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February 16, 2005
Bush Budget Ghettoizes 18 Community Development Programs, Slashing Their Funds
    by William Baue

Community development advocates criticize the proposed budget for fiscal year 2006, as the consolidated programs will have to compete with one another for a smaller pool of funds.

Last week, President George W. Bush released his budget proposal for fiscal year (FY) 2006, which begins October 1, 2005. The proposed budget reduces the Community Development Financial Institutions (CDFI) Fund budget from $55.5 million in FY 2005 to $7.9 million in FY 2006.

The Bush budget proposal also significantly restructures the 35 community development programs currently under seven cabinet agencies by consolidating 18 of them under the umbrella of the new Strengthening America's Communities Grant Program at the Commerce Department. The 17 unconsolidated programs would experience some upward mobility, with their collective budgets rising almost $1 billion, from $10.9 billion in FY 2005 to $11.8 billion in FY 2006. Meanwhile the 18 programs lumped together like ghetto residents would get their collective budgets chopped from by $1.6 billion, from $5.3 billion in FY 2005 to $3.7 billion in FY 2006.

Almost immediately, community investment advocates including the National Community Capital Association (NCCA), the CDFI Coalition, and the Association of Community Organizations for Reform Now (ACORN) criticized this proposed consolidation.

"There are no data to justify the radical, sweeping scope of President Bush's budget proposal to scrap the existing federal community economic development system and replace it with an almost entirely unfunded shell," said Mark Pinsky, president and CEO of NCCA. "I would describe it as 'popcorn policy,' which is to say there's a kernel of truth to what the administration is saying, but there's also a lot of hot air."

"The kernel of truth is that not all government programs work perfectly--that's true whether you're talking about contracting to provide services in Iraq, or the Community Development Block Grants, or the CDFI Fund," Mr. Pinsky told "The problem is that this does not seem to be a serious effort to try and improve the role government can play in helping underdeveloped domestic markets emerge, but rather it seems to be part of a deliberate 'war of the crumbs' strategy under which a variety of interests and groups would be set at each other's throats to battle over an increasingly small amount of funds."

The 18 merged programs would include the CDFI Fund, the CDFI Native Americans Initiatives, the Bank Enterprise Award (BEA) Program, the Brownfields Economic Development Initiative (BEDI), and the Rural Housing and Economic Development (RHED), among many others. The 18 programs are looked at by the Bush administration "as being direct grant programs that have very similar types of goals for the end-user, but they are administered through different processes and means," according to Troy Stang, public and legislative affairs director at the CDFI Fund

"The knee-jerk reaction is that the CDFI Fund is being gutted," said Mr. Stang. "The new plan is not quite ironed out yet, and the details are pending, and pending for a reason, as the administration feels it's important as the new plan is developed to get input from the community development industry and let these folks have a seat at the table."

"So although the programs as they know them today, such as the CDFI Fund program, may lose their identity, it's a great opportunity for CDFIs or constituents of any of the 18 programs to help define what community development looks like in the new program," Mr. Stang told

Mr. Stang explained that part of the $7.9 million allocation to the CDFI Fund would go to administer the New Markets Tax Credit (NMTC) program, which would remain intact under the Treasury Department. The rest of the $7.9 million allocation would go toward administration and ongoing disbursement of the CDFI Fund's current and past awards.

"The $7.9 million does not include any current appropriation dollars for new awards to be made beyond 2005," Mr. Stang stated.

It remains to be seen how the US Congress will respond to the Bush budget proposal.


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