Policy Points: Obama’s Final Budget Submission Contains Bold Proposals, Faces Long Odds in GOP-Controlled Congress

Published by Peter Lawrence on Wednesday, March 2, 2016
Journal thumb March 2016

The Obama administration released its $4.2 trillion fiscal year (FY) 2017 budget request Feb. 9, the last and perhaps the boldest budget submission of Obama’s presidency. While it is traditional for pundits to proclaim administration budget requests as “dead on arrival,” especially when Congress is controlled by the opposing party of the president, it is worth noting that this request includes proposals that push the envelope even more than previous budget requests. That includes about $3 trillion over 10 years in revenue increases to provide for more spending on variety of initiatives addressing administration priorities, such as expanded earned income tax credits, more spending on clean energy and infrastructure, cancer research and funding for drug addiction, among others. These revenue increases and the spending proposals they enable will likely not get any consideration by Congress.

It appears the president decided that if Congress is going to ignore the headline items in his request—and for the first time in decades, Congress didn’t even invite U.S. Office of Management and Budget Director (and former HUD Secretary) Shaun Donovan to testify on the budget—he might as well include big asks that fulfill his priorities.

However, much of the budget that forms the baseline that sets the beginning of the annual federal budget and appropriations process–the overall discretionary budget–largely adheres to the levels set in the Bipartisan Budget Act of 2015. The budget requests $1.1 trillion in FY 2017 discretionary spending, a 0.8 percent increase from FY 2016.

A summary of how several key housing, community development and renewable energy programs fare in the FY 2017 budget request follows.

U.S. Department of Housing and Urban Development

The FY 2017 request includes $48.9 billion of gross appropriated funding for the Department of Housing and Urban Development (HUD). This is about $6.3 billion or 14.8 percent more than the amount appropriated under FY 2016 funding levels. As in previous years, the FY 2016 request depends on significant projected Federal Housing Administration (FHA) and Ginnie Mae receipts that offset the cost of the HUD program budget, which the Congressional Budget Office has rejected in the past.

Public and Assisted Rental Housing

Project-Based Rental Assistance (PBRA)
The budget requests $10.8 billion for Project-Based Rental Assistance, which is $196 million or 1.8 percent more than the FY 2017 funding level of $10.6 billion. This funding level should be sufficient to renew all contracts. HUD also would need to conduct procurement for contact administrators, but any budget adjustments resulted from this procurement likely would take effect in the FY 2018 budget request.

Tenant-Based Rental Assistance (TBRA)
Tenant-Based Rental Assistance is proposed to be funded at $20.9 billion. Of that amount, $18.5 billion is for Section 8 Housing Choice Voucher contract renewals, which is a 4.3 percent increase over FY 2016. It appears this level of funding would be sufficient to renew vouchers in use. The budget also proposes $88 million for 10,000 new vouchers for homeless families with children, to be awarded based on need. This funding is intended to complement a new Obama administration family homelessness program initiative described below. For the HUD-Veteran Affairs Supportive Housing (HUD-VASH) program, the budget proposes only $7 million to focus on Native American veterans, instead of the $60 million provided in FY 2016 serving all veterans. HUD also proposes $110 million for Tenant Protection Vouchers, a $20 million decrease from the FY 2016 enacted level.

Public Housing Capital and Operating Funds
Funding for the Public Housing Capital and Operating funds would not change much under the request: the proposal provides $1.87 billion for the Public Housing Capital Fund and $4.57 billion for the Public Housing Operating Fund, representing a 1.8 percent cut and 1.5 percent increase over FY 2016 levels, respectively.

Rental Assistance Demonstration
The FY 2015 CR-Omnibus bill increased the cap on the Rental Assistance Demonstration (RAD) program from 60,000 to 185,000 public housing units, enabling all pending applications as of December 2014 to go forward as well as a few others and the administration later proposed to repeal the unit cap last year in the FY 2016 request. The administration is proposing once again to remove the unit cap in the FY 2017 budget and requests $10 million for incremental funding to enable RAD conversions where such incremental funding is needed for financial feasibility. The administration estimates that this incremental funding will support the conversion of 25,000 rental housing units through RAD.

Moving To Work
oses to rescind the language authorized in the FY 2016 omnibus spending bill enacted last December, which significantly expanded the Moving To Work (MTW) public housing demonstration program. The legislation directs HUD to admit 100 new public housing agencies to the MTW program over the next seven years, which is a significant increase over the current 39 participating agencies. In previous budget requests, the administration proposed a more modest expansion of MTW to only 15 new agencies. The FY 2016 omnibus bill also directed HUD to extend all of the existing MTW contracts without changes unless mutually agreed to by the public housing agency and HUD.

