Order Code RL31304
Report for Congress
Received through the CRS Web
Appropriations for FY2003:
VA, HUD, and Independent Agencies
Updated October 7, 2002
Dennis W. Snook and E. Richard Bourdon, Coordinators
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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Appropriations are one part of a complex federal budget process that includes budget
resolutions, appropriations (regular, supplemental, and continuing) bills, rescissions, and
budget reconciliation bills. The process begins with the President’s budget request and is
bounded by the rules of the House and Senate, the Congressional Budget and Impoundment
Control Act of 1974 (as amended), the Budget Enforcement Act of 1990 (scheduled to
expire at the end of FY2002), and current program authorizations.
This Report is a guide to one of the 13 regular appropriations bills that Congress passes each
year. It is designed to supplement the information provided by the House and Senate
Appropriations Subcommittee on VA, HUD, and Independent Agencies. It summarizes the
current legislative status of the bill, its scope, major issues, funding levels, and related
legislative activity, and will be updated to reflect new developments. The Report lists the
key CRS staff relevant to the issues covered and related CRS products.
NOTE: A Web version of this document with active links is
available to congressional staff at:
[http://www.crs.gov/products/appropriations/apppage.shtml].

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Appropriations for FY2003:
VA, HUD, and Independent Agencies
Summary
FY2003 appropriations. The Senate Committee on Appropriations reported
S. 2797, setting the stage for congressional action on FY2003 appropriations for the
Departments of Veterans Affairs (VA), Housing and Urban Development (HUD),
and Independent Agencies, including the Environmental Protection Agency (EPA),
the Federal Emergency Management Agency (FEMA), the National Aeronautics and
Space Administration (NASA), and the National Science Foundation (NSF). The bill
recommends a total of $124.5 billion (net, after rescissions) for the activities covered
by the bill. According to S.Rept. 107-222, the Administration requested a net $121.4
billion for those activities, or $3.1 billion less than S. 2797 recommends.
S. 2797 recommends $23.9 billion for VA medical care, an increase of $2.6
billion over FY2002, and over $1.1 billion more than requested by the
Administration. In FY2003, VA expects to provide medical services to nearly 5
million veterans, double the number VA served 5 years ago.
S. 2797 recommends an increase of $734 million for HUD, an amount that
S.Rept. 107-222 states will be sufficient to renew all expiring rental assistance
(Section 8) contracts, and provide for 15,000 additional vouchers. The
Administration proposed a $400 million reduction to public housing capital funds,
but because of public housing capital needs, the Senate bill recommends $358
million more than requested. S.Rept. 107-222 reports that the Committee is
concerned that the Administration’s proposed private financing of public housing
capital needs could cause further erosion of the supply of public housing units.
S. 2797 proposes adding $679 million to the request for EPA. The
Administration proposed that EPA projects receiving approximately $500 million in
“earmarked” funds for FY2002 would not receive funding for FY2003; S. 2797
recommends a number of local projects for specific funding. The Superfund, which
funds the clean-up of toxic wastes would continue the decline which began when its
taxing authority ceased at the end of 1995.
Under S. 2797, NASA funding would remain close to FY2002 levels. NSF
funding would increase by $564 million, $325 million more than requested. Funding
for FEMA, under consideration for inclusion in the proposed Department of
Homeland Security, would continue to depend largely on unknown emergency needs.
Accrual accounting. In its budget, the Administration proposed that the
future costs of retirement benefits and retiree health insurance for current federal
employees should be shown as an accrued cost for each fiscal year. Because this
change would require legislation, the effects upon annual appropriations are not
shown in this report, which is based on CBO estimates of program costs under
current law. S.Rept. 107-222 is critical of the Administration’s inclusion of the
effects of accrual accounting within the request levels for appropriations, and asks
that future legislative proposals be sent to Congress without assuming their
enactment for purposes of budget estimates.

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Key Policy Staff
CRS
Name
Area of Expertise
Telephone and E-Mail
Division
Disaster Assistance;
7-8672
Keith Bea
G&F
Emergency Mgmt.
kbea@crs.loc.gov
7-7806
Richard Bourdon
Housing
DSP
rbourdon@crs.loc.gov
Community
7-8689
Eugene Boyd
G&F
Development
eboyd@crs.loc.gov
Bruce Foote
7-7805
Housing
DSP
bfoote@crs.loc.gov
Environmental
7-7260
Martin Lee
RSI
Policy
mlee@crs.loc.gov
National and
7-2323
Ann Lordeman
DSP
Community Service
alordeman@crs.loc.gov
National Science
7-7055
Christine Matthews
RSI
Foundation
cmatthews@crs.loc.gov
7-2163
Margaret M. McCarty
Housing
DSP
mmccarty@crs.loc.gov
Consumer
7-7775
Bruce Mulock
G&F
Affairs
bmulock@crs.loc.gov
7-7832
Pauline Smale
Banking
G&F
psmale@crs.loc.gov
National Aeronautics
7-7076
Marcia Smith
RSI
and Space Admin.
mssmith@crs.loc.gov
Veterans Affairs
7-7314
Dennis Snook
DSP
dsnook@crs.loc.gov
7-7808
Susan Vanhorenbeck
Housing
DSP
svanhorenbeck@crs.loc.gov
Housing for Homeless,
DSP
7-6262
M. Ann Wolfe
AIDS Victims
mwolfe@crs.loc.gov
Division abbreviations: DSP=Domestic Social Policy; G&F=Government and Finance;
RSI=Resources, Science and Industry.

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Contents
Most Recent Developments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Total Appropriations Enacted for FY2002 and Requested for FY2003 for VA,
HUD, and Independent Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Title I: Department of Veterans Affairs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Spending for VA Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
VA Cash Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Medical Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Medical Care Cost Collections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Medical research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Housing benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
VA construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Burial and cemetery benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Department administration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Title II: Department of Housing and Urban Development . . . . . . . . . . . . . . . . . 11
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Highlights of Proposed HUD budget for FY2003 . . . . . . . . . . . . . . . . . . . . 11
Summary of Administration’s budget proposals . . . . . . . . . . . . . . . . . 12
Senate Appropriations Committee Action (S. 2797) . . . . . . . . . . . . . . 13
Policy Issue: The Shortage of Affordable Rental Housing . . . . . . . . . . . . . 15
A brief history of federal housing assistance . . . . . . . . . . . . . . . . . . . . 17
Is there available housing at an affordable price? . . . . . . . . . . . . . . . . 18
Increasing the supply of affordable housing . . . . . . . . . . . . . . . . . . . . 19
Public and Indian Housing Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Housing Certificate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Public housing programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Public Housing Operating Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Public Housing Capital Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
HOPE VI Revitalization of Distressed Public Housing . . . . . . . . . . . . 28
Native American Block Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Community Planning and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Housing for Persons with AIDS (HOPWA) . . . . . . . . . . . . . . . . . . . . 28
Rural Housing and Economic Development . . . . . . . . . . . . . . . . . . . . 29
Empowerment Zones and Enterprise Communities . . . . . . . . . . . . . . 29
Community Development Block Grants . . . . . . . . . . . . . . . . . . . . . . . 30
Brownfields Redevelopment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
The HOME Investment Partnership Program . . . . . . . . . . . . . . . . . . . 34
Homeless Assistance Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Housing Program Administration
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
Housing for the Elderly and Disabled . . . . . . . . . . . . . . . . . . . . . . . . . 37
Federal Housing Administration (FHA) . . . . . . . . . . . . . . . . . . . . . . . 38

