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December 23, 2002
HUD partially explains
Operating Fund shortfall
FY '02 shortfall information is still not available
On Friday, PHADA attended a meeting of industry groups with Assistant Secretary for Public and Indian Housing Michel Liu and several senior HUD staff members concerning the $250 million operating fund shortfall for FY '02. HUD announced its analysis of $175 million of the shortfall that originated in FY '01 and was paid from FY '02 appropriations. The main causes for this shortfall were that HUD's data on HAs' needs was too stale, and the department's information systems were not up to the task of producing accurate estimates for operating subsidies. These are likely to be the same sources for a $75 million contribution to the shortfall from FY '02.
HUD staff now acknowledges that use of old data in HUD's estimate of the costs of changing the operating fund formula contributed to the shortfall as did conservative estimates of local inflation factors. HUD hinted at future requests that HAs move fiscal year ends earlier in the federal fiscal year so HUD will have better data earlier in preparing projections, prorations, and tracking fund disbursements.
Assistant Secretary Liu remains abashed at discovering this shortfall on his watch, characterizing the crisis as, "incredible." He repeated his commitment to mitigating the shortfall's impact, but was clear that HUD will not request any supplemental appropriation to alleviate the funding gap. HUD plans to support the shortfall through FY '03 appropriations, resulting in inadequate funding of FY '03 operating requirements. Also, HUD may be very conservative in establishing prorations for FY '03 once an appropriations bill for HUD is signed. It is vital that HAs be conservative in planning spending during FY '03.
PHADA will publish more detailed information on HUD's evaluation of sources for the operating fund shortfall in FY '01 and FY '02 when a full analysis is ready. The association and other industry groups will continue to urge Congress to provide additional funding for operating subsidies, and not burden FY '03 appropriations with a shortfall that accumulated during prior fiscal years.
In other news, more national organizations are continuing to raise their voices against the drastic voucher-related changes included in the House appropriations bill, H.R. 5605. The latest groups to oppose the bill are the US Conference of Mayors, the National League of Cities and the National Association of Counties. Their joint letter to Congress may be found below. PHADA reported last week that a number of other influential organizations, including the National Associations of Realtors and Homebuilders (see their letter) have also written Congress to express their opposition to the legislation, which PHADA estimates would result in the potential loss of hundreds of thousands of vouchers. PHADA will continue working with these and other groups to ensure adequate funding of the voucher program in the FY '03 HUD spending bill.
Finally, PHADA wishes all members HAPPY HOLIDAYS. As a reminder, the Washington office is closed December 24 and 25, and will reopen on Thursday, December 26.
USCM/NLC/NACo letter to Congress
On behalf of over 20,000 local governments represented by the National League of Cities (NLC), the U.S. Conference of Mayors (USCM), and the National Association of Counties (NACo), we are writing to express our concern over the level of funding for the Section 8 Voucher program as the 2003 appropriations process moves forward. We ask that you support the voucher renewal provisions in Senate Report 107-222, the Senate VA HUD Appropriations bill. The funding proposal for the Section 8 Voucher program in House Report 107-740 jeopardizes the continuity of the program in the future.
More than 15 million families in this country have critical housing needs. Some live in unsafe and substandard housing, others pay too much of their income for rent or a mortgage, and still others are living in overcrowded conditions. Too many are homeless. Overall, these conditions affect about one in every seven American households. Local governments rely on federal funding to help provide citizens with stronger communities and decent housing. We are concerned with the funding level for the Section 8 Voucher program in the 2003 House Appropriations Committee recommendation, House Report 107-740.
The tenant-based Section 8 program, which provides "Housing Choice Vouchers" to qualified families, is a vital part of our country's housing policy. Nearly 1.6 million families rely on this program to help them pay the rent every month. Given the housing affordability crisis faced by our country's poorest families, including thousands of elderly Americans, we should be expanding, not downsizing, this program. The House bill would change the renewal formula for the Section 8 program. In doing so, it would provide 127,000 fewer voucher renewals than the President requested in his 2003 budget. The bill would also fund 27,000 fewer incremental vouchers. This change is being proposed in response to problems with voucher utilization in some places.
Under the House renewal proposal, public housing agencies (PHAs) may find themselves without enough funding for their current vouchers. The number of vouchers that PHAs would receive would be based on data that is dated. If utilization of vouchers has gone up over the past two years, PHAs would not get enough funds to cover the vouchers now in use. The House Report 107-740 would create a central reserve fund to cover additional vouchers, but calculations show that it would be inadequate.
Section 8 vouchers play a significant role in our local communities across the country. We encourage you to support Senate Report 107-222 and reject the provisions in House report 107-740. If you have any questions or comments, please contact John Dailey at NLC, (202) 626-3020; Eugene Lowe at USCM, (202) 293-7330; or Cassandra Matthews at NACO, (202) 393-6226.
Very truly yours,
National League of Cities
United States Conference of Mayors
National Association of Counties
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