Community Planning and Development (CPD) Programs

The Community Development Block Grant (CDBG) program is proposed to be funded at $2.8 billion, representing a $200 million or 6.7 percent decrease from FY 2016 ($3 billion) enacted level. The HOME Investment Partnerships Program (HOME) is proposed to be funded at $950 million, with $10 million set-aside from this amount for the Self-Help Homeownership Opportunities Program (SHOP), level with FY 2016. HOME program funding would remain 41 percent below nominal FY 2011 levels ($1.61 billion).

Homeless and Supportive Housing Programs

McKinney-Vento Homeless Assistance Grants are proposed to be funded at $2.66 billion, a $414 million or 18.4 percent increase over FY 2016 funding. This amount includes a $2.39 billion set aside for the continuum of care and rural housing stability assistance programs, and $270 million for Emergency Solutions Grants. The administration estimates that this request supports 25,500 new units of permanent supportive housing to end chronic homeless and 8,000 new units of rapid rehousing, and will complement the new administration initiative to address family homelessness described below.

The proposal provides $505 million for the Housing for the Elderly (Section 202) program, a 16.7 percent increase over FY 2016 levels. The Housing for Persons with Disabilities (Section 811) program is funded at $154 million, a 2.7 percent increase from FY 2016 funding levels. The budget would provide $335 million for the Housing Opportunities for Persons with AIDS (HOPWA) program to provide housing and supportive services to persons living with HIV and AIDS, which is level with the FY 2016 enacted funding level.

Obama Administration Initiatives

Opening Doors Initiative to End Family Homelessness
The budget proposes a new $11 billion mandatory spending program over 10 years to reach and maintain the goal of ending family homelessness by 2020, as outlined by its Opening Doors Initiative. This program would significantly expand the availability of rapid rehousing and Housing Choice Vouchers, serving an estimated 550,000 vulnerable families with children.

Housing Trust Fund
The administration is not proposing to provide a $1 billion mandatory appropriation for the Housing Trust Fund, as it has in the past. However, in December 2014, Federal Housing Finance Agency Director Mel Watt directed Fannie Mae and Freddie Mac to start setting aside contributions to the Housing Trust Fund through the course of 2015. On Jan. 30, 2015, HUD published interim program regulations, but funding is not expected to be allocated to states until mid-2016. Our latest estimate of the 2015 contributions as originally authorized by the Housing and Economic Recovery Act of 2008 is about $188 million. However, the FY 2017 budget estimates that $170 million in the Housing Trust Fund resources will be allocated to states in FY 2016 and $136 million in FY 2017.

Choice Neighborhoods Initiative
The Choice Neighborhoods Initiative, which is designed to comprehensively revitalize high-poverty public and assisted housing communities, is proposed to be funded at $200 million, which is 60 percent more than the FY 2016 enacted level.

U.S. Department of the Treasury

Community Development Financial Institutions Fund
The administration proposes to fund the Community Development Financial Institutions (CDFI) Fund at $246 million, a 5.3 percent increase from FY 2016 funding levels. The administration also proposes to extend the CDFI Bond Guarantee program’s authorization by one year, through FY 2017, at $1 billion, a $250 million increase from FY 2016. The budget also estimates the Capital Magnet Fund will receive $98 million in FY 2016 and $80 million in FY 2017, compared with the $101 million in our latest estimate.

Next Steps

Now that the administration’s budget request is in, the ball is in Congress’ court. Next step is for Congress to develop a FY 2017 budget resolution. This could prove difficult, as a minority of House Republicans voted for the Bipartisan Budget Act of 2015, which set the overall discretionary budget for FY 2017, and many of them, especially members of the House Freedom Caucus, are in no mood to ratify the budget levels.

However, Speaker Paul Ryan, R-Wis., will remind the detractors that the Senate is not likely to renegotiate the deal, and if the House tries to do so unilaterally, that will likely lead to yet another stopgap temporary spending bill and yet another large omnibus spending bill that House fiscal conservatives loath.

If Speaker Ryan gets his wish and Congress passes a new budget resolution, we could yet see separate consideration of the 12 annual spending bills in the spring and summer and actually getting through Congress before Oct. 1–also known as “regular order.”

Then again, it is an election year–a presidential one at that–and if the race is close in September (which is eminently possible at this point), each party may decide that it’s better to wait until after the election in case their candidate wins, before negotiating the final details.