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Office of Federal Housing Enterprise Oversight (OFHEO) . . . . . . . . . 41
Fair Housing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Lead-Based Paint Hazard Reduction . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Title III: Independent Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Environmental Protection Agency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
State and Tribal Assistance Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Superfund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Federal Emergency Management Agency . . . . . . . . . . . . . . . . . . . . . . . . . . 45
National Aeronautics and Space Administration . . . . . . . . . . . . . . . . . . . . . 47
International Space Station (ISS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Space Shuttle . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Space Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Biological and Physical Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Earth Science . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 52
Aero-Space Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
National Science Foundation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
Research and Related Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Major Research Equipment; Facilities Construction . . . . . . . . . . . . . . 55
Education and Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Other Independent Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Agency for Toxic Substances and Disease Registry . . . . . . . . . . . . . . 57
American Battle Monuments Commission . . . . . . . . . . . . . . . . . . . . . 57
Cemeterial Expenses, Army . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Chemical Safety and Hazard Investigation Board . . . . . . . . . . . . . . . . 59
Community Development Financial Institutions fund . . . . . . . . . . . . . 59
Consumer Product Safety Commission (CPSC) . . . . . . . . . . . . . . . . . 60
Corporation for National and Community Service (CNCS) . . . . . . . . 60
Council on Environmental Quality; Office of Environmental Quality 61
U.S. Court of Appeals for Veterans Claims . . . . . . . . . . . . . . . . . . . . . 61
Federal Consumer Information Center (FCIC) . . . . . . . . . . . . . . . . . . 61
Federal Deposit Insurance Corporation . . . . . . . . . . . . . . . . . . . . . . . . 61
Interagency Council on the Homeless . . . . . . . . . . . . . . . . . . . . . . . . . 61
National Credit Union Administration . . . . . . . . . . . . . . . . . . . . . . . . 62
National Institute of Environmental Health Sciences . . . . . . . . . . . . . 62
Neighborhood Reinvestment Corporation (NRC) . . . . . . . . . . . . . . . . 62
Office of Science and Technology Policy . . . . . . . . . . . . . . . . . . . . . . 63
Selective Service System (SSS) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Selected World Wide Web Sites . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
Additional Reading . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
List of Tables
Table 1. Status of VA, HUD and Independent Agencies Appropriations,
FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Table 2. Summary of VA, HUD, and Independent Agencies
Appropriations, FY2002-FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Table 3. Department of Veterans Affairs Appropriations, FY1998-FY2002 . . . . 8
Table 4. Appropriations: Department of Veterans Affairs, FY2002-FY2003 . . . 9
Table 5. Department of Housing and Urban Development Appropriations,
FY1998 to FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

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Table 6. Appropriations: Housing and Urban Development,
FY2002-FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Table 7. Requested Spending for the Housing Certificate Fund
(HCF), Administration and Congressional Estimates, FY2003 . . . . . . . . . . 25
Table 8. Community Development Block Grants (CDBG): Entitlement
Communities with Per Capita Income At Least Twice the National
Average . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Table 9. Community Development Block Grants, FY2002-FY2003 . . . . . . . . . 32
Table 10. Environmental Protection Agency Appropriations,
FY1998-FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Table 11. Appropriations: Environmental Protection Agency,
FY2002-FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Table 12. Appropriations: Federal Emergency Management Agency,
FY2002-FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Table 13. National Aeronautics and Space Administration Appropriations,
FY1998-FY2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Table 14. Appropriations: National Aeronautics and Space
Administration, FY2002-FY2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
Table 15. National Science Foundation Appropriations, FY1998 to FY2002 . . 55
Table 16. Appropriations: National Science Foundation, FY2002-FY2003 . . . 56
Table 17. Appropriations: Other Independent Agencies, FY2002-FY2003 . . . 58

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Appropriations for FY2003:
VA, HUD, and Independent Agencies
Most Recent Developments
Senate Committee on Appropriations reports S. 2797. On July 25,
2002, the Senate Committee on Appropriations reported (S.Rept. 107-222) a bill to
provide FY2003 appropriations for the Departments of Veterans Affairs (VA),
Housing and Urban Development (HUD), and various other independent agencies.
S. 2797 recommends $124.5 billion (net, after rescissions) in budget authority for
activities of the departments and agencies covered by the bill.
President submits FY2003 budget. On February 4, 2002, the President
submitted a proposed budget for FY2003. According to S.Rept. 107-222, the
President’s budget requests would require $121.4 billion (net, after rescissions) in
appropriations for programs provided through the VA-HUD bill.
President signs H.R. 2620 as P.L. 107-73, appropriations for
FY2002. On November 26, 2001, President Bush signed the VA, HUD, Independent
Agencies appropriations bill for FY2002. Conferees finished their work on
November 6, and both Chambers approved the Conference Report (H.Rept. 107-272)
on November 8.
Congress approves, President signs P.L. 107-38, an emergency
supplemental in response to terrorist acts. On September 18, 2001, the
President signed H.R. 2888, a bill Congress unanimously approved (September 14)
that provides $40 billion “. . . for additional disaster assistance, for anti-terrorism
initiatives, and for assistance in the recovery from the tragedy that occurred on
September 11, 2001, and for other purposes.”
Status
Table 1. Status of VA, HUD and Independent Agencies
Appropriations, FY2003
Subcommittee
Conference
markup
Report approval
House
Passed
S.Rept.
Passed Conference
House Senate Report
House
107-222
Senate
Report
House
Senate Signed
–
7-23
–
–
7-25
–
–
–
–
–

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CRS-2
Total Appropriations Enacted for FY2002 and
Requested for FY2003 for VA, HUD, and
Independent Agencies
Table 2. Summary of VA, HUD, and
Independent Agencies Appropriations, FY2002-FY2003
(budget authority in billions)
FY2002 FY2003 FY2003
FY2003
FY2003
Department or Agency
enacteda
request
House
S. 2797
Confer.
Department of Veterans Affairs
51.137
54.514
–
58.090
–
Department of Housing and
Urban Development
32.149
31.349
–
32.083
–
Environmental Protection
Agency 8.079
7.621
–
8.299
–
Federal Emergency
Management Agency
7.925
6.704
–
4.435
–
National Aeronautics and Space
Administration
14.902
15.000
–
15.200
–
National Science Foundation
4.789
5.028
–
5.353
–
Other Independent Agencies
0.926
1.143
–
1.047
–
Grand Total: Appropriations
119.907
121.359
–
124.508
–
Source: S.Rept. 107-222.
Note: Totals will not add due to rounding at agency level.
a Totals for FY2002 include emergency supplementals.

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CRS-3
Title I: Department of Veterans Affairs
Spending for VA Programs
FY2003. The President requested $56.6 billion for the Department of Veterans
Affairs (VA) for FY2003. Congressional reestimates of the Administration’s budget
for the VA for FY2003 show the request to be $54.5 billion, an increase of $3.4
billion over the amount projected to be the final appropriations recorded for
FY2002.1 (Congressional estimates do not include amounts that the Administration’s
budget documents project would be required to carry out an Administration proposal
to “book” to the current year, the future costs of federal employee retirement income
and health benefits presumed to be earned in that year.)
S. 2797. The Senate Committee on Appropriations has reported S. 2797
(S.Rept. 107-222), FY2003 appropriations for VA, HUD, and Independent Agencies.
The Committee’s bill would provide $58.09 billion for VA, an increase of almost $7
billion over projected FY2002 expenditures for VA programs, and $3.6 billion more
than the President’s request. About $4.3 billion of the projected programmatic
increases result from recent mandatory spending estimates that project higher levels
for VA cash entitlement programs.
Discretionary funds would increase by $2.7 billion under S. 2797, as the
Committee “...once again has made VA its top priority...” in the FY2003 bill. The
VA medical care program would receive about $23.9 billion in appropriated funds,
and $1.4 billion in recovered medical costs available for reuse by the medical
program. The combined total of $25.3 billion in spending authority is $3.3 billion
above FY2002 levels, and $1.8 billion above the Administration’s FY2003 request.
FY2002. After including updated spending for increased mandatory spending
for VA entitlements, projected FY2002 final appropriations for VA will total $51.1
billion. According to the conference report accompanying P.L. 107-73 (H.Rept. 107-
272), the VA-HUD appropriation bill (as the bill containing annual appropriations
for VA is popularly known), the Administration requested $50.7 billion for VA
programs for FY2002.
VA Cash Benefits. Spending for the VA cash benefit programs is mandatory,
and the amounts requested in the budget are based on projected caseloads. Eligibility
requirements and benefit levels are specified in law. While the number of veterans
is declining, VA entitlement spending, mostly service-connected compensation,
pensions, and readjustment (primarily education) payments, reached $23.4 billion in
FY2000, $25.7 billion in FY2001, is expected to be $27.3 billion in FY2002, and is
projected to reach $31.6 billion in FY2003. Much of the projected increases
FY2001-FY2003 result from cost-of-living adjustments for compensation benefits,
and from liberalizations to the Montgomery GI Bill, the primary education program.
1 Final spending levels remain uncertain until all program experience has been recorded, and
any supplemental appropriations or rescissions have been included.

