, affects access to capital for entrepreneurs, including veteran-owned businesses.
But focusing on the budget alone misses the bigger picture.
Because what makes this moment particularly important is not just what is in the budget, it is how Congress is likely to act on it.
Right now, Washington is not moving toward a single legislative outcome. It is moving toward multiple, overlapping ones.
Growing Momentum For A Second Reconciliation Bill
There is an emerging reconciliation effort tied to border funding, specifically ICE and CBP. There is growing momentum for a second reconciliation bill tied to defense. And at the same time, Congress is beginning the annual appropriations process, which will almost certainly stretch into the end of the year.
Each of these vehicles carries risk.
Reconciliation, by design, is fast-moving and difficult to amend. It is also one of the few legislative tools that can directly impact tax policy with a simple majority vote. That reality alone should focus the credit union movement.
Because if lawmakers are searching for revenue to offset new spending, especially across two or even three reconciliation efforts the credit union tax status will inevitably be part of the conversation.
And once that conversation begins inside a reconciliation process, it can move quickly.
We have also seen how unrelated policies can find their way into must-pass legislation. As bills move through Congress particularly in the House they often become platforms for competing priorities. Members look for leverage. Leadership looks for votes. And suddenly, a bill that started with one purpose becomes something much larger.
That is where the real risk begins.
The timeline only adds to the concern.
Congress is working under compressed deadlines. There is pressure to act quickly on border funding. There is growing interest in addressing defense priorities through reconciliation. And there is an election-year reality that makes it unlikely all appropriations bills will be completed on time.
What Could Be Ahead?
The most likely outcome? A continuing resolution in the fall, followed by a high-stakes, end-of-year legislative push potentially in lame duck where appropriations and multiple reconciliation priorities could collide.
That is when major decisions get made quickly.
And when that happens, organizations that are not engaged early often find themselves reacting too late.
For credit unions, this is not a moment for complacency. It is a moment for engagement.
We cannot afford to assume that harmful proposals, whether related to tax status, interchange, or regulatory burden will simply fade away. We cannot afford to wait until the final stages of legislation to make our case. And we cannot afford to treat budget, reconciliation, and appropriations as separate conversations.
They are all connected.
What happens in the budget shapes what is possible in reconciliation. What moves in reconciliation affects what is left for appropriations. And what ultimately passes potentially across multiple reconciliation bills, including one after the election will reflect decisions made across all three.
That is why credit unions must be active now.
We must continue to educate policymakers about the role we play in supporting financial readiness, particularly for military families and veterans. We must reinforce the value of the credit union model, member-owned, mission-driven, and focused on service over profit. And we must be clear about the real-world consequences of policies that weaken community-based financial institutions.
Because when programs are cut, when costs increase, or when access to credit is reduced, it is not an abstract policy debate.
It is a servicemember trying to buy a home.
A veteran starting a small business.
A family working to stay financially stable.
And if Congress gets this wrong, if it targets the very institutions designed to serve those communities, the consequences will be real.
The months ahead will bring uncertainty. There will be competing priorities, shifting timelines, and intense political pressure.
But one thing should remain constant: the need for credit unions to be vigilant, engaged, and ready.
Because in a world of multiple reconciliation bills before and after the election nothing is guaranteed.
And everything—including our tax status—must be defended.
Jason Stverak is Chief Advocacy Officer at the Defense Credit Union Council.