By Eugene T. Lowe
July 3, 2006

The U.S. House of Representatives June 14 passed its FY2007 Transportation, Treasury, HUD, Judiciary and the District of Columbia appropriations bill, H. R. 5576, with an increase of $162 million in Community Development Block Grant (CDBG) formula funding. As the funding for CDBG and other housing programs reached its first major hurdle, oversight Subcommittees in both the House and the Senate held hearings on a recently released Administration proposal to reform CDBG.

Funding for the CDBG formula program was $3,711 billion in FY 2006. The House increased the amount to $3,873 billion for the next fiscal year. The Administration’s FY2007 budget request for CDBG formula grants was $2,975 billion. The HOME Investment Partnership program is funded at $1,917 billion, an increase over the FY 2006 funding level of $1,733 billion. Homeless Assistance Grants also received an increase in funding from $1,327 billion in FY06 to $1,536 billion in FY2007. HOPE VI, which the Administration had requested not only program termination but rescission of the $99 million appropriated to the program in FY2006, is funded at $30 million. The Senate’s Subcommittee markup of its version of the HUD bill for FY2007 is scheduled for July 20.

On May 25, HUD released “The Community Development Block Grant (CDBG) Reform Act of 2006” which, among other provisions, would change the formula of the 31-year old grant program of the Department of Housing and Urban Development. On June 27, the House Subcommittee on Federalism and the Census of the Committee on Government Reform, chaired by Representative Mike Turner (OH), and on June 29, the Senate Subcommittee on Federal Financial Management, Government Information, and International Security of the Subcommittee on Homeland Security and Government Affairs, chaired by Senator Tom Coburn (OK) held hearings on the HUD reform package.

Several national organizations, including the U.S. Conference of Mayors submitted testimony to both the House and Senate Subcommittees. The national groups stated from the outset their opposition to the proposal. One element of the reform package is statutory language on a performance outcome measurement system for CDBG. The testimony argued that legislation was not needed on a performance system that is currently being implemented by HUD. Moreover, the system that HUD is now pursuing came about through the work of the national groups work with HUD and the Office of Management and Budget (OMB). The national groups said in a letter to Senator Norm Coleman (MN) on June 28 who participated in the Senate hearing: “Not only are we oppose to opening up a process which is well underway , but we strongly believe that the performance measure system itself significantly reforms the CDBG program.”

The national organizations contend that the most troubling part of the CDBG reform package is the change in the formula program. The proposed CDBG formula would use five variables to allocate funds:

1. The number of households living in poverty, excluding full-time dependent college students.

2. The number of overcrowded housing units.

3. The number of female head of households with minor children.

4. The number of homes 50 years or older occupied by a low-income family.

5. The per capita income of the community relative to the per capita income of its metropolitan area.

The national groups’ testimony said: “It’s no surprise that the CDBG formula has not changed since 1977. The difficulty of making a change is finding a new formula that can garner enough votes to pass the House and Senate.” Under the HUD proposal applied to the FY2006 appropriation, more than 300 communities that now receive direct entitlement funding would lose their eligibility and have to compete for funding from the State government, which has to submit a plan showing how cities under 50,000 would participate. As for the other entitlement communities, while some would receive increase funding, other communities would be severely reduced. (Please see the Conference of Mayors’ website to see how your city would fare under the proposed formula change).

HUD’s reform package also includes a bonus funding pool called the “Economic Development and Revitalization Challenge Grants.” Communities would have to compete for a $200 million pot of funds. The major problem with the program is that it would take funds out of the CDBG formula which is already limited.

Finally, the national groups opposed the reform proposal’s elimination of the Section 108 Loan Guarantees, the Brownfields Economic Development Initiative (BEDI), and the Rural Housing and Economic Development programs. HUD contends that these programs can be eliminated and the activities carried out with CDBG funds. The national groups said that in reality each of the programs complemented and enhanced CDBG, without duplication.

Putting aside its rebuke of the CDBG reform package, the national groups thanked the house subcommittee for the house passed increase in the CDBG formula grant program and called for the senate to also significantly increased the formula grants in its version of the FY 2007 Transportation, Treasury, and Housing and Urban Development appropriations bill.