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CRS-4
Compensation and pensions. The compensation program pays benefits
to living veterans who have suffered a loss or reduction in earning capacity as a result
of a condition traceable to a period of military service, and to the dependent survivors
of certain veterans. The VA pension program is a means-tested benefit for
permanently disabled (from a condition unrelated to their military service) veterans
of war-time service, whose incomes and assets fall below certain levels. After taking
into consideration the financial circumstances and dependents of eligible veterans,
the pension payments, along with countable income, are intended to bring their total
incomes to the basic targeted amounts.2 Given the broad availability of other sources
of income, including social security, program caseload is diminishing, as fewer
veterans have incomes below the categorical levels.
During FY2002, about 2.3 million veterans are drawing an average of $633 in
monthly compensation for service-connected disabilities; about 310,000 of their
dependent survivors are averaging about $1,021 in monthly payments. Pensions for
346,000 veterans average about $569 monthly; 233,000 survivors of veterans
pensioners average about $245 monthly.
Readjustment. Following a tradition going back to the beginnings of the
Republic, near the end of World War II Congress enacted a series of programs to
assist veterans in their readjustment to civilian life, and to help the national economy
adapt to the influx of demobilizing armed forces. The GI Bill has entered the
national lexicon as an example of federal responsibility for this readjustment
responsibility, and many citizens continue to refer to the current array of programs
by that historical name. Indeed, the largest current program providing readjustment
education benefits is named the Montgomery GI Bill program, after its congressional
sponsor and the heritage it brought into the age of an all-volunteer military service.
Without conscription to fill the ranks of active duty armed services, the
inducements to potential recruits must be sufficient to attract them to enlist. The
Montgomery GI Bill provides recruits with the promise of educational assistance
when they separate, and the amounts that eligible participants receive has climbed
significantly over the last few years. The current payment of $800 per month for 36
months for a participant completing a 3-year enlistment is scheduled to rise to $900
per month on October 1, 2002, and $985 per month on October 1, 2003.
During FY2003, about $2.3 billion in total payments for education payments
will go to 326,000 active duty personnel and veterans, 82,000 reservists, and 52,000
dependents. About 160,000 veterans will receive other forms of tuition assistance,
65,000 will receive vocational assistance, and 81,000 will receive assistance with
preparing for and taking licensing and certification tests.
Medical Care. VA operates the nation’s largest health care system, with 172
hospitals, 137 nursing homes, 43 domiciliaries, 206 readjustment counseling centers,
73 home health-care programs, and almost 900 outpatient clinics. About 88% of
2 For 2002, the annual basic level for an eligible single veteran is $9,556; with 1 dependent,
$12,516; and each additional dependent, $1,630. Additional amounts are available for
eligible veterans who are housebound, or in need of aid and attendance.

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CRS-5
VA’s 207,000 employees are providing medical services to an estimated 4.7 million
veterans during FY2002, a caseload expected to reach 4.9 million by the end of
FY2003. The FY2001 caseload was about 4.2 million unique patients. Almost 2,000
medical care employment slots will shift from inpatient programs to outpatient care
during FY2002.
Outpatient visits are rapidly increasing. The total number of such visits reached
43.8 million during FY2001, and is projected to increase by 2.3 million over
FY2002-FY2003, from slightly less than 47 million to 49.2 million. Veterans who
are provided outpatient care average around 12 visits per year.
According to VA data accompanying the FY2003 Budget, the daily inpatient
caseload for FY2002 is projected to be 57,522 rising to 58,361 patients by the end of
FY2003. There is a decline in all service units except for two categories, acute care
and nursing homes. Acute care patients have increased because of the larger number
of total numbers of veterans who are seeking VA medical services, and while the
total number of acute care cases has increased by 2,700 over the last year, the average
daily census for acute care has declined by 20 patients, the result of a decline in the
average length of stay. The aging of the veteran population, and the congressional
commitment to increase the capacity of VA to serve this population, means that the
number of patients receiving convalescent care will increase by over 7,000 during the
next year, with the average daily nursing home census rising by 1,205 patients.
The FY2003 Budget request for VA medical care. The Administration
has asked Congress to provide $22.7 billion for VA medical care for FY2003,
continuing the annual increases in funds as the program continues to serve a larger
number of veterans each year. FY2002 congressional appropriations for VA medical
care were $21.3 billion, $1 billion above the $20.3 provided for FY2001. Congress
approved $19 billion for FY2000.
S. 2797. The Senate Committee on Appropriations has recommended $23.9
billion for FY2003 VA medical care, $2.6 billion over FY2002, and $1.1 billion
above the amount requested. In its report (S.Rept. 107-222), the Committee states
that it is “...deeply concerned about overwhelming evidence that the VA medical
system is failing its core constituency–service-connected, lower income, and special
needs veterans... [from] numerous anecdotal examples where VA’s core constituency
does not have access to timely, quality medical care because the networks that serve
them are operating with long waiting lists.”
The report cites VA data claiming that 310,000 veterans are on waiting lists for
medical care, and that many veterans are waiting as much as 6 months for an
appointment to see medical staff, a waiting time expected to grow “if current
guidelines and expectations do not change.” However, in spite of the evidence
supporting the perception of expanding waiting lists and longer appointment times,
there does not appear to be evidence that VA is denying care to veterans who need
it, and it appears that VA is making decisions about the order of treatment given to
veterans entirely on a medical basis.
The report suggests that there are 3 reasons for the growth in demands on the
VA medical care system:

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! Increased access to a system with generous health benefits has
encouraged veterans to seek care at VA.
! Eligibility reform in 1996 made more veterans eligible for care.
(Veterans were eligible for outpatient care before 1996 if a VA
physician prescribed it, but were widely perceived as not eligible.)
! The lack of an alternative national prescription drug program has
encouraged veterans, an aging population with an increasing demand
for drugs, to seek drug benefits from VA, especially given that VA
is limited in the extent to which it pursues copayment obligations.
The report supports a view shared by those who believe that VA should
primarily serve a “core constituency” seeking care because they have been
adjudicated as having a service-connected basis for care, or because they have been
determined as meeting the income/asset tests that indicate limited ability to pay for
care elsewhere. If that view were to become the basis for determining who does not
receive care at any time, then a medical triage judgement about the priority by which
limited medical resources are used to provide needed care would give way to a
categorical priority system that prejudges eligibility for health care independent of
judgements by medical staff about the urgency of any particular medical service.

At the present time, veterans presenting themselves at a health care intake desk
and stating a medical symptom are screened and treated by medical professionals
who do not evaluate administrative criteria before providing the medically indicated
services. There is no evidence that any such applicants for immediate medical
evaluation and care are being turned away, and VA data suggest that the medical
system is improving the delivery of care by decreased waiting times for appointments
and diminished times in the facility waiting rooms. As VA staff see more walk-in
patients while reducing waiting room times, it is possible that appointment delays
will increase, unless additional staff slots are provided to handle the increased load.
Thus, the increases in appropriations to VA medical care over the last few fiscal
years, and the growth in capacity supported by those increases have encouraged even
more veterans to seek care from VA. The growth in the number of veterans served
will likely continue to increase, as veterans recognize the advantages to them of
seeking care from VA facilities. S. 2797 gives VA the authority to require VA
medical facilities to provide care according to statutory priorities. Whether such
authority would result in VA limiting medical services according to administrative
criteria rather than medical judgements is not stated.
Medical Care Cost Collections. In addition to the funds provided by
Congress, VA medical care is also authorized to “recycle” budget authority from
amounts VA facilities collect from various sources with an obligation to help defray
the cost of VA care for certain patients. The Balanced Budget Act of 1997 (P.L. 105-
33) gave VA authority to retain net receipts of the Medical Care Collections Fund
(MCCF), allowing the funds to be spent for medical services to veterans rather than
be transferred to the Treasury as under previous law. Congress also created a new
fund for FY2002, the Health Services Improvement Fund (HSIF), which collects
increases in pharmacy copayments that went in to effect on February 4, 2002. This
new fund also receives income from “enhanced use leases,” which are arrangements
for sharing VA medical assets with paying customers from outside of VA. These

