CDBG Cuts Even Greater Than Expected in Some Places

Cities and counties knew they'd lose CDBG money in 2012. But a quirk in the formula is causing some to see even larger cuts.
by | January 18, 2012
 

Cities and counties across the country got a stark look at the impact of Congress’s focus on spending cuts this week, after the Department of Housing and Urban Development announced exactly how more than $390 million in cuts to a popular grant program would impact each community.

The much-awaited release details how Community Development Block Grants (CDBG) will be divvied up, after Congress late last year passed a 2012 budget that reduced funding for the program by nearly 12 percent.

But, to the chagrin of many recipients, some took an even larger hit, due in part to their own changing demographics as well as new, technical changes to the type of data HUD uses to make its funding decisions.

New Orleans, for example, loses more than $4 million in CDBG funds, or 27 percent of its 2011 total. Los Angeles does even worse, losing out on $12.5 million, or 19 percent of its 2011 total. Hialeah, Fla. is the biggest loser. In 2012, it will receive $1.8 million less than it did in 2011. About half of its CDBG money will be lost.

CDBG funding represents a relatively modest proportion of any city's budget. But the program is a favorite among localities, since it's one of the few sources of federal revenue that flows directly to cities and counties instead of first being channelled through the states. Recipients also have wide latitude in how they use the money, which can fund everything from affordable housing to job training programs.

The new quirk in how funding is allocated has only added to the frustration that local leaders have with the Congressionally-driven cuts. (View a map illustrating the cuts)

“The formula, to me, seems flawed,” Allentown, Pa. Mayor Ed Pawlowski told HUD Secretary Shaun Donovan during a panel at the U.S. Conference of Mayors winter meeting Wednesday. "I don’t think it’s capturing what’s happening within our communities.” His city lost about 22 percent of its CDBG money this year. That, Pawlowski said, was especially surprising, since he expected a growing population and poverty rate would help send more money to the city.

What exactly happened? Localities’ CDBG allocations are based on complicated formulas that take into account a community's population, poverty level, overcrowding, volume of pre-1940s housing stock, and a statistic called growth-lag, which measures how slowly a city has grown relative to other cities.

Some observers – including a study by HUD itself – have suggested the formula itself has flaws that may result in inadequate funding for high-need communities and disproportionately high funding for some communities that aren't that bad off.

To complicate matters, this year HUD began plugging new types of Census data into those formulas. In addition to the 2010 Census data, HUD is, for the first time, using data from the Census's American Community Survey, a more frequent product produced by the Census based on sophisticated estimates. HUD -- knowing the change would cause some confusion -- published a 127-page report last month detailing how the slight changes to the data could actually have big effects on some communities.

Some communities benefit from the new methodology. But the overall budget cuts mean the overwhelming majority of CDBG recipients will get less in 2012 than they did in 2011.

For local leaders, that's particularly troublesome. Their revenue still haven’t returned to pre-recession levels, and most local leaders say they're so fiscally strained that they won't provide their own money to help plug up the hole left by the feds.

“It’s forcing us and a lot of other communities to start making very hard choices,” says Eric Brown, director of housing and community development for Prince George’s County, Md., which will see its CDBG funds cut by about 23 percent to $4.2 million this year, according to HUD’s new figures.

In Prince George’s County, officials are mulling through 118 applicants from non-profits seeking $18 million of CDBG funds. Brown says those organizations have been told not to expect more than what the feds have given the county. “We’re looking at what our priorities are and trying to make do with the limited resources we have to fund those priorities," Brown says.

For many local leaders, the CDBG cuts have almost a symbolic meaning and are being perceived as an indication of the current state of intergovernmental relations. “If they’re going to cut CDBG… what does that say about Congress’s support for the local level?” says Mike Wallace, federal relations program director at the National League of Cities (NLC).

More than a year ago, local leaders and the groups representing them began various campaigns to call attention to CDBG success stories and to fight potential cuts to the program. They were dealt a blow when President Obama – seen as an ally of cities and mayors – proposed cutting the program by 7.5 percent.

Ultimately, Congress approved an even larger cut of about 12 percent to CDBG, and the program has been cut 25 percent since 2009. But by the time Congress approved the cuts in November, the CDBG crusade had largely lost steam. With Congress's renewed focus on spending cuts, driven largely by the compromises that came from the deficit-ceiling battle, it was clear there were larger issues at play and CDBG's budget – like that of HUD itself – would not be given special treatment.

“In the context of the spending bill – I think at the end, nobody was thinking about the impact on particular programs,” says Wallace, of NLC.

Yet the release of the CDBG totals may bring the issue again to the forefront. During HUD Secretary Donovan's remarks Wednesday, he called CDBG “absolutely critical to our economic recovery” and pledged to “redouble our efforts” to fight for CDBG funds. A year ago, both he and the president proposed $300 million in cuts to the program.

To be fair, the administration didn’t advocate for the bigger cuts that were ultimately approved. But local leaders and organizations that lobby for them were disappointed with the administration's lack of support for even level funding.

Daria Daniel, association legislative director with the National Association of Counties, said her organization won’t just advocate for level CDBG funding this year. It’s going to push for an increase, despite the climate in Washington that will make any spending increasing a challenge. “We still have some fight in us,” Daniel says.

The president will release his budget next month. Though Donovan pledged to fight for the program, HUD spokesman Brian Sullivan declined to say how much CDBG funding the department is requesting.

Map

Click the markers in the map below to display grant amounts for each community. Markers are colored by the percent change in the amount awarded for Community Development Block Grants:

Red: 20+ percent reduction in CDBG funding

Yellow: Reduction in funding less than 20 percent

Green: No change/increase in funding

View a complete list of all communities receiving grants.

CDBG's biggest losers in FY 2012:

Hialeah, Fla.

2011 funding: $3.81 million

2012 funding: $2 million

Cut: 47 percent

Hammonton, N.J..

2011 funding: $146,505

2012 funding: $79,647

Cut: 46 percent

Miami Beach, Fla.

2011 funding: $1.57 million

2012 funding: $909,737

Cut: 42 percent

Alexandria, Va.

2011 funding: $1.14 million

2012 funding: $678,236

Cut: 41 percent

Alhambra, Calif.

2011 funding: $1.25 million

2012 funding: $766,087

Cut: 39 percent

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