After much speculation, President Trump’s Budget Blueprint for fiscal year 2018, which begins this coming October 1st, has now officially been released. The plan proposes cuts of $54 billion from domestic discretionary funding to enable a corresponding increase in military spending. Under the plan, federal programs supportive of inclusive community development face drastic cuts and, in many cases, elimination. This would undoubtedly cause immeasurable harm in many low-income and economically disenfranchised communities. If this budget were to be enacted, decades of slow and steady progress on the ground would likely be reversed.
The budget proposal eliminates 19 independent agencies in their entirety. While popular agencies such as the Corporation for Public Broadcasting and the National Endowment for the Arts have garnered a lot of attention and public outcry, six agencies involved in economic and community development are also on the chopping block.
Elimination of the Appalachian Regional Commission (p. 5)
The Appalachian Regional Commission (ARC) was created in the 1960s in response to growing concerns about extreme poverty in Appalachia. Since then it has invested hundreds of millions of dollars in the 420 communities in 13 states in the region. This public investment has leveraged millions more in private investment. With an annual budget of $146 million in 2017, ARC focuses on five main areas: economic development, workforce readiness, infrastructure, natural and cultural assets, and leadership and community capacity. The agency estimates that its continuing investments will create or retain more than 23,670 jobs and train and educate nearly 50,000 workers and students.
Elimination of the Delta Regional Authority (p. 5)
The Delta Regional Authority (DRA) was created in 2000 with a similar mission to ARC. DRA works in poor counties in Alabama, Tennessee, Louisiana, Mississippi, Kentucky, Missouri, and Illinois. In the 17 years since its establishment, it has helped create or retain more than 26,000 jobs in some of the most distressed parts of the country. With a remarkable leverage ratio of 20.2 to 1, the agency’s $25 million annual budget (FY17) goes a long way to improve the lives and communities of the 10 million Americans who live in the Delta Region.
Elimination of the Denali Commission (p. 5)
The Denali Commission is also a regional economic development agency, founded in 1998, that works in the most remote areas of Alaska. The Commission provides job training and economic development services to rural communities in addition to assisting the development of rural power generation, transportation infrastructure, modern communication systems, water and sewer systems, health facilities, and other much needed services. It receives around $20 million in annual funding from the federal government (FY17).
Elimination of the Northern Border Regional Commission (p. 5)
The youngest of the regional economic development agencies, the Northern Border Regional Commission (NBRC), enacted in 2008, is a federal-state partnership focused on community and economic development in the Northernmost counties of Maine, New Hampshire, Vermont, and New York. With a budget of only $8 million, in 2016 it funded 43 projects through $7.5 million in grants, leveraging an additional $43.7 million in matching funds.
Elimination of the United States Interagency Council on Homelessness (p. 5)
The United States Interagency Council on Homelessness (USICH) facilitates collaboration among 19 federal agencies involved in fighting homelessness. Through “Opening Doors,” the nation’s first comprehensive federal strategy to end homelessness, between 2010 and 2016 the agency reduced homelessness nationwide by 14 percent, including a 47 percent drop in homelessness among veterans and 65 percent drop in unsheltered homelessness among families.
Elimination of the Neighborhood Reinvestment Corporation (p. 5)
Commonly known as NeighborWorks America, the Neighborhood Reinvestment Corporation is one of the biggest and most effective providers of training and technical support for a network of more than 240 housing and community development organizations. For every dollar of federal appropriation, the agency leverages $91 in matching funds. In 2016 alone, the agency created or maintained more than 53,000 jobs, helped 21,000 people become homeowners, assisted 360,000 other families find affordable housing, made repairs to more than 55,000 homes, and provided financial education to more than 116,000 individuals. In 2013, NeighborWorks also announced that its foreclosure program had helped 1.6 million homeowners avoid foreclosure.
Elimination of the Corporation for National and Community Service (p. 5)
The Corporation for National and Community Service is responsible for the popular Americorps, City Year, and Senior Corps volunteer service programs, but it also houses the less well known Social Innovation Fund (SIF). SIF, started in 2009, works through existing grant making institutions or “intermediaries” to provide funding to support nonprofit innovation and social enterprise. SIF consists of two fund programs: SIF Classic, which provides grants to community-based efforts that positively impact people and their communities, and SIF Pay for Success, which funds nonprofits and state and local governments serving low-income communities and evaluating social interventions for effectiveness.
In addition to the loss of these six independent agencies, the significant cuts proposed for other departments would result in huge losses to community development across the board:
Department of Agriculture (p. 11-12)
The United States Department of Agriculture (USDA) is scheduled to receive a 21 percent budget reduction if President Trump’s budget blueprint is approved. Included in this is a $95 million cut to the Rural Business-Cooperative Service, which works on rural develop in three areas: business programs, cooperative programs, and community economic development. Through the Business Program, it provides much-needed capital in rural communities to help catalyze small businesses and cooperatives. The Cooperative Program provides education and training in the use of the cooperative form of business, an important aspect of community wealth building. The program also helps rural residents start new cooperatives or improve the operations of existing ones. The third component of the Service, the Community Economic Development Programs, helps communities and regions create strategies to achieve long-term economic development goals.