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leases can include the revenue from liquidation or leasing of VA capital assets, as
well as income from VA services for which users have contracted.
Congressional Budget Office (CBO) estimated that collection receipts added
$639 million in recycled spending authority in FY2001. S. 2797 contains language
that combines the two collection accounts, and S.Rept. 107-222 shows a combined
MCCF/HSIF yield of $1.031 billion for FY2002, and estimates that $1.449 billion
will be collected and transferred to the medical account during FY2003.
Medical research. The VA engages in research as an ancillary function of
the treatment of veterans, and conducts independent research projects intended to
advance medical science. Almost one-half of VA’s research funding comes from
conventional medical research funding sources, the bulk of which is provided
through grants from the National Institutes of Health (NIH). The remaining funds
supporting VA research are split almost evenly between appropriations from
Congress specifically for such research, and salaries and expenses from the VA
medical care budget for the VA medical staff who are producing the studies that
exhibit VA’s research findings. About two-thirds of the research projects are
initiated by the medical staff reporting their findings. These projects are giving
greater attention to the diseases associated with an aging population, especially in
conjunction with the management of those chronic conditions that are a growing part
of the outpatient workload.
S. 2797 recommends $400 million for VA research in FY2003. The
Administration requested $394 million. Congress provided $371 million for VA
research in FY2002, $350 million for FY2001, and $321 million for FY2000.
Response to Hepatitis C virus (HCV). The Centers for Disease Control
and Prevention (CDC) estimates that over 4 million Americans are infected with
Hepatitis C, and some data exist that the disease is even more prevalent among
veterans compared to the general population. A VA study in 1999 found that the
veterans it surveyed had a prevalence rate of 6.6%, compared to an estimated 1.8%
in the general population. Upon release of the study, leading veterans groups and
some health care professionals advocated an aggressive response by VA to combat
the contagious threat. The Administration’s budget estimated that funding for the
diagnosis and treatment of infected veterans would rise to $340 million in FY2001,
up from $195 million in FY2000, and $46 million in FY1999.
However, VA analysts were concerned that “. . . no comprehensive system was
in place to collect information about actual workloads and costs” for the Hepatitis C
program because the projections for them “were based on formulas that relied on
untested assumptions” and “actual performance (particularly for FY2000) did not
bear out projections.” While Hepatitis C continues to be a serious health issue in
need of dedicated attention to its causes, prevalence, diagnosis, treatment,
management and possible cure, it does not appear that the dire predictions about its
effect on the veteran population have been borne out. However, the costs of
diagnosis and treatment have risen considerably from their FY1999 levels. Actual
costs for HCV related medical services during FY2001 are estimated to have been
$98 million, and for FY2002 are projected to reach $105 million, with $111 million
expected to support diagnosis and treatment during FY2003.

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Housing benefits. The VA program to guarantee home loans for veterans
has made a significant contribution to the national goal of increasing the number of
families who own their own homes. Because of the guarantees, lenders are protected
against losses up to the amount of the guarantee, thereby permitting veterans to
obtain mortgages with little or no down payment, and with competitive interest rates.
These guarantees, and certain direct loans to specific categories of veterans were
obligations of the federal government that constituted mandatory spending;
administrative expenses are discretionary appropriations transferred from the home
loan programs to the General Operating Expenses account.
Table 3. Department of Veterans Affairs Appropriations,
FY1998-FY2002
(budget authority in billions)
FY1998
FY1999
FY2000
FY2001
FY2002
$42.41
$44.25
$46.04
$47.95
$51.14
Source: Figures for FY1998-FY2001 are from administration budget submissions of subsequent
years; figures for FY2002 are from the House Committee on Appropriations, and are the latest
available estimates for that fiscal year. Final spending levels remain uncertain until all program
experience has been recorded, and any supplemental appropriations or rescissions have been included.
VA construction. The Administration requested $194 million for major
construction projects for FY2003, and $211 million in minor construction (projects
with an estimated cost under $4 million) for FY2003, the amount for minor
construction as was appropriated for FY2002. “Major construction” projects have
an estimated cost over $4 million. Many of the construction projects will continue
VA’s overall strategy of expanding outpatient access for medical care.
S. 2797 endorses the requested level for both major and minor construction
projects, and accepts the VA proposed allocations of those funds among the various
construction projects planned by the Department.
Congress provided $183 million in major construction for FY2002, and $211
million in minor construction. Congress provided $66 million for major
construction, and a total of $171 million for minor construction for FY2001. P.L.
106-74 included $65 million for major construction, and $160 million for minor
construction for FY2000.
Capital asset realignment. VA has developed a comprehensive planning
approach to constructing, altering, extending, or otherwise improving facilities. In
part, this new planning approach, called Capital Asset Realignment for Enhanced
Services (CARES), is the Department’s reaction to the criticism it has received from
areas of the country in which hospital resources have been cut back, in order to
redirect those resources to outpatient care, usually in other geographical areas. While
VA has been successful in expanding the number of patients it serves, conflict
continues between advocates of a more efficient use of resources (who advocate
reducing hospital space and closing or selling superfluous inpatient facilities), and

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CRS-9
veterans groups (who see any reduction in inpatient care as a threat to the medical
care needs of the veteran population).
The following table shows appropriations to VA for FY2002, the
Administration’s request for FY2003, amounts recommended by each House for
FY2003, and the amounts ultimately enacted by Congress and signed by the
President.
Table 4. Appropriations: Department of Veterans Affairs,
FY2002-FY2003
(budget authority in billions)
FY2002
FY2003
FY2003
FY2003
FY2003
Program
enacted
request
House
S. 2797
enacted
Comp., pension, burial
24.944
26.524
–
28.949
–
Insurance/indemnities
.026
.028
–
.028
–
Housing programs
.204
.339
–
.339
–
Readjustment benefits
2.135
2.265
–
2.265
–
Subtotal: Mandatory
27.309
29.156
–
31.580
–
Medical carea
21.331
22.744
–
23.889
–
Med., prosthetic research
.371
.394
–
.400
–
Medical administration
.067
.070
–
.070
–
General operating exp.
1.198
1.256
–
1.256
–
Admin. expense (hsng.)
.166
.169
–
.169
–
Nat’l Cemetery Admin.
.121
.133
–
.133
–
Inspector General
.052
.055
–
.055
–
Construction, major
.183
.194
–
.194
–
Construction, minor
.211
.211
–
.211
–
Grants; state facilities
.100
.100
–
.100
–
Parking, revolving fund
.004
.000
–
–
–
State veteran cemeteries
.025
.032
–
.032
–
Subtotal: Discretionary
23.829
25.358
–
26.509
–
Subtotal: (VA)
51.137
54.514
–
58.090
–
Source: S.Rept. 107-222
Note: Rounding may cause discrepancies in subtotals.
a Medical Care Collections Fund (MCCF) receipts are restored to the Medical Care account as an
offset equal to the revenue collected, estimated to be $691 million in FY2002; the amount projected
for FY2003 has been reestimated upward from $752 million to $1.386 billion.

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The CARES effort is an attempt to make the planning process by which the
capital assets are developed, used, modified, or relinquished, open to veterans groups.
Often, the fears about reductions in health care to veterans are based on an inadequate
understanding of the improvements in care for more veterans that such realignment
of resources makes possible, and the CARES approach may lessen those
misunderstandings.
Some veterans have expressed the belief that, over time, moving resources from
an inpatient facility in one area to outpatient access in another yields an unacceptable
rate of deterioration in the former facility, as the commitment to maintain the
building is diminished as the Department moves toward its eventual abandonment.
Burial and cemetery benefits. Payments to honor and help defray the cost
of veterans’ burials will total about $155 million in FY2003, and cover about 84
thousand burials, 69 thousand burial plots, 9 thousand service-connected deaths, 528
thousand flags, and 354 thousand headstones and markers.
Department administration. The Administration requested $1.256 billion
for General Operating Expenses (GOE) for FY2003, and $70 million for medical
administration; S. 2797 endorses the request. Congress also had approved the
Administration’s request for funds for administration for FY2002, providing $1.2
billion for GOE and $67 million for medical administration. P.L. 106-377 included
$1.050 billion of the requested $1.062 billion requested for GOE, and $62 million for
medical administration for FY2001. P.L. 106-74 provided $913 million for GOE,
and $60 million for administration of the medical care programs for FY2000.
VA employment estimates. The Bush Administration projects overall VA
employment will decline to an average of 204,670 in FY2002, down from an average
205,896 during FY2001, which was up from an average of 202,621 during FY2000,
and 205,547 in FY1999. Much of the decline will be in medical staff, which VA
projects will average 179,300 during FY2002. Currently, VA projects that VA
medical care slots will average 181,500 in FY2001. VA originally estimated that
179,206 medical care slots were needed for FY2001, compared to an 179,520 in
FY2000, and 182,661 in FY1999.
Accrual Accounting. Part of the Administration’s budget estimate of a $4.4
billion increase in total VA spending for FY2003 does not reflect expanded program
costs for additional benefits or medical services to veterans, but a change in methods
by which future compensation for VA employees who will eventually retire is
attributed to current service those employees perform. This new accounting method
would result in the transfer of $892 million to central accounts in the Treasury to
fund the accruing future cost of retirement and retiree health benefits for VA
employees. Because the accrued funds would be retained in a government fund, this
new accounting practice does not affect employees’ benefits in any way, nor does it
have a direct impact on taxpayers.
However, to cover the accrual payments, the changing practice makes the
apparent current cost of VA employment somewhat higher, especially in the labor
intensive medical programs, as appropriations to fund requested program levels must
be higher than would otherwise be required to maintain the same level of services.

