CDFIs, Sustainability and Trump’s ‘Skinny” Budget

(Illustration by Rodion Kutsaiev / Unsplash+)

Earlier this month, President Trump released his “skinny” budget, proposing significant cuts to resources across wide swathes of social services, from housing to education.

As some of us expected, the White House proposed a significant cut to the CDFI Fund: the elimination of $291 million of discretionary awards that support community development financial institutions across our country. The White House provided a table that summarized the major discretionary grant changes across government and for the CDFI Fund, and noted the following:

“Consistent with the President’s goal of reducing the Federal bureaucracy, the Budget recommends eliminating CDFI Fund discretionary awards. Past awards may have made race a determinant of access to loan programs to ‘advance racial equity,’ funded products and services that built so-called ‘climate resiliency,’ and framed American society as inherently oppressive rather than fostering unity. The CDFI industry has matured beyond the need for ‘seed’ money and should at this point be financially self-sustaining. Remaining funding supports oversight and closeout of prior awards, maintaining CDFI certification, and support for New Markets Tax Credit administration and the zerocost Bond Guarantee Program.”

I wasn’t surprised by the White House’s interest in removing traces of “racial equity,” but I was a bit surprised to see the administration’s reasoning that CDFIs should no longer need grants to support the services CDFIs provide entrepreneurs and small business owners, including business coaching and technical assistance. After all, if you receive a grant or two, you should be sustainable, right?

Where else have we been probed about the “sustainability” of our initiatives?

The idea of “sustainability” comes up a lot in the philanthropic world, too. The beloved philanthropic thought leader Vu Le calls it a “myth,” and has written about the difficulty of expectations for grantees to have to justify how a nonprofit program can become sustainable after a one- or two-year grant. As grantees, we surrender to this difficult dance, spending time determining ways to build our initiatives to no longer need outside funding.

There are a host of problems with this line of thinking. In this tumultuous year, challenging each other on whether our initiatives are sustainable implies we no longer need each other. It feeds into the notion that we can build initiatives that arise to a point where we no longer need assistance from anyone else. It perpetuates a vision in which our efforts will develop where we no longer have a defined role for others.

This focus obscures our role as a nonprofit: Our North Star is to work with community members and to fill the gaps left by public and private sector investments and interventions. Our mission is people, not profits.

Our country is built on this false idea that we can lift ourselves up by our “bootstraps.” We idolize the entrepreneurs who built vast corporate empires and amass unimaginable wealth. Then we buy into the illusion that they did it alone — without investment, without taxpayer support, without a safety net.

But we rarely idolize the social entrepreneurs and nonprofit leaders who build businesses in the same way that their private sector counterparts did: pitching their initiatives, seeking grants and investments, experimenting, failing, succeeding, and then failing again. And all this with fewer resources and greater scrutiny.

For nonprofit leaders, we deliver a double standard that restricts funding, questions their approaches and — in the case of the White House’s “skinny budget” — removes the ability to access funding for small business coaching, technical assistance and technological improvements to lend more low-interest capital to emerging small businesses local economies.

The White House’s proposal will have negative impacts for CDFIs like Inclusive Action. Since 2020, we’ve received grants from the CDFI Fund to help us expand our lending and small business development programming and multiply the amount of support we can provide community members.

In this same span of time, our loan program has grown from serving 40 businesses per year to over 200 businesses each year who each received tailored support. This year’s success in deploying $2.5 million in cash assistance to outdoor workers impacted by the L.A. wildfires was built off of lending and business coaching infrastructure that was seeded by CDFI Fund support.

We’ve seen quick responses to this latest proposal from leading CDFI trade associations, like the Opportunity Finance Network. My hope is that we can build a case as to how discretionary grants awarded by the CDFI Fund create jobs, build businesses and support our economy. I also hope that we use this moment to change how we engage with each other.

The textbook definition of sustainability is the ability to be maintained at a certain rate or level. In 1987, the United Nations’ Brundtland Commission defined it as “meeting the needs of the present without compromising the ability of future generations to meet their own needs.”

Unfortunately, the use of this term in grantmaking and investing is not about maintaining, meeting needs or seeking balance. It’s used to define when we will no longer need each other.

We need each other more than ever. While our roles eventually change, those roles should never be defined in a way where we are no longer working with each other and supporting a collective mission. To this end, I hope that we can arrive at a shared understanding of “sustainability” — a definition that elevates a shared goal of prosperity for everyone, and an understanding that we need a deep and long-lasting solidarity to achieve that goal.

This post was originally published on Next City.