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Bush plans sharp cuts in HUD unit

The White House will seek to sharply cut the Department of Housing and Urban Development's $8 billion community branch, purging dozens of economic development projects, scrapping a rural housing program and folding high-profile anti-poverty efforts into the Labor and Commerce departments, officials say.
/ Source: a href="" linktype="External" resizable="true" status="true" scrollbars="true">The Washington Post</a

The White House will seek to drastically shrink the Department of Housing and Urban Development's $8 billion community branch, purging dozens of economic development projects, scrapping a rural housing program and folding high-profile anti-poverty efforts into the Labor and Commerce departments, administration officials said yesterday.

The proposal in the upcoming 2006 budget would make good on President Bush's vow to eliminate or consolidate what he sees as duplicative or ineffective programs. Officials said yesterday that economic development programs are scattered too widely in the government and have proved particularly ineffectual at HUD.

Advocates for the poor, however, contended that the White House is trying to gut federal programs for the poorest Americans to make way for tax cuts, a mission to Mars and other presidential priorities. Administration officials would not say how much the consolidation would save, but it could lead to steep funding cuts. That is because the HUD programs would have to compete for resources in Commerce and Labor budgets that are not likely to expand to accommodate the shuffle.

"I'm always willing to look at consolidation, but clearly they're using consolidation as a shield for substantial budget reductions," said Rep. Barney Frank (Mass.), the ranking Democrat on the Financial Services Committee, which has jurisdiction over housing and community development programs.

The plan was detailed in a December memo from the White House Office of Management and Budget to HUD. The document provides one of the first concrete examples of the types of cuts in the works as the administration comes to grips with a soaring deficit.

"The purpose of the exercise has nothing to do with achieving or not achieving savings," said one administration official, who spoke on the condition of anonymity to avoid preempting the Feb. 7 release of the president's fiscal 2006 budget request.

"What we are trying to accomplish is to meet our obligation to people living in distressed communities, to hold communities accountable for helping those people and to become more efficient in the process," another official said.

Congressional housing aides say the $4.7 billion Community Development Block Grant (CDBG) program -- the majority of the community planning budget -- could be cut as much as 50 percent. Cities have become dependent on HUD's development programs, especially the CDBG, which has existed for 30 years, city officials said. Stanley Jackson, director of the D.C. Department of Housing and Community Development, said the city has used CDBG grants of $21 million to $22 million a year for clinics, recreation centers, day-care facilities, literacy programs and housing development.

With housing and property values skyrocketing, the need for such programs for low-income families has never been higher, he said.

"If this is a backdoor way of eliminating a program like CDBG, it would have a profoundly negative impact on cities," said Jim Hunt, a vice president of the National League of Cities and a city council member in Clarksburg, W.Va.

Under the plan, the CDBG program -- which provides multipurpose development grants to state and local governments -- would be sent to the Commerce Department. The Urban Empowerment Zones and Renewal Community programs -- both of which offer tax favors for development in urban or other troubled areas -- would also go to Commerce, as would the Brownfields Economic Development Initiative, designed to revitalize abandoned industrial sites.

Youthbuild USA, a $62 million program to teach teens home-construction skills, would be sent to the Labor Department. The $24 million rural housing and economic development program would probably be eliminated.

HUD would maintain the Home Investment Partnerships to build or buy affordable housing, homeless assistance programs, and housing assistance for AIDS sufferers. The budget would eliminate $260 million in economic development projects earmarked this year by lawmakers. HUD could ultimately lose a quarter of its $31 billion budget.

White House officials said HUD employees would have to stay on the job to oversee outstanding grants for some time. But with Bush promising an aggressive attack on domestic spending, the 817 HUD community planning and development employees are girding for the worst.

"It's a body blow," said one career employee, who spoke on the condition of anonymity for fear of being fired.

The proposal could face an uphill fight in Congress, said Frank, who called the proposal "just appalling." With budgets tight, vested interests in the Commerce and Labor departments would be expected to favor their programs over the newcomers from HUD. "It wouldn't even be a fair fight," he said.

Moreover, HUD has evolved into the agency designed to support urban interests and low-income citizens, while Commerce and Labor are more receptive to business needs. Indeed, community development programs at HUD are far larger than those at Commerce and Labor, said Saul Ramirez Jr., executive director of the National Association of Housing and Redevelopment Officials and a former deputy secretary of housing. The Commerce Department's Economic Development Administration has a $320 million budget, a fraction of CDBG's allocation.

"If there are any programs in Commerce that encourage direct economic development to some of the most disadvantaged and blighted areas, those programs are dwarfed by these programs," he said. "If [consolidation] is what they want, the reverse should be proposed."

One White House official agreed that HUD programs have more of a community focus, while the Commerce Department's Economic Development Administration is more interested in economic growth. But, he said, "they're funding a lot of the same things."

HUD's city focus may be why the White House is dismantling the HUD programs, Frank charged. "HUD is the place where mayors and urban interests can put up the strongest fight," he said.