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Although there is no necessary reason for accrual accounting to make any difference
in total government expenditures over time, the apparent higher current personnel
costs for individual agencies may act as a psychological impetus to reduce personnel
expenditures if Congress requires the agency to absorb the accrual transfer within an
appropriation that does not increase to meet the new requirement.
These changes in accounting require legislation, and are not included in
appropriations estimates in this report. Furthermore, S.Rept. 107-222 is critical of
the Administration’s inclusion of accrual accounting amounts in its budget requests
for the various discretionary appropriation accounts, adding that “[t]hese amounts are
based on legislation that has yet to be considered and approved by the appropriate
committees of Congress [leading] to numerous misunderstandings both inside and
outside of Congress of what was the ‘true’ President’s budget request....OMB should
follow long-established procedures with respect to discretionary spending proposals
that require legislative action.”
For additional information on VA programs, see CRS Report RL30803,
Veterans Issues in the 107th Congress, by Dennis Snook.
Title II: Department of Housing and
Urban Development
Introduction
Most of the appropriations for the Department of Housing and Urban
Development (HUD) address the housing problems faced by households with very-
low incomes or other special housing needs. Programs of rental assistance for the
poor, elderly or handicapped, housing assistance for persons with AIDS, varying
types of shelter for those who are homeless – all deal with the issue of the availability
of affordable housing. The two large HUD block grant programs also help
communities finance various efforts to address these housing issues. In the last half
dozen years, HUD has focused more attention than previously on efforts to increase
homeownership opportunities for lower-income households.
Highlights of Proposed HUD budget for FY2003
! Proposed FY2003 budget of $31.3 billion;
! All expiring Section 8 rental contracts are renewed;
! Additional housing choice vouchers of 33,400;
! Public Housing Capital Fund cut by $417 million;
! Initiative to convert public housing units to Section 8 assistance;
! Community Development Block Grants cut by $284.5 million;
! HOME up by $238 million, with $200 million for down payment
assistance;
! Help for persons with AIDS increased to $292 million; and
! HUD to end acquisition of foreclosed FHA single-family homes.

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Summary of Administration’s budget proposals. The Administration
presented its FY2003 budget for the Department of Housing and Urban Development
(HUD) on February 4, 2002, the first budget that fully reflects its own vision for the
agency, and for federal policy on housing and urban development. The proposal
called for $31.3 billion of discretionary budget authority, about $800 million less
than the $32.15 billion funded in FY2002.3 This budget maintains the “status quo”
for assisted rental housing since it would be sufficient to renew all 2.9 million
expiring Section 8 contracts and to protect other tenants from losing their existing
rental assistance, but also would entail significant cuts in several other HUD
programs (discussed below) and Section 8 recaptures of $1.1 billion.
A proposal to add 33,400 vouchers, at a cost of $204 million, would not
significantly reduce the 4.9 million very low-income renter households who pay more
than 50% of their income for shelter or who live in substandard housing, but who
receive no federal assistance. Under the proposed budget, there would also be $260
million for 43,000 “tenant protection” vouchers for individuals who are currently
receiving rental assistance, but who are threatened with the loss of that assistance.
Examples include tenants in dilapidated public housing units being torn down or
renters in Section 8 projects whose owners are opting out of the program or being
terminated for cause.
The Public Housing Capital Fund, used to rehabilitate and modernize units,
would be cut by $417 million, from $2.843 billion in FY2002 to $2.426 billion. The
Public Housing Operating Fund would be increased by $35 million to $3.530 billion.
The Administration’s new Public Housing Reinvestment Initiative, could use up to
$120 million of public housing capital funds and $130 million of operating funds to
convert some of the 1.25 million public housing units to Section 8 project-based
assistance. HUD thinks this would allow some Public Housing Authorities (PHAs)
to secure private financing to rehabilitate or replace aging properties by pledging
project-based revenue as collateral for loans for capital improvements.
The HOPE VI program, the purpose of which is to rehabilitate or tear down the
worst public housing units, would receive $574 million, the same as provided for
FY2002. The program is scheduled to expire at the end of 2002. H.R. 3995, the
Housing Affordability for America Act of 2002, an omnibus housing bill passed by
the House Financial Services Committee on July 10, 2002, would reauthorize HOPE
VI through FY2004 and amend the program.
The Community Development Block Grant (CDBG) program would be cut by
$284.5 million, from $5.0 billion to $4.716 billion. Most of these funds, $4.43
billion in FY2003, would go to over 1,000 cities, urban counties, and states through
formula grants. HUD is proposing to change the formula to reduce grants to the
wealthiest 1% of communities, defined as those with per capita incomes two times
the national average. Also as part of the CDBG program, the Administration
proposes to end funding for what are called variously economic development
3 The $32.15 billion includes a $2 billion emergency supplemental appropriation made in
late 2001 for aid to New York City. Without this $2 billion, the proposed HUD budget for
FY2003 is $1.2 billion more than originally enacted for FY2002.

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initiatives, special purpose grants, or “earmarks.” These grants received $294 million
in FY2002, despite opposition from the Administration. The Self-Help
Homeownership Opportunity Program (SHOP), a set-aside within CDBG used to
support Habitat for Humanity and similar community building efforts, would be
increased from $22 million in FY2002 to $65 million.
The HOME block grant program would be increased by $238 million to $2.08
billion, with the set-aside for the homeowner Downpayment Assistance Initiative
increased from $50 million to $200 million. (Later in this report, Increasing
Homeownership, discusses this and other Administration homeownership initiatives.)
HUD has a number of programs to protect vulnerable populations - the elderly,
persons with physical and mental disabilities, individuals with HIV/AIDS, and the
homeless. Funding for supportive services for elderly and disabled persons is
recommended at $1.02 billion, the same as in FY2002. Housing for persons with
AIDS would receive $292 million, up by $15 million.
HUD proposes to spend $1.13 billion on programs for the homeless, about level
with funding during the previous 2 years. Secretary Martinez has made ending
chronic homelessness in the next 10 years a top priority. The budget proposes to
consolidate HUD’s three largest homeless programs into one. But HUD has not yet
made this proposal. HUD also is proposing to transfer the $153 million Emergency
Food and Shelter Program that is currently administered by FEMA to HUD in order
to consolidate all emergency shelter assistance.
Senate Appropriations Committee Action (S. 2797). On July 25, 2002,
the Senate Appropriations Committee filed their report (S. 2797, S.Rept. 107-222),
recommending $32.1 billion for HUD, $734 million more than the President’s
request, but $66 million less than the FY2002 enacted level. The Housing Certificate
Fund would receive $17.4 billion, enough to renew all expiring rental housing
contracts and fund 15,000 incremental vouchers –19,000 fewer vouchers than the
34,000 requested by the Administration. Of the $90 million for new vouchers, $20
million would be set-aside for about 3,400 new welfare-to-work vouchers, $40
million for an estimated 8,000 vouchers for disabled families, and the remainder to
be used for fair share vouchers distributed to public housing authorities that have at
least a 97% occupancy rate.
The Committee recommended $2.783 billion for the Public Housing Capital
fund, $357 million more than the budget request and $60 million less than enacted
in FY2002. Of the $2.783 billion, up to $55 million is for supportive services for
residents of public housing. The Committee rejected the Administration’s legislative
proposal to encourage privately financed capital needs of public housing by
converting some units to Section 8 funding. Under S. 2797, the Public Housing
Operating Fund would receive $3.530 billion, an increase of about $35 million over
the FY2002 level. The HOPE VI program for the revitalization of severely distressed
public housing would be funded at $574 million, the same as the budget request and
the same as FY2002 funding. The Committee expressed certain concerns about the
future of the program and included language to sunset HOPE VI on September 30,
2003 to encourage “a meaningful reauthorization process” between HUD and the
appropriate authorizing committees.

