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Proposed Budget Cuts
Impacting Community Development

The 2007 Bush Administration Budget On February 6, President Bush submitted his FY 2007 budget to Congress. The $2.77 trillion proposal cuts discretionary funding by 5% or $15 billion by eliminating or reducing 141 programs, cutting overall spending in more than a dozen departments and agencies, and shrinking entitlement programs, including Medicare by $65 billion over 5 years. The budget also includes significant increases in the Defense and Homeland Security budgets. In addition, the President proposes to make the 2001 and 2003 tax cuts permanent, which over time would squeeze funds available for discretionary spending even more.

The Budget's impacts include:
  • An overall $2.1 billion cut in HUD budget. There is more money for Section 8 vouchers and project-based funds, the HOME program, and for Homeless Assistance grants. Left on the cutting room floor are the public housing capital fund, Section 202 elderly housing with a $200 million cut, Section 811 housing for the disabled with an almost 50% cut, and CDBG with a 1/3 total formula cut (a $1 billion cut). The CDBG program will remain at HUD, but HUD in conjunction with the Commerce Department will determine additional performance goals and standards under the yet-to-be filed legislation to create the much touted and controversial Strengthening America's Communities Initiative (SACI). HUD is also prepared to submit legislation that will change the current formula by which CDBG funds are allocated to communities.
  • The budget includes elimination of Section 4 funding from the HUD budget for the second consecutive year. Other eliminated programs include programs that support nonprofit capacity building, funds for the Rural Housing and Economic Development Program (RHED), Section 108 Program, and the Brownfields Program. The budget also eliminates the HOPE VI program, rescinding unobligated funds. In a separate budget, Neighborworks America received a $3 million increase to a total of $120 million.
  • The budget also affects USDA rural housing funds. It eliminates Section 515 rental development program and funds to support the building of capacity of nonprofits through the Rural Community Development Initiative (RCDI), as well as a new fund established last year for rental housing development and preservation. There is a significant cut proposed for the rural rental assistance program with contract periods reduced from 4 years to 2. Increases include funding for the Self-Help Homeownership Program and Section 502 direct loans for rural homeownership, although its companion guarantee program suffers a cut.
Other Programs of Interest:
  • Elimination of funding in the Department of Treasury budget for the CDFI Program (Technical Assistance and Financial Assistance), the Bank Enterprise Award Program (BEA), and the CDFI Native American Initiatives. Only $7.8 million is available to administer the New Markets Tax Credit Program. This is an overall reduction of $46.6 million from 2006 levels.
  • Funding for the Community Service Block Grant Program (CSBG) in the Health and Human Service budget is targeted for elimination. This program supports many rural community developers.
  • Funding for the AmeriCorps Program in the Corporation for National Service budget is targeted for a 17% cut in its state and national grant pool.