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Wednesday, April 13, 2011

Community Development Block Grants: Funding Issues in the 112th Congress and Recent Funding History

Eugene Boyd
Analyst in Federalism and Economic Development Policy

In the coming weeks and months Congress will consider legislation appropriating funds for the remainder of FY2011 and for FY2012. The budget debate will establish national priorities and will take place within the context of growing concerns about the need to address federal budget deficits, the national debt, and a sluggish economic recovery following the longest and deepest recession since the Great Depression. The Obama Administration and the 112th Congress may consider and debate a number of approaches to spur economic activity and job growth, including federal public works and community and economic development programs. In addition, the Administration and Congress must arrive at a consensus on how to address long term deficit reduction, including spending cuts. The Department of Housing and Urban Development’s (HUD) Community Development Fund (CDF), which includes the Community Development Block Grants (CDBG), are among the programs that Congress may consider candidates for funding reduction or elimination.

On February 19, 2011, the House of Representatives passed H.R. 1, a bill that would fund federal agencies for the remainder of FY2011. The House-passed version of H.R. 1 recommends an appropriation of $1.500 billion for the Community Development Block Grants and related programs. The $1.500 billion included in the House-passed bill is 66.3% less than the $4.450 billion appropriated for FY2010. Should Congress approve a significant reduction in funding it may consider several options to mitigate the impact of a sudden disruption or reduction in federal assistance, including targeting assistance to a smaller number of communities; converting the program to a competitive grant; requiring matching funds from recipients; or establishing a multiyear phaseout of the program.

Once Congress completes action on the FY2011 budget it may then consider the Obama Administration’s FY2012 budget proposals, including the proposals for the CDF account. On February 14, 2011, the Obama Administration submitted its FY2012 budget recommendations for congressional consideration. The President’s proposed budget recommends $3.804 billion for the CDF account. This is 14.5% below the account’s FY2010 funding level and 60.6% more than the amount recommended by the House for FY2011. The Administration has proposed a restructuring of the CDF account by minimizing, through the transfer or termination, activities not directly related to the CDBG program by authorizing statute. The Administration’s FY2012 budget proposes to: 
·         reduce funding for CDBG formula grants by 6.6% from $3.943 billion appropriated in FY2010 to $3.684 billion; 
·         eliminate funding for the Neighborhood Initiative and Economic Development Initiative programs; 
·         eliminate funding for Section 107 activities; 
·         transfer its Sustainable Communities Initiative to a new stand alone account; and 
·         convert Section 108 loan guarantees to a fee-based program.

Date of Report: April 6, 2011
Number of Pages: 25
Order Number: R41754
Price: $29.95

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