As the government shutdown continued, the White House initiated sweeping layoffs on Friday, including the complete elimination of the Community Development Financial Institutions Fund (CDFI) within the U.S. Department of the Treasury. The move is part of the Trump administration’s broader plan to pressure Democrats into passing a budget, after repeated warnings that major staffing and budget cuts would follow a prolonged stalemate. All 102 full-time staff at the CDFI Fund received layoff notices, marking one of the most significant federal workforce reductions in the current shutdown. The administration is targeting programs it claims are either unfunded or misaligned with its policy goals.
The CDFI Fund was originally designed to expand access to capital and financial services in underserved communities. However, critics within the administration argue that the fund has lost its focus and become politically charged, channeling federal dollars into race-based awards and progressive causes. Officials cited controversial grants supporting LGBTQ clinics that offer gender-affirming care to clients of any age, as well as funding to organizations accused of promoting divisive racial narratives. One recipient, for instance, hosted a transgender-themed fashion show, while another published critiques of “whiteness” in community development.
Russ Vought, Trump’s budget chief, confirmed the layoffs in a social media post, stating bluntly, “The RIFs have begun,” using the acronym for reductions in force. These layoffs are expected to impact multiple federal agencies, though the final number of affected employees remains uncertain. Prior to the October 1 shutdown deadline, the Office of Management and Budget instructed agencies to develop workforce reduction plans for programs that lack current funding or fail to meet the administration’s legislative priorities. The move is part of a long-standing effort by the Trump administration to scale back the federal government and eliminate what it deems to be wasteful or ideologically driven initiatives.
Earlier in the year, Trump signed an executive order directing all federal agencies to restrict their actions strictly to those authorized by law. This directive provided the legal framework for dismantling programs like the CDFI Fund, which the administration argues have overstepped their mandates. In particular, funding decisions that appeared to prioritize identity-based initiatives have drawn ire from conservatives, who view them as examples of government overreach and left-leaning activism. The administration’s focus on cutting these types of programs reflects its ongoing effort to reorient federal spending away from progressive causes.
The legality of these layoffs is now under scrutiny, as several federal employee unions have filed lawsuits attempting to block them. The American Federation of Government Employees (AFGE), the largest union representing federal workers with over 800,000 members, has condemned the administration’s actions. AFGE President Everett Kelley accused the White House of using the shutdown as an excuse to unlawfully terminate workers who provide essential services, calling the layoffs “disgraceful.” Legal experts are now debating whether mass terminations of this kind are permissible during a government shutdown, and the outcome of these lawsuits could have long-term implications for federal labor policy.
The shutdown itself is the result of a protracted budget impasse between congressional Democrats and Republicans. Funding expired after Senate Democrats repeatedly rejected a bipartisan spending bill that would have temporarily reopened the government. Although the bill has been reintroduced several times by Senate Majority Leader John Thune, it continues to fail in votes along largely partisan lines. Democrats are pushing for $1.5 trillion in new spending for progressive initiatives, as well as restrictions on the president’s authority to rescind allocated funds. Trump has flatly rejected these terms, stating that his administration will focus on cutting Democrat-backed programs, regardless of their popularity, as part of a broader effort to reshape federal priorities.