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For the Housing Opportunities for Persons with AIDS program, the Committee
recommends $292 million, about $14.6 million more than for FY2002 and the same
as the budget request. The Committee did not accept the Administration’s
recommendation to eliminate funding for the Office of Rural and Economic
Development, but instead, chose to fund it at $25 million, the same as in FY2002.
Empowerment Zones and Enterprise Communities would be funded at $30 million,
$15 million below last year’s level, but $30 million more than the budget request.
The $30 million would be distributed to the 15 communities that received a second
round EZ designation.
The Senate Committee on Appropriations would provide $5.05 billion for the
Community Development Block Grant (CDBG) program for FY2003. This is $317.5
million above the HUD request and $50 million more than provided in FY2002. No
funding was recommended for the Administration’s Colonia Gateway Initiative.
There would be a set-aside of $140 million for the Economic Development Initiative.
The HOME program would be funded at $1.95 billion, $104 million more than in
FY2002 and $134 million less than the budget request. Of the total for HOME, $40
million would fund housing assistance counseling, but not in a new account as
recommended by the Administration.
Homeless assistance grants would be funded at $1.215 billion, an increase of
$92.5 million from FY2002 and $85.5 million more than the budget request. The
Committee recommends $783.3 million for the Section 202 program for the elderly,
$9 million more than the President’s request, and $250.5 million for the Section 811
housing program for people with disabilities. Fair Housing programs would receive
$45.9 million, the same as the budget request, while the Office of Lead Hazard
Control would be funded at $201 million, an increase of $75 million and $91 million
more than the budget request.
For the Federal Housing Administration (FHA), the Committee included a
limitation on guaranteed loans of $160 billion and had extended comments on the
FHA’s lender oversight program. The Committee notes that ...”in some cases and
in certain neighborhoods, FHA has been misused to underwrite bad loans that lead
to defaults and foreclosed homes, contributing to neighborhood decline and
destabilization” and directs HUD to report to the appropriate Congressional
Committees on further actions that can be taken to protect homebuyers and
communities.
FY2002 Appropriations. The President signed P.L. 107-73 on November
26, 2001 providing HUD with $30.15 billion for FY2002 (H.Rept. 107-272). This
is $1.67 billion more than FY2001 appropriation of $28.48 billion, an increase of
about 6%. Of the $30.15 billion approved, $16.28 billion, more than half of the
HUD budget, is to renew all Section 8 expiring contracts, add an additional 25,900
vouchers, and pay for contract administration and various tenant protection
assistance. The $30.15 billion is in addition to the $2 billion in emergency
supplemental funds made available to HUD’s Community Development Fund to be
used for assistance and economic revitalization related to the terrorist attacks in New
York City (H.R. 2888, P.L. 107-38, signed by the President on September 18, 2001).

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On August 2, 2002, the President signed H.R. 4775 as P.L. 107-206 (Conference
Report, H.Rept. 107-593), the FY2002 Supplemental Appropriations Act for Further
Recovery From and Response to Terrorist Attacks on the United States. This Act
provides an additional $783 million for the Community Development Fund for
further recovery efforts in New York City. The Act also rescinds $738.5 million in
HUD funds, including $388.5 million of unobligated balances from the Section 8
voucher program, $300 million realized from the prepayment of Section 236
subsidized mortgages, and $50 million from the Administration’s HOME
downpayment assistance initiative. The Section 236 money had been intended for
the rehabilitation of assisted multifamily housing, and some housing organizations
have criticized HUD for the delay in the spending of these funds, thus leaving them
open for rescission. For more details, see CRS Report RL31406, Supplemental
Appropriations for FY2002: Combating Terrorism and other Issues.
Table 5. Department of Housing and Urban Development
Appropriations, FY1998 to FY2002
(Net budget authority in billions)
FY1998
FY1999
FY2000
FY2001
FY2002
$21.44
$24.08
$25.92
$28.48a
$32.15a
Source: Figures for FY1998-FY2001 are from administration budget submissions of subsequent
years; figures for FY2002 are from House Committee on Appropriations, and are the latest available
estimates for the current fiscal year. Final spending levels remain uncertain until all program
experience has been recorded, and any supplemental appropriations or rescissions have been included.
a Includes net effect of treating “excess” FHA mortgage insurance premiums as an offset against
discretionary spending within the Federal Housing Administration. The offsets are an estimated -
$2.246 billion for FY2001, and -$2.323 billion for FY2002. Because of the scoring change, the
figures for FY2001 and FY2002 are not comparable to figures shown for previous fiscal years. The
FY2002 figure includes $2 billion in emergency supplemental funds for the Community Development
Fund for assistance to New York City following the terrorist attacks of September 11, 2001.
Policy Issue: The Shortage of Affordable Rental Housing
A budget is a statement of spending priorities. Despite the fact that HUD now
spends almost all of its budget – an average of about $28 billion in recent years – to
help low-income families with their housing costs, the shortage of affordable rental
housing continues to be the most important housing issue before the Congress.
(Housing that costs more than 30% of one’s income is considered by the government
to be excessively burdensome or “unaffordable”.) In a February 5, 2002 conference
held by the Urban Institute, Preventing Homelessness: Meeting the Challenge,
researchers found that the number of homeless people in a number of large cities was
increasing, and all attributed this to a growing shortage of affordable housing. Others
believe this shortage is reducing the chances that welfare recipients will be able to
achieve economic self-sufficiency. As it becomes increasingly clear from the new
fiscal realities that there will be no large increases in spending for housing in the
immediate years ahead, there is likely to be an increasing intense scrutiny of all

---

CRS-16
existing federal resources devoted to housing to assure that these funds are efficiently
addressing the most pressing issues.
Including the effect upon federal revenues of residential real estate-related tax
provisions, and housing programs through HUD and the Department of Agriculture,
the federal government now spends more than $140 billion on housing assistance.
The Congressional Budget Office estimates that nearly $55 billion of the mortgage
interest and property tax deductions or “tax expenditures” (spending through the tax
code) in FY2002 will be made for housing assistance to homeowners with annual
incomes above $100,000. In comparison, the requested budget for HUD for FY2003,
at $31.3 billion, is substantially less in real terms than was spent 2 decades ago.4
Since most of the HUD budget addresses the shortage of rental housing, and
because many mayors and governors and other elected officials believe the problem
has become serious, this report reviews this issue in some detail. The shortage of
affordable housing is a complex matter with many dimensions, including the often
overlooked but important role that local governments play, too often some say, as
part of the problem. There are many statistics available for advocates who argue that
more federal assistance is needed. HUD reported in 2001 that 1999 American
Housing Survey data from the U.S. Census Bureau showed 4.9 million “worst case”
households, those with incomes below 50% of the local area median (“very-low
incomes”) who pay more than 50% of their income for housing or live in substandard
housing, but who receive no assistance because of limited funding.5 These same data
showed that in 1999, 44% of extremely low-income renters, about 3.75 million
households, were in the worst case situation. To put these median incomes into more
meaningful perspective, on a national basis, those with very-low incomes would be
households with recent incomes below about $21,000. Those with extremely low-
incomes had incomes below $13,000.
Those who support more federal efforts to help low-income households with
their housing costs generally want either more funds for housing vouchers or more
funds to encourage the construction of affordable rental housing, or both. HUD
Secretary Martinez says he favors housing vouchers over subsidized housing
production to address the affordability issue and does not support another rental
housing production program. He points out that there are already government
programs that can and are being used to produce affordable rental housing.
The agency does not have a long-term goal of increasing the number of worst-
case families who can be helped with housing assistance. In fact, some critics of
HUD programs say that because there is generally no shortage of units available in
most communities, the affordability issue is not a housing issue at all, but an income
issue. They argue that a better way to respond to worse-case renters is through
government efforts to help low-income households become more productive, which
4 The HUD budget peaked at $33.5 billion in FY1981 (about $67.6 billion in 2002 dollars)
and declined to $14 billion in 1987.
5 Report On Worst Case Housing Needs In 1999: New Opportunity Amid Continuing
Challenges. Executive Summary. January 2001. U.S. Department of Housing and Urban
Development. Office of Policy Development and Research.

---

CRS-17
could translate to higher incomes. Presumably this would mean they would not need
federal rental housing assistance, or not as much of it.
The Administration seems to favor this approach. The FY2003 budget says
“....HUD would fail in its mission if families were not moving towards eventual self-
sufficiency. An important measure of HUD’s success should be the number of
families that no longer need to reside in assisted housing because they have moved
to safe, decent, and affordable private housing.” The Administration (and the Clinton
Administration before it) has placed increasing emphasis on promoting
homeownership for lower-income families in the belief that this is an effective way
to move families towards self-sufficiency and wealth accumulation. While achieving
self-sufficiency may mean receiving less or no rental housing assistance, many
homeowners receive substantial federal housing assistance.
A brief history of federal housing assistance. In the Housing Act of
1949, Congress established a national goal of providing: “a decent home and suitable
living environment for every American family.” Much progress was made in the
next 2 decades in eliminating substandard housing as many of the nation’s worst
slums were torn down. But against the backdrop of the inner city riots of the 1960s
and the recommendations of the 1967 Douglas Commission, the 1968 Kaiser
Committee, and the 1968 Kerner Commission on Civil Disorders, Congress adopted
the Housing Act of 1968 which set a specific 10-year goal of building 6 million
housing units for low- and moderate-income families.
Federally-subsidized housing production increased from 91,000 in 1967 to
166,000 in 1968; 200,000 in 1969, 430,000 in each of 1970 and 1971, and 339,000
in 1972. During the 4 years from 1968-1972, there was also a total of about 200,000
units rehabilitated with federal subsidies and 2,200,000 mobile homes built, the latter
considered an important source of affordable housing for lower-income households.6
During the 1970s, attention on housing issues changed from its previous focus
on the problem of too many substandard housing units, to the problem of housing
being too expensive for lower-income families to afford. In effect, the 1949 Housing
Act paved the way for the more elusive goal of making it possible for all families to
have a decent affordable home and suitable living environment.
The problem of substandard housing has not been entirely eliminated. Data
from 1999 show more than 2.5 million housing units lacked some or all plumbing
facilities, with nearly a million without a bathtub or shower, and over 900,000
without a flush toilet. Yet, the quality of the housing built in the past 25 years and
the level of amenities provided or required, such as off-street parking, wide sidewalks
and roads, air conditioning, landscaping, health, safety, and environmental
protections, had so upgraded housing and neighborhoods that many lower income
families could not afford it. The policy objective of improving the minimum
standard for housing began to conflict with the objective of increasing the availability
of affordable housing. An increasing number of lower income households now cope
6 U.S. Department of Housing and Urban Development. Housing in the Seventies. A Report
of the National Housing Policy Review, 1974.

---

CRS-18
with high housing costs by sharing a single-family home or apartment, sometimes
two or three households in a unit meant for one.
During the latter half of the 1970s, HUD began phasing out its involvement in
subsidizing new housing construction. By the early 1980s, this withdrawal was
nearly complete and the shift towards subsidizing existing units with housing
vouchers was well underway.
Since the 1980s, there has been no obvious consensus as to what should be done
to improve housing opportunities for those with difficulties finding affordable
housing. Beginning in 1982, the number of additional rental units receiving
assistance under HUD dropped sharply. In 1986, Congress replaced a number of
existing rental housing tax provisions that were thought to be poorly targeted, with
the Low Income Housing Tax Credit program, a tax incentive to encourage
developers to build apartments affordable to households with incomes no greater than
60% of the local area median. After a slow start, the number of subsidized units
built or rehabilitated averaged about 50,000 to 60,000 a year during most of the
1990s.
During the 1990s (and continuing), there was also a small number of apartments
built or rehabilitated under HUD’s Section 202 program for the elderly and under the
HOME and Community Development Block Grant programs. But it is also
important to remember that during each of the last 3 decades, hundreds of thousands
of older or obsolete rentals (many shabby but affordable), including “trailer parks”
in urban areas, and most of the remaining inner-city “single-room-occupancy”
“hotel” units (including many YMCA/YWCA facilities that provided shelter to the
near-homeless), were torn down.
After a number of years in which no new housing vouchers were added,
Congress appropriated money for 50,000 additional vouchers in FY1999 and 60,000
in FY2000. The Clinton Administration recommended 120,000 additional vouchers
for FY2001, with 79,000 approved. The Bush Administration requested 34,000
additional vouchers for FY2002; 25,900 were funded. As noted, HUD is
recommending 33,400 additional vouchers for FY2003.
Is there available housing at an affordable price? With the exception
of some cities in the Northeast, West Coast, and a few other places, most areas have
an adequate supply of modern apartments. But restrictive zoning, building codes,
health and safety and environmental regulations, and local opposition have made it
difficult to construct basic no-frills rental housing affordable to lower-income
households. The smaller apartment units built in the 1940s and 1950s with 500
square feet or less, with no walk-in closets or in-unit washer-dryers, with small
kitchens and baths, and with no on-site parking, are much sought after in older cites
because of their low rents, but they cannot be built today under current laws.
As more profitable alternatives presented themselves during the prosperous
1990s, some Section 8 owners decided not to renew their expiring contracts. Older
apartment buildings, with their lower rents, continue to be torn down or renovated
for a more upscale and profitable market. Mobile home parks that provide relatively
affordable housing have largely disappeared from most large metropolitan areas.

---

CRS-19
There is no shortage of reports, studies, and commissions documenting the
difficulties that lower-income people have in finding affordable housing. The
bipartisan Millennial Housing Commission released its report, Meeting Our Nation’s
Housing Challenges on May 30, 2002. It said “there is simply not enough affordable
housing” and recommended a substantial increase in the number of vouchers and
substantially increased appropriations for the HOME program. The National Low
Income Housing Coalition’s extensive research shows that in most major cities and
counties, it is highly unlikely that households earning near the minimum wage of
$5.15 an hour or even $6, $8, or $10 an hour, can find an affordable apartment.
Waiting lists for rental assistance in most major cities are so long that no others are
allowed to be added.
The National Housing Conference (NHC) examined recent American Housing
Survey data, and concluded that affordable housing problems had moved up the
income ladder. Police, teachers, fire fighters, and other public municipal employees
have been increasingly cited in the media as having problems affording housing.
(Although two-earner families, for example, a police officer and teacher, can often
reach securely into the middle-class.) The NHC concluded that simply having a full-
time job does not guarantee a family a decent place to live at an affordable cost.
Among its findings: “More than 220,000 teachers, police, and public safety officers
across the country spend more than half their income for housing, and the problem
is growing worse.”7
Local governments are often reluctant to adopt policy approaches that may
attract low-income households, the mentally and physically handicapped, ex-felons,
many of the estimated 8 million illegal aliens, and others – partly, some say, because
of their negative fiscal impact. Many of these households would pay much less in
local taxes than the cost of providing schools, police, fire and rescue, trash collection,
and other social services.
Many homeowners may believe that affordable rental units built near their
homes would lower their property values, and resist local government efforts to
increase the supply of low-income housing in their neighborhoods. The result is that
very-low-income households or even those not quite so poor, are heavily
concentrated in particular neighborhoods, and local officials in these areas often find
it necessary to look the other way as many apartments are shared by two or three
families in violation of local laws.
Increasing the supply of affordable housing. Housing analysts inside
and outside of HUD, elected officials, and others have been debating for decades the
relative advantages and disadvantages of “tenant-based” rental assistance and
“project-based” assistance. In simple terms, this usually means whether to use
housing vouchers to assist individual households, or to subsidize the construction (or
rehabilitation) of more housing. Knowing when each type of assistance is most
7 The Center for Housing Policy (a research affiliate of the National Housing Conference),
Housing America’s Working Families, New Century Housing, Washington, D.C., June 2000.
p. 2.

---

CRS-20
appropriate requires a knowledge of local housing market conditions. The discussion
that follows reviews this on-going debate.
Voucher utilization rates. In the past few years, there has been growing
concern that not all of the housing vouchers awarded to local public housing
authorities have been put to use. Some households with vouchers have found it
difficult or impossible to find an apartment within the time period for which the
voucher is approved. An increasing number of vouchers have been returned unused
(although these vouchers are often given to someone else who does succeed in
finding appropriate housing).
In recent years, arguments have surfaced in Congress that because not all
vouchers are used, there is less reason to increase the number of vouchers. Both
HUD and the VA-HUD appropriation committees expressed concern ( H.Rept. 107-
159) that the average utilization of vouchers has fallen in recent years. There are
differing estimates on the percentage of vouchers that get used, but most are in the
mid-90s.
The 33,400 additional vouchers that HUD is proposing for FY2003 would only
be awarded to PHAs with a voucher utilization rate of 97% or greater. Some PHAs
with lower voucher utilization rates have tried, with noted success, to better inform
landlords about the voucher program, and to encourage more to participate in it by
offering various incentives.8 Some voucher holders have been provided
transportation to assist them with their search, and help with security deposits.
Nevertheless, where vacancy rates are very low, it may have become prohibitively
expensive on a per-unit basis for PHAs to try to locate additional units for voucher
holders.
Some landlords are unwilling to accept vouchers because they want to avoid the
bureaucratic “red tape” of the program, or because they believe, rightly or not, that
low-income families will cause problems. A few local governments have recently
adopted laws requiring landlords to accept renters with vouchers, although landlords
can often reject a voucher holder because of bad credit, lack of references, and for
other reasons. Reports also continue to show that discrimination in rental housing
on the basis of race and against households with children is still common, which
makes the use of vouchers more difficult.
Increasing the number receiving assistance by adding vouchers.
The HUD Secretary is on record as not being in support of a new national affordable
housing trust fund proposal to subsidize the construction of affordable rental housing.
He instead favors housing vouchers because of the freedom of mobility they offer to
low-income renters. In theory at least, a family with a voucher can move out of a
poorly maintained building or a dangerous neighborhood and go to a safer one with
better schools and more job opportunities. However, as the above discussion has
indicated, the freedom of a voucher holder can be quite limited. Those who do not
have automobiles are also very limited in where they can live.
8 Slavin, Peter. Getting Section 8 Programs Leased Up. Journal of Housing & Community
Development, July/August 2001. Pps. 39-44, 48.

---

CRS-21
At a recent congressional hearing on the FY2003 budget, some concern was
expressed at the increasing cost of the Section 8 program. As the cost of housing
low-income families in Section 8 units increases, either fewer households can be
assisted with a given size budget or a larger budget is needed just to maintain the
same number of assisted units. It will cost almost $1.4 billion more in FY2003 just
to renew all 2.9 million Section 8 contracts and protect some vulnerable groups from
losing their current rental assistance. The proposed $17.5 billion for the Housing
Certificate Fund (largely Section 8 ) will account for well over half of the total HUD
budget. There are a number of reasons why Section 8 costs continue to increase
rapidly, the main one being that rents have increased significantly. The cost of an
average voucher is now about $6,000 a year. Just for illustrative purposes, one
million additional vouchers would cost $6 billion a year.
Increasing rental housing production. The difficulty of using vouchers
in some areas has led to legislative proposals for a new HUD program devoted solely
to the development of rental housing for extremely low-income households.
Referring to the limited value of vouchers in many tight rental markets, the Senate
Appropriations Committee expressed its concerns in 2001 that “families with
vouchers often have little choice in their rental decisions, leaving them often in low-
income and very low-income neighborhoods and living in substandard housing.”
Several bills (H.R. 2349; S. 1248; S. 652) introduced in the 107th Congress seek
to influence the production of rental housing, by stimulating construction through a
“trust fund” financed by what some believe to be “excess” reserves of the FHA
mortgage insurance premium pool. Others point out that the so-called excess
reserves are not idle pools of unutilized capital, but federal funds treated like other
federal revenue. The debate over the reserves is largely academic. Both sides agree
that if Congress were to redirect part of the FHA reserves into a housing trust fund,
there would have to be additional appropriations to make up for the reserves already
built into the budget. Another housing bill, H.R. 3995, marked up by the House
Financial Services Committee on July 10, 2002, would authorize a new program of
matching grants to state and local “housing trust funds,” subject to appropriations.
Table 6. Appropriations: Housing and Urban Development,
FY2002-FY2003
(budget authority in billions)
FY2002
FY2003
FY2003
FY2003
FY2003
Program
Enacted
Request
House
S. 2797
Confer.
Housing certificate fund
15.641
17.527
–
17.412
–
Appropriation
11.441
13.327
–
13.212
–
Advance appropriation
4.200
4.200
–
4.200
–
Section 8 recaptures
-1.200
-1.100
–
-1.100
–
(rescission)
Public housing capital fund
2.843
2.426
–
2.783
–
Public housing operat. fund
3.495
3.530
–
3.530
–
Revitalization of distressed
.574
.574
–
.574
–
public housing (HOPE VI)

---

CRS-22
FY2002
FY2003
FY2003
FY2003
FY2003
Program
Enacted
Request
House
S. 2797
Confer.
Native American housing
.649
.657a
–
.649
–
block grants
Indian housing loan guar.
.006
.005
–
.005
–
Native Hawaiian loan guar.
.001
.001
–
.001
–
Hsng., persons with AIDS
.277
.292
–
.292
–
Rural Housing; Economic
.025
.000
–
.025
–
Development
Empowerment zones;
enterprise communities
.045
.000
–
.030
–
Community Devel. Blk.
5.000
4.716
–
5.050
–
Grant
Comm. Devel. Fund
(emergency supplemental)b
2.000
.000
–
.000
–
Sec.108 loan guar.; subsidy
.015
.007
–
.015
–
Brownfields redevelopment
.025
.025
–
.025
–
HOME Invest. Partnerships
1.846
2.084
–
1.950
–
Homeless Assist. Grants
1.123
1.130
–
1.215
–
Housing for special
1.024
1.024
–
1.034
–
populations
Housing for the elderly
.783
.774e
–
.783
–
Housing for the disabled
.241
.251
–
.251
–
Hsg. counseling assistance
.000
.035
–
.000
–
Federal Housing Admin.
(net)c
-1.671
-2.207
–
-2.207
–
GNMA (net)d
-.373
-.348
–
-.348
–
Research and technology
.050
.047
–
.047
–
Fair housing activities
.046
.046
–
.046
–
Office of lead hazard
.110
.126
–
.201
–
control
Salaries and expenses
.556
.510
–
.510
–
Inspector General
.067
.074
–
.074
–
Working capital fund
.000
.276
–
.277
–
Rescissions; legislative
-.025
-.108
–
-.008
–
savings; supplemental
Subtotal (HUD) net
32.149
31.349
–
32.083
–
Source: S.Rept. 107-222
Notes: Rounding may cause discrepancies in subtotals. FY2002 amounts do not reflect P.L. 107-206,
FY2002 supplemental appropriations enacted on August 2, 2002.
a Includes $10 million requested for Native Hawaiian housing block grants.

---

CRS-23
b Emergency supplemental for assistance to the City of New York, following terrorist attacks on
September 11, 2001.
c Net, interagency transfers and offsetting receipts against appropriations of the current year; included
in the totals are projected experience gains greater than premiums to the mortgage insurance fund,
which are now treated as offsetting receipts against discretionary funds. The effect is estimated to be
$-2.323 billion for FY2002, and -$2.753 for FY2003.
d Net, interagency transfers and offsetting receipts against appropriations of the current year.
e In addition, the account would be given authority to spend $9.7 million in unobligated funds
recaptured from previous years.
Are there other options for obtaining more affordable rental housing? Some
point to the Congressional Budget Office report of February 2001, Budget Options:
Restrict Itemized Deductions, Credits. And Exclusions Under the Income Tax. One
of the options identified by CBO to increase federal revenues is: limit the mortgage
principal on which interest can be deducted to $300,000. Taxpayers may now deduct
interest on up to $1 million of mortgage debt used to buy and improve a first and
second home. CBO says that reducing the eligible amount of debt for the mortgage
interest deduction from $1 million to $300,000 would trim deductions for 1.2 million
taxpayers with large mortgages and increase revenues by $55.8 billion over the 2002-
2011 period. Some argue that this would be a less regressive option to fund a rental
housing production program for extremely low-income families. Limiting
deductions to the interest on not more than $300,000 of mortgage debt would affect
high-cost areas such as San Francisco, Los Angeles, New York, and Boston.
However, it is probably no coincidence that these are the areas that have some of the
lowest rental vacancy rates in the country, and the most severe shortages of
affordable rental housing.
Another option for addressing the shortage of affordable rental housing is to
encourage more local governments to use “inclusionary zoning,” which requires
home builders to construct and set-aside a minimum percentage of new units in a
specific residential development that are affordable to a particular income level. (See
Inclusionary Zoning: A Viable Solution to the Affordable Housing Crisis? The
Center for Housing Policy. October 2000, for the pros and cons of this approach and
how it has worked in Montgomery County, Maryland.)
Public and Indian Housing Programs
Housing Certificate Fund. The Housing Certificate Fund (HCF) is the
major disbursing mechanism through which HUD provides funding to local entities
responsible for administering project-based housing programs and direct low-income
rental housing subsidies (vouchers). The Administration is requesting $17.5 billion
for the Housing Certificate Fund in FY2003. According to Administration estimates,
this amount includes a direct appropriation of $16.9 billion plus a carry-over of $640
million in Section 8 reserve funds from previous years, for a total increase of nearly
$2.0 billion over the FY2002 funding level of $15.6 billion. The Senate bill, S.2797,
recommends an appropriation of $17.4 billion for the Housing Certificate Fund in
FY2003, approximately $100 million less