Department of Commerce (p. 13-14)
The Department of Commerce is slated to see a 16 percent decrease in funding and economic development programs housed in the department would be slashed. The Economic Development Administration (EDA), a $221 million program, would be terminated. The EDA plays a key role in providing federal support for local economic development with a focus on place-based revitalization, regional innovation, and cross-agency/cross-sectoral partnerships. For example, the EDA’s University Centers program helps make the immense resources of universities available for economic and community development purposes.
The Minority Business Development Agency (MBDA) would also be eliminated. Established by President Nixon in 1969, the MBDA fosters inclusive economic development by specifically promoting and advocating for the growth of minority-owned businesses. The MBDA recognizes the unique barriers faced by entrepreneurs of color and connects minority-owned businesses with capital, contracts, and markets and provides technical assistance at over 40 business centers spread across the US.
The budget blueprint also outlines the discontinuation of all federal funding ($124 million in FY17) for the Manufacturing Extension Partnership (MEP) program. MEP provides technical expertise and services for medium and small US manufacturers to help them reach new customers and markets. Since its establishment in 1988, the program has worked with 86,620 manufacturers and created and retained more than 797,994 jobs.
Department of Housing and Urban Development (p. 25-26)
President Trump’s budget would hit the Department of Housing and Urban Development (HUD) with a $6.2 billion dollar cut (a sizeable 13.2 percent decrease from 2017), with these largely coming out of its community development programs.
The largest cut to federal funding for community development comes from the elimination of the Community Development Block Grant (CDBG) program, roughly $3 billion in funding that is dispersed at the local level, allowing governments to innovate and experiment with what works best in a particular community. The CBDG program is used to support a vast array of important programs beyond “Meals on Wheels.” The CDBG program was a key initial source of capital for the development of the innovative the Evergreen Cooperative network in Cleveland, Ohio. At the laundry, the first coop to launch, a HUD Section 108 loan (which leverages CDBG funds to provide low-interest, long term loans for community development projects) provided $1.5 million out of roughly $5.5 million in startup financing. The Green City Growers greenhouse use a similar Section 108 loan for $8 million dollars of its initial financing, over half the total of around $15 million. Aside from being a huge funding source for local community development, the flexibility of the CDBG program allows it to support innovative forms of development such as the Cleveland Model. It would be a tragic loss if the CDBG program was dissolved.
Another promising shift towards community control that the loss of CDBGs would abrogate is new experimentation in participatory budgeting, as in Oakland, where the first use of participatory budgeting to allocate federal funds just launched this January.
The budget outline also eliminates funding for what it calls “low-priority programs,” including the HOME Investment Partnerships Program, Choice Neighborhoods, and the Self-help Homeownership Opportunity Program, which together constitute a $1.1 billion cut to affordable housing. The HOME program awards annual formula grants to States and localities, often in partnership with non-profit and community organizations to provide affordable housing for low-income residents through homeownership; rental assistance; or housing building, buying, or renovating. According to Burlington Associates, when it comes to community land trusts (CLTs) nationwide, “the ‘HOME Investment Partnership Program’ is the single most important source of both project subsidies and operating support. The Program’s regulations make certain special provisions for CLTs and present no special obstacles to the use of HOME funds by CLTs.”
The budget draft also calls for the termination of the Self-Help Homeownership Program (SHOP). Established in 1996, SHOP is designed to alleviate the high costs of land acquisitions and infrastructure improvements. The program provides grants to national and regional nonprofit groups that have experience in “self-help” or “sweat equity” housing, using homebuyer and volunteer labor to build housing for low-income families. Two of the largest recipients of these grants are Habitat for Humanity and the Housing Assistance Council (HAC).
The cuts to community development under HUD continue with the abolishment of the Choice Neighborhoods program. The Choice Neighborhoods program funds locally driven strategies in distressed neighborhoods through a comprehensive approach to neighborhood development. The program aims to “catalyze critical improvements in neighborhood assets, including vacant property, housing, services and schools.” For example, in 2016 in Boston, Choice Neighborhood funds were used to facilitate a partnership between the Boston Housing Authority, the Dudley Street Neighborhood Initiative, and the City of Boston. The $30 million in FY2016 Choice Neighborhood Funding will be used to revitalize the Whittier Neighborhood, by creating a 472 unit, mixed-income housing development, increasing access to health care at a local clinic, providing additional access to education and training for local residents, and supporting small businesses with loans and a retail incubator space.
Finally, funding ($35 million in FY17) for Section 4 Capacity Building for Community Development and Affordable Housing would be removed. This funding provides grants to national intermediaries that then re-grant the funds to community development corporations (CDCs) or community housing development organizations (CHDOs) that support low-income residents and create holistic neighborhood improvement. Capacity Building grants are currently awarded to five intermediary organizations: Living Cities/The National Community Development Initiative, Local Initiatives Support Corporation (LISC), Enterprise Community Partners, Inc., Habitat for Humanity International, and YouthBuild USA. Between 1991, when the Section 4 program began, and 2005, the number of CDCs more than doubled, climbing from 2,000 to 4,600.
Department of the Treasury (p. 37-38)
The Treasury Department’s funding is set to be cut by $519 million, about half of which is achieved by ending Community Development Financial Institutions (CDFI) Fund grants ($210 million FY17). For the more than 1,000 CDFI’s that provide key sources of capital and banking services in communities not served by traditional financial institutions, the CDFI fund is a key source of funding. Beyond helping community members purchase their first home or start a small business, assisting local non-profits in developing affordable housing, building community centers, or providing services, CDFIs have often played a pioneering role in community wealth building. For example, in New Hampshire, the New Hampshire Community Loan fund, a CDFI, was the first group to lend to residents for the creation of manufactured housing cooperative, a model, that has since been replicated across the country.
The CDFI Fund operates the New Markets Tax Credit (NMTC) Program, which provides federal tax credits to attract private investment to distressed communities. Since its inception in 2000, NMTCs have financed over 5,400 businesses, and attracted $8 of private investment for every federal dollar spent. The CDFI Fund also houses the Capital Magnet Fund, a program that finances affordable housing and community development efforts through grants awarded to non-profit housing organizations. Since 2008, the program has generated more than $1 billion of combined investment and created more than 10,000 affordable homes. The CDFI’s Native Initiatives program is another source of inclusive community development funding that would be lost. Native Initiatives supports the efforts of native communities to provide affordable housing, grow small businesses, create jobs, and provide financial services to tribal members through the creation and expansion of Native CDFIs. Between 2001 and 2015 the number of certified Native CDFIs has increased from 14 to 71.
Small Business Administration (p. 45)
President Trump’s 2018 Budget cuts funding to the Small Business Administration (SBA) by 5 percent from 2017 levels. SBA’s Program for Investment in Micro-entrepreneurs (PRIME) technical assistance loans would be eliminated. These loans provide grants to intermediaries that provide services, education, training, assistance to low-income entrepreneurs so that they can gain access to capital to establish or expand a small business. The Regional Innovation Clusters program, which provides services and support to small businesses in a specific region and sector, would be discontinued. Within each regional cluster, the SBA provides business training, commercialization and technology transfer services, counseling, and mentoring to expand small business development. The recently initiated Growth Accelerator Fund Competition would also be cut. The Growth Accelerators program provides funds to organizations whose focus is on helping start-ups grow and create sustained economic impact. In the two years that the program has been established, it has helped create or sustain 14,158 jobs and served nearly 3,500 start-ups.
There is still a long way to go in the federal budget process. The budget proposed on March 16th is a “skinny budget"—only outlining discretionary domestic spending and not including tax proposals, deficit projections, mandatory spending, or staffing in federal agencies. According to the Administration, a full budget request will be submitted to Congress in May.
Later this spring, the House and Senate Budget Committees will each pass budget resolutions using the President’s Budget request for guidance. Then the Appropriations Committees will appropriate funds to the draft budget resolutions, after which time the House and Senate will meet to reconcile differences in the appropriations bills, before returning the completed finished products back to the executive branch to sign into law.
Of course, in reality the budget process never works this smoothly. In fact, the last time the 12 bills that make up the federal budget were delivered to the President’s office on time was more than 20 years ago. And in many years a budget is simply not passed and programs are funded through continuing resolutions. It’s also unlikely that all the proposed cuts will withstand Congressional negotiations, even with a Republican majority in both chambers. In 2013, when President Obama’s budget suggested privatizing the Tennessee Valley Authority, a federal agency that provides affordable electricity, river management, and economic development in parts of the South, Republican legislators who were concerned about the impacts its privatization would have on their constituents fought vigorously for the TVA to remain a federal agency.
Nevertheless, by proposing drastic cuts to funding for community development, the Trump Administration has made it likely that less extreme, but still significant, budget cuts will be accepted as a reasonable compromise. Additionally, because some of the key funding that helps low-income, marginalized communities with affordable housing and good jobs comes from smaller agencies and less well known programs outside the media spotlight, it would certainly be a mistake to dismiss this budget proposal as empty rhetoric.
The Democracy Collaborative will continue to track federal attacks on inclusive community development, along with state-level measures enabled and encouraged by the new federal context, on its Rolling Back Inclusion Tracker.