Latino economy advocates ‘on high alert’ over potential budget cuts

Hispanic economic activity could take a steep dive if key programs are reduced as part of across-the-board federal spending cuts, according to a network of nonprofit organizations dedicated to growing wealth among Hispanics.

The National Association for Latino Community Asset Builders (NALCAB) is hosting representatives from 20 of its affiliates in a broad advocacy push in Congress Wednesday, seeking to raise awareness of the link between federal programs and Latino economic activity.

“I would say we’re on high alert. Our advocacy prior to this was really seeking additional funding for the programs that support the work that our members do in communities,” NALCAB CEO Marla Bilonick told The Hill.

“I don’t think I’m saying anything that’s rocket science, but cuts really are going in the opposite direction of where we need to go. The need is still really, really high. And those of our members who are operating on the ground need more support, certainly not less.”

The group’s asks come as Republicans and Democrats dial up a spending fight in an effort to avert a government shutdown and maintain 1 percent mandatory spending cuts per the recently passed Fiscal Responsibility Act.

That bill was signed into law by President Biden earlier this month, marking the end to a protracted fight over raising the debt ceiling. It includes mandatory discretionary spending cuts if all 12 appropriations bills are not passed by Jan. 1.

That 1 percent haircut could grind the Latino economy to a halt, Bilonick said.

“Basically what it means is, entrepreneurs that are looking to start businesses or grow businesses wouldn’t be able to access funding to be able to do that. Aspiring homeowners will not get the support that they need or the programs that they need to access affordable housing,” she said.

“[Community Development Financial Institutions (CDFIs)] that are working in communities will not have sufficient funding to fund consumers and small businesses in their communities to move upward on the economic spectrum. So there are real consequences to this that should not be overlooked.”

NALCAB’s targets include programs run by the Small Business Administration, the Department of Housing and Urban Development (HUD) and the Department of the Treasury that broadly help provide liquidity to communities underserved by the financial system.

They include relatively small federal budget line items such as Community Development Block Grants (CDBG), which provide targeted assistance for economic activities ranging from infrastructure projects to business development.

NALCAB’s target budget for CDBG is $4.2 billion for fiscal 2024, up from the $3.3 billion budget HUD reported for the program in fiscal 2023.

The 2022 State of Latino Entrepreneurship report, an annual analysis published by the Stanford Graduate School of Business, found that Latino-owned businesses grew in number, revenue and payroll at a faster clip than white-owned businesses from 2007 to 2019.

And between 2019 and 2022, Latino-owned businesses grew their revenue on average 25 percent, while white-owned businesses grew 9 percent.

Yet Latino-owned businesses had greater liquidity needs and lower approval rates for loans over $50,000.

“At the time of application for business loans from national banks, [Latino-owned businesses] have similar, if not better, qualifying indicators than [white-owned businesses] on average,” wrote the Stanford researchers.

“Nevertheless, [Latino-owned businesses] have substantially lower approval rates than [white-owned businesses] when applying for larger loans ($50,000 or more), and higher rates of approval for small loans (less than $50,000),” they added.

That lack of access to capital is not new to Latino entrepreneurs, but Bilonick said federal cuts to programs like CDFIs could accentuate the problem.

“One huge lever to entrepreneurship is access to capital, and the traditional financial system has not been very friendly to Latino entrepreneurs,” she said.

And Bilonick added the cuts could be most painful for the kinds of entrepreneurs who drive economic mobility.

“I’m talking sole proprietors, street vendors who are looking to convert to a storefront, folks who are kind of in this transition point, whether that be going from an idea to a business or a business to two locations,” she said.