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<i>The Week in Public Finance:</i> What's in the Congressional Spending Bill for States and Localities

Several major programs -- some that the White House aimed to eliminate -- will get a significant funding boost. President Trump signed the bill hours after threatening to veto it.

Congressional leaders, from left, House Speaker Paul Ryan, Senate Majority Leader Mitch McConnell and House Minority Leader Nancy Pelosi have agreed to a $1.3 trillion spending package.
(AP/Andrew Harnik)
In the federal spending bill that President Trump signed on Friday, several government programs are getting funding boosts, including two that the White House sought to eliminate a year ago.

Community Development Block Grants, which help fund an array of local government projects spanning from affordable housing assistance to small business loan programs, are set to see a $300 million increase in funding. That puts total federal funding at $3.3 billion for a program that Trump’s 2017 budget proposal had targeted for elimination. It’s also the first meaningful increase for the program since the early 1990s.

“Every year, it costs more to build roads and homes and to rehab facilities,” says the Urban Institute’s Brett Theodos. “So a program that’s the same dollar value every year is actually a shrinking program in terms of what it can produce on the ground.”

Congress also plans to triple funding for the Transportation Investment Generating Economic Recovery (TIGER) program that's popular with states and cities. Funding for the program will increase from $500 million to $1.5 billion. That's a huge boost given that only a year ago, administration officials were saying the program should be defunded and the money spent elsewhere. The majority of the increase will fund local and state multimodal and multijurisdictional projects that include things like transit, bike lanes and rail lines. Nearly one-third of the funding will be set aside for rural areas.

The budget avoids another government shutdown, but its passage was uncertain. As recent as this morning, Trump tweeted that he was "considering a VETO of the Omnibus Spending Bill based on the fact that the 800,000 plus DACA recipients have been totally abandoned by the Democrats (not even mentioned in Bill) and the BORDER WALL, which is desperately needed for our National Defense, is not fully funded."

The funding boosts are not a total surprise since February’s spending deal included increases in domestic spending. But states were still doing a fair amount of guesswork when it came to anticipating exactly how much money certain programs would get from the feds, says John Hicks, executive director of the National Association of State Budget Officers.

“This is a really good budget for states as it relates to traditional programs where they partner with the federal government,” he says. “I’d say the numbers here in many areas are even higher than what states were counting on.”

For example, highway funding will get a $3.5 billion boost. More than two-thirds of the increase will come in the form of discretionary funding and will supplement what's coming from the Highway Trust Fund.

Education funding will see a $2.6 billion increase, with $400 million of that being set aside for charter schools.

Child care development grants, which help pay for child care so that low-income parents can find work or go back to school, are set to almost double to a historic $5.2 billion in funding. The Center for Law and Social Policy called the boost a “significant win” that will help 230,000 children and their parents across the country.

Affordable housing scored some wins as well. It will see a 12.5 percent increase to the Low-Income Housing Tax Credit and a two-year extension of the U.S. Interagency Council on Homelessness, which had faced defunding last fall.

And, with the 2018 elections looming and the probe into Russia’s 2016 election tampering in full swing, the bill includes $380 million in Help America Vote Act dollars to safeguard election security. The National Association of Secretaries of State said the “money will go a long way to aiding the states as they prepare for 2018 elections and beyond.”

The budget, however, doesn't address a few issues pertinent to states and localities.

There's no mention of a path to citizenship for 1.8 million so-called Dreamer immigrants. A deal on that reportedly fell apart after Democrats rejected a White House bid to extend protections in exchange for $25 billion in funding for a border wall. It also doesn’t reinstate subsidies to help stabilize the cost of insurance on state health insurance exchanges. And it takes away $4.5 billion -- a 6 percent cut -- from food stamps.

Additional reporting by J.B. Wogan.


In other public finance news this week:

Rating Agency Warns of Climate Change Risk

Thanks to two major hurricanes and several wildfires, 2017 was the most expensive year on record for natural disasters. Damages totaled more than $305 billion.

In a report this week, S&P Global Ratings warns that because of a potential shift in federal disaster relief and insurance funds, as well as the potential for increasingly frequent climate-related disasters, “the risks to local governments will likely compound without planning or prevention.”

The agency says governments must manage budget volatility following such events, repair and adapt their key assets to the changing risks, and plan for potential long-term impacts.


The Most and Least Federally Dependent States

New Mexico, Kentucky and Mississippi rely the most on federal money, while Delaware, Illinois and Kansas are the least dependent, according to WalletHub’s annual study on tax dependency.

The study incorporated things like where money goes for federal contracts, grants, and other financial and income assistance, as well as a state’s own economic output. The study found a correlation between low state tax rates and higher federal dependence.

“If a state can afford not to tax its residents at high rates, there are multiple explanations. One is that their economic policies are sound and the state economy is doing well,” the study says. “But another is that the state gets disproportionately more funding from the federal government than states with harsher tax codes.”

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*This story has been updated.

Liz Farmer, a former Governing staff writer covering fiscal policy, helps lead the Pew Charitable Trusts’ state fiscal health project’s Fiscal 50 online resource.
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