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Thursday, August 11, 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 FY2012. The budget debate will establish national priorities and takes 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 accounts that Congress may consider candidates for funding reduction or elimination.

On April 15, 2011, the President signed into law P.L. 112-10, the Department of Defense and Full-Year Continuing Appropriations Act for FY2011. The measure, which passed the House and Senate on April 14, 2011, after months of intense budget negotiations, appropriated $3.508 billion for activities in the CDF account, including $3.343 billion for CDBG formula funds. P.L. 112-10 included two provisions reducing the account’s overall appropriations. P.L. 112-10 also included a 0.2% mandatory across the board rescission of all appropriated funds and a 1% discretionary transfer from designated HUD funds, including CDF activities to HUD’s Transformation Initiative. The mandatory across the board rescission reduces the CDF account by $7 million to $3.501 billion, while the 1% discretionary transfer would move $35 million from the CDF account and its components to the Department’s Transformation Initiative. This 1% discretionary transfer reduces the amount available for CDBG formula grants to states, entitlement communities, and insular areas to approximately $3.303 billion. This is approximately 16% less than appropriated in FY2010. The act also appropriated $64 million for Indian tribes’ CDBG activities and $98 million for the Department’s Sustainable Communities Initiative, which supports regional coordination of land use planning, housing, environmental, and transportation activities and policies. The formula-based Community Development Block Grant program was one of several programs targeted for significant budget reductions in an earlier version of a consolidated appropriations bill, H.R. 1, that passed the House, but not the Senate. H.R. 1 would have reduced funding for CDBG activities to $1.500 billon, or 62.5% below the amount appropriated for FY2010.

Having completed action on the FY2011 appropriations, Congress will now consider the Obama Administration’s FY2012 budget proposals, including the proposals for the CDF account. The President’s proposed budget recommends $3.804 billion for the CDF account. This is 8.6% higher than the account’s FY2011 funding level. The Administration has proposed a restructuring of the CDF account by minimizing, through transfer or termination, activities not directly related to the CDBG program by authorizing statute. The Administration’s FY2012 budget proposes to: (1) increase funding for CDBG formula grants by 10.5% from $3.303 billion appropriated in FY2010 to $3.691 billion; (2) eliminate funding for the Neighborhood Initiative and Economic Development Initiative programs; (3) eliminate funding for Section 107 activities; (4) transfer its Sustainable Communities Initiative to a new stand alone account; and (5) convert Section 108 loan guarantees to a fee-based program.

Date of Report: July 13, 2011
Number of Pages: 27
Order Number: R41754
Price: $29.95

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