Community Development Financial Institutions operating in the Chilkat Valley and throughout Southeast Alaska are considering their futures after a Trump administration executive order targeted the U.S. Treasury Department’s CDFI Fund for elimination.
The order, signed on March 14, requires seven federal entities, including the Community Development Financial Institutions Fund, to reduce services and functions to the “maximum extent consistent with applicable law.”
“Without them, we wouldn’t have been able to get started,” said Spruce Root Executive Director Alana Peterson. “We received a lot of our initial funding through [the fund].”
Juneau-based Spruce Root was founded in 2012. It targets entrepreneurs and businesses in low-income, rural, and historically Alaska Native communities in the region.
Peterson said it wasn’t immediately clear what the direct impact of a reduction in the services or loss of the CDFI Fund would mean for organizations like Spruce Root. But, she said most of their initial funding wasn’t handouts or grants from that fund.
“A lot of these funds we receive are in the form of debt capital. Low interest capital. So we’re paying it back,” she said.
Peterson said she was finding it hard to see the economic justification for threatening CDFIs.
“It’s actually pretty bizarre when you think about what this administration purports to support,” she said. “They support small businesses and economic development and supporting capital markets and those sorts of things. But they draw the line at organizations like Spruce Root who are trying to ensure that people in our smallest communities also have access to capital to grow and start businesses.”
She said Spruce Root isn’t at risk of losing any direct funding this year. But the CDFI Fund had planned to award nearly $350 million through various programs in 2025. So, Peterson said some of that could have ended up with Spruce Root indirectly.
“Basically a lot of our lending capital right now is from other entities that all have federal funding sources,” she said. “So that’s a pretty scary thought that all of that loan capital could dry up or that we could be operating in a new field where it’s unclear where we get our loan capital.”
For now, Spruce Root is not going to change its operations.
“None of this is going to stop us from our plan, as far as deploying capital in the region in the form of small business loans,” she said.
But, other federal funding freezes have changed operations this year. Peterson listed off $20 million in funds that were slated for the organization’s three-year effort to stand up the Tongass Green Bank, which was supposed to support clean infrastructure project financing and development in Southeast Alaska.
“That’s now being litigated in court,” she said.
Another $2.5 million community change grant through the Environmental Protection Agency has been frozen and Peterson said it looked like the funds were not going to come through.
“It’s millions and millions of dollars that Spruce Root is losing because of these executive orders and it’s really changing what we thought the year was going to look like.
Five Chilkat Valley businesses have benefitted from one of Spruce Root’s flagship programs – the Path to Prosperity. That business planning competition that puts businesses in the running for $20,000 grants each year. Past winners included Foundroot, Four Winds Farm, Adventure Harvest, Mud Bay Lumber Company, the Port Chilkoot Distillery and Fairweather Ski Works. The Chilkat Valley News took part in its Path to Prosperity business plan competition in 2024.
Port Chilkoot Distillery owner Heather Shade said the program was pivotal to the distillery’s development. “They invested in me as a person, they invested in my learning and education and becoming a better business person – everything from managing my finances to being a good employer to developing my business plan and accessing funds.”
Spruce Root is one of more than 1,400 community development institutions that focus capital – through everything from loan programs, to affordable housing, to business development – in rural and underserved communities across the country.
Michael Ching, Spruce Root’s CDFI director, said the organization signed onto a letter sent to Treasury leadership and members of Congress by the Native CDFI Network, and Oweesta, an intermediary that works with Native CDFIs and in Native communities.
In it, they argue that the executive order should not apply to the CDFI fund as it directs the program to reduce its size and scope to what is authorized in statute. The letter’s authors argue that the CDFI fund’s basic functions are all authorized through Congressional statute.
“We also take the position that this attack on the CDFI Fund is unfounded,” they write, and go on to list the impact of the community development institutions which “help the federal government fulfill its trust and treaty obligations to Tribal Nationals by fostering economic growth and opportunity.”
Another local CDFI is the Tongass Federal Credit Union, a nearly 14,000-member credit union operating throughout Southeast Alaska.
Beyond access to banking in areas where there are no other options, Chief Executive Officer Helen Mickel said Tongass focuses on financial education and credit building in communities that do not otherwise have access to those resources. It also offers unique loans. For instance in Metlakatla – Alaska’s only Native American reservation – people are not required to file taxes on their fishing income. So, the credit union will accept fish tickets as proof of income to qualify its members for loans on their commercial fishing vessels.
Mickel said the immediate impact of the loss of the CDFI fund would be that Tongass will be limited in opening any more microsites. These are small operations in places that don’t have other banks available, like Hydaburg, Kake and Hoonah.
The credit union relies on the community to donate a space and trains tellers, and then people in the community can avoid having to travel by boat or plane to reach a bank where they can handle loans, deposit checks or in some cases access ATMs. Mickel said those sites often are not profitable at first and need a few years to grow large enough to be sustainable.
“No one else is going in there. There are no banks targeting those locations,” she said. “There’s not big money to be made.”
The credit union had been targeting Gustavus and Angoon for new sites, but those plans will likely have to be shelved.
“We certainly aren’t going to pull out of anywhere, or stop what we’re doing,” she said.