President Bush yesterday unveiled a $33.6 billion fiscal 2007 Department of Housing and Urban Development budget plan that would keep the Community Development Block Grant program in HUD, but cut its funding by 27%; boost spending on the mammoth Section 8 housing voucher program; and wipe out funding for a program that demolishes severely distressed public housing units.
The overall proposed funding for HUD in fiscal 2007 is $622 million less than the department’s actual enacted $34.3 billion budget in fiscal 2006, according to budget briefing books the administration released yesterday.
HUD Secretary Alphonso Jackson lauded the proposed budget, which he called “a real investment in building a society based on ownership and reaching out to those people and places in need to make sure every American has a place to call home.”
“This budget places a premium on demonstrating results and allows HUD to sustain our core programs that are built on compassion while we continue to improve the way we serve communities around this country,” Jackson said.
The administration’s proposal to reduce funding for CDBG to $3.03 billion in fiscal 2007, down from $4.18 billion in the current fiscal year, which began Oct. 1, will probably encounter stiff resistance from lawmakers and lobbyists on Capitol Hill.
The administration tried unsuccessfully last year to replace CDBG and various other community and economic development programs with a less well-funded “Strengthening America’s Communities Initiative” that would have been administered by the Commerce Department. Lawmakers overwhelmingly rejected the proposed overhaul last year, but agreed to cut CDBG funding by 10%. Conservative critics have long urged the killing of CDBG, which they claim amounts to a congressional slush fund for favored interests that funds local projects that local governments wouldn’t spend their own tax dollars on.
Roy Bernardi, HUD’s deputy secretary, acknowledged that the department had learned from last year’s political debacle in which even some of the more philosophically conservative members of the president’s own party openly defied his plan to restructure the program — which is immensely popular with local government leaders — and move it to the Commerce Department. The consensus now is that HUD is better suited to run CDBG than Commerce is, Bernardi told reporters during a teleconference yesterday.
Although Bush wants to keep CDBG at HUD, he yesterday proposed a modified SACI proposal that involves moving some small HUD programs such as the $10 million brownfields redevelopment program to Commerce. The new SACI plan also calls for changing the grant-making rules of some of the programs that the president wants to move to Commerce.
The HUD budget also calls for $15.92 billion in funding for tenant-based Section 8 rental-assistance vouchers, up from the current funding level of $15.42 billion, along with $5.68 billion for project-based vouchers, up from the current funding level of $5.04 billion. The two prongs of the program together would eat up 64% of the total HUD budget for fiscal 2007, a new record, according to Bernardi.
The administration has warned for years that the rising costs of the Section 8 program imperil housing programs in general because the increasingly expensive program continues to swallow growing portions of HUD’s annual budget. Two years ago, Congress converted the program from a unit-based program to a budget-based program, which has helped to cap costs to an extent. No new rental-assistance vouchers have been approved since Bush came to the White House in 2001. Instead, appropriated funds have been used to renew existing vouchers.
HUD officials said the administration would continue to press an overhaul proposal, known as the “State and Local Housing Flexibility Act,” in Congress this year. Sen. Wayne Allard, R-Colo., introduced the measure in the Senate, and Rep. Gary G. Miller, R-Calif., introduced a companion measure in the House. Both bills are stalled in committees.
In the new budgetary blueprint, the administration again proposed no new funding for HUD’s HOPE VI program, which demolishes or rehabilitates severely distressed public housing. In addition to eliminating funding, Bush has proposed taking back the $99 million that Congress appropriated for HOPE VI in the current year. Bush has tried several times in recent years to eliminate the program, which the administration calls inefficient, but each time lawmakers have refused his request.
The administration also proposed spending $2.18 billion on the public housing capital fund in fiscal 2007, down from $2.44 billion in the current year. It proposed $3.57 billion in spending for the public housing operating fund, which is almost identical to current funding levels.
Bush proposed funding the HOME Investment Partnerships program at $1.92 billion, up from $1.76 billion in the current year, which includes $100 million for the American Dream Downpayment Initiative, up from $25 million in the current year.
CDBG, HOME, HOPE VI, Section 8 funds, and public housing capital grants can be leveraged in municipal bond transactions. HUD officials are currently working on regulations that would allow the securitization of public housing operating grants. They expect to unveil the new rules later this year.
