September 18, 2023
The Honorable Kathy Hochul
Governor of New York State
NYS State Capitol Building
Albany, NY 12224
Dear Governor Hochul:
We, the undersigned labor and community groups and Community Development Financial Institutions (CDFIs), write to urge you to take immediate actions, as outlined below, to repair and restore the NYS CDFI Fund to its intended purpose.
As you know, CDFIs play a crucial role in New York, providing responsible and affordable loans and other financial services in low-income communities and historically redlined neighborhoods. In 2007, New York State established – but failed to fund – the nation’s first state-based CDFI Fund, modeled after the successful federal CDFI Fund, which provides flexible grant funding to CDFIs to help them build capacity and expand lending and other vital services.
New York is home to more than 80 mission-driven CDFIs serving every county in our state. By failing to adequately fund and effectively administer the state’s CDFI Fund, New York is squandering an obvious opportunity to address persistent racial wealth inequality and inequities in our financial system.
As members of the NYS Community Equity Agenda coalition, we successfully advocated in 2019 for the state to finally breathe life into the NYS CDFI Fund with an initial commitment of $25 million over five years. Last December, we sent you the enclosed letter urging release of the funds and greater efficiency in the administration of the program. As we noted then, “[t]he state’s failure to distribute the full amount of these critical grant funds in a timely manner raises serious concerns about New York’s commitment to addressing persistent banking inequality, redlining, and lending discrimination.” (To date, we have received no reply to the letter or to our repeated follow-up.)
Unfortunately, our calls appear to have gone unheeded. If anything, the latest round of funding strongly suggests that your Administration is neglecting its responsibility to implement the Fund in a way that actually benefits low-income, Black and brown, immigrant and other New Yorkers excluded and exploited by the big banks. For example:
- CDFIs in New York, including many members of our coalition, have long pressed New York State to emulate the federal CDFI Fund’s Financial Assistance award grant program, which offers resources for capacity building, enabling CDFIs to increase their lending. The federal CDFI program serves as a proven and effective model for New York; the state’s departure from the federal model misses a critical opportunity to replicate a successful program that effectively gets public funds out to communities. Moreover, failure to streamline the programs imposes unnecessary burdens on NY’s CDFIs, and as a result several vital NY CDFIs have foregone the funding opportunity.
- The NYS CDFI Fund was intended to be a flexible grant funding source for New York CDFIs, and to prioritize small CDFIs that have an explicit mission to advance racial justice. The funding criteria were meant to be broad, with the expectation that CDFI applicants could best demonstrate the specific lending and other financial services needs of the communities they serve. Instead, the current round of funding narrowly defines activities eligible for funding, with undue emphasis on financial education and almost no reference to lending or to meeting community credit needs.
- The stated purpose of the new funding round is to help “unbanked” and “underbanked” individuals and micro businesses “become bankable.” By placing the onus on individuals and ignoring structural barriers to banking, this framing indicates a deeply problematic approach by your Administration to addressing long-standing inequities in our financial services system that play out in low income communities and communities of color throughout our state – the very communities that CDFIs ably seek to serve.
In short, under your Administration, the NYS CDFI Fund has yet to fulfill its tremendous promise to the people of New York. We urge your Administration to take immediate steps to ensure that the NYS CDFI Fund achieves its intended purpose – to provide flexible funding to CDFIs to build their capacity and strengthen their critical work in communities throughout the state long underserved by mainstream banks.
Specifically, we respectfully urge you to take the following actions:
- Structure the state CDFI Fund’s grants program to mirror the federal CDFI Fund’s Rapid Response Program, which appropriately gives CDFIs the flexibility to best identify and meet the financial services needs of the communities they serve. Our organizations have deep experience in the field and would be happy to work with your office to design sound criteria for accountable administration of the funds.
- Include significant additional funding for the NYS CDFI Fund in your budget. As your Administration begins budget discussions with the Legislature, it should ensure that the Fund has ample resources, critical to ensuring that New York addresses New Yorkers’ financial services needs and helps build wealth in low income, Black, brown, and immigrant neighborhoods.
The NYS Community Equity Agenda coalition endorses the NYS CDFI Coalition’s views and recommendations, set forth in its August 14, 2023 letter to Empire State Development.
cc: The Hon. Charles E. Schumer, U.S. Senate
The Hon. Kirsten Gillibrand, U.S. Senate
The Hon. James Sanders Jr., Banks Committee Chair, NYS Senate
The Hon. Pamela J. Hunter, Banks Committee Chair, NYS Assembly
The Hon. Adrienne A. Harris, Superintendent, NYS Department of Financial Services
The Hon. Hope Knight, President, CEO and Commissioner, Empire State Development