Mayors from across the country met with President Obama last week to discuss issues facing their localities. While attendees were pleased to get handshakes and autographs from the president, a burning question lurked in their minds: Will he cut funding for Community Development Block Grants, the federal program that gives billions of dollars to cities to spend on low-income residents?
Such a move could slow down or even eliminate thousands of local and state projects, according to groups such as the National League of Cities and the U.S. Conference of Mayors, which was hosting its annual winter meeting in Washington last week.
Groups representing local governments say they believe the program may face a 25 percent cut — about $1 billion — in the president's FY 2012 budget, which will be released next month. Meanwhile, some Republicans have proposed cutting the program altogether. Neither bodes well for a program that funds everything from affordable housing to childcare to economic development.
"It has certainly created a firestorm," Cardell Cooper, a former Housing and Urban Development Undersecretary, told Governing. "It doesn't appear to me that this is smart government at all."
The potential loss of CDBG money comes at a time when — despite improving unemployment figures — many in the country still need to find work. Unemployment rates won't return to pre-recession levels until at least 2012 for an estimated 335 metro areas, according to a report released this week by the U.S. Conference of Mayors. And at least 32 metro areas won't see employment figures return until beyond 2025. Those conditions suggest that CDBG is needed now more than ever, local leaders argue.
Now mayors are taking umbrage at the fact that a program specifically designed to aid cities' most vulnerable residents is being targeted for cuts, based largely on the need to reduce the deficit. If the president does propose cuts to CDBG, local officials may view the decision as a betrayal, given that he has repeatedly described himself as an ally of cities and mayors.
"I recognize this is a time of great economic challenge ... but this is a program that works and has worked for a long, long time," Philadelphia Mayor Michael Nutter told Governing. "It's one of the best investments you can make."
In a letter to Obama earlier this month, organizations representing county and city governments said they were "puzzled" that CDBG cuts are on the table, despite the president's campaign promises to fully fund the program. In lieu of cuts, the mayors are urging CDBG funding to be frozen at its current level of $4 billion.
The program, which took effect in 1975, provides billions of dollars each year to more than 1,200 state and local governments. It's particularly attractive to city governments because in most cases, they can receive money directly from the feds instead of going through states, as is often the case with federal grants.
Federal officials, meanwhile, are keeping quiet about what exactly they have planned for CDBG. The White House Office of Management and Budget has not publicly addressed the CDBG issue, and it didn't respond to questions from Governing. During a meeting with the nation's mayors at the White House Friday, President Obama did not specifically say how much funding CDBG will get in his upcoming budget. But the administration has signaled that it recognizes the importance of the program to communities. "Let me be perfectly clear — when it comes to CDBG funding, I hear you, and President Obama hears you loud and clear," Housing and Urban Development Secretary Shaun Donovan told mayors in a speech Friday. He encouraged mayors to lobby for the program and provide data indicating its track record at creating jobs.
Some House Republicans, meanwhile, have previously said they will try to return the domestic budget to its pre-Obama levels, which could threaten funding to any program, including CDBG. The Republican Study Committee, a group of 165 conservative House Republicans, released a spending reduction plan Thursday that — among other deep cuts — proposes eliminating CDBG entirely.
House Budget Committee leaders have not responded directly to the mayors' pleas to save the program. "No aspect of the federal budget is immune from thorough oversight," Conor Sweeney, a spokesman for the House Budget Committee, told Governing.
Some critics of those plans speculate that House Republicans may be targeting CDBG simply because the many newly elected freshmen representatives don't exactly know what the program is or how it works.
But Brian Straessle, a spokesman for the Republican Study Committee, said that's not the case. He cited a report from the Cato Institute that called CDBG "a poster child for waste and abuse for decades" as illustrative of fiscal hawks' objections to the program. Cato's report argues that the federal government shouldn't be involved in local projects, and it also says CDBG has proven to be ineffective at accomplishing its goals — primarily using Detroit as an example of a city that has failed to turn around despite a massive infusion of CDBG cash.
Their allegations have been substantiated by HUD's Office of the Inspector General, which reported in 2006 that the program is plagued by fraud, misuse of funds and a lack of oversight.
CDBG funding helps provide a range of services targeted to low-income and middle-income residents by helping with homeownership assistance, developing senior and youth centers, providing employment training, promoting crime awareness and offering mental health services, among many others things. Mayors are fond of CDBG largely because of the flexibility they have with the money.
CDBG also includes a loan guarantee program that provides assistance for financing economic development activities, construction projects and property acquisition intended to aid low- and middle-income residents. Funding can be used by a city directly, or it can be to local non-profits that provide services to the community.
Mayors are engaging in an all-out lobbying effort to try to preserve the program. In addition to meeting with the president Friday morning, local leaders spent the previous week meeting with their senators and representatives to protest potential cuts, and they'll continue to do so. Their strategy is to provide concrete examples of projects that have been aided by CDBG. "The important thing is we make known what happens with these dollars," said Fresno, Calif. Mayor Ashley Swearengin in an interview with Governing.
In most cases, CDBG funding represents just a small portion of a city's budget. For example, Denver received $9.6 million CDBG funding in 2010 but had a $1.3 billion budget. Houston received $32.8 million and had a budget of $4 billion.
But CDBG often serves as valuable seed money for economic development projects and can be used to leverage more funds. Without it, some of those efforts may never be launched, said Cooper, the former HUD undersecretary, who is now executive director of the non-profit National Community Development Association.
"Every dollar in this economy means something," Cooper said. "If I can take $5 million to do a construction project that's going to bring in an additional $40 million investment — and I don't have the $5 million — the $40 million is never coming."
Setti Warren, the mayor of Newton, Mass. and chair of mayors' community development committee, agreed that local officials will have to tell the stories of how CDBG has protected their communities' most vulnerable residents. His city gets about $2 million in CDBG funds annually. "These are investments in people," Warren said.
The program has the potential to face two separate budgetary battles in a span of just months. In addition to the debate over CDBG funding for the upcoming 2011-2012 fiscal year, there could soon be a fight over how much funding CDBG will get for the remainder of the 2011 fiscal year, which ends Sept. 30. Last year's stop-gap budget ends in March. "This is a real, immediate question we all need to work on," Secretary Donovan said.
Still, some have spoken in more tempered tones about CDBG. Detroit Mayor Dave Bing, like his colleagues, is fighting to preserve CDBG funding. His city gets about $40 million through the program. But he said CDBG allocations may warrant more scrutiny than they've gotten in the past. "I think historically, they've tried to help too many people," Bing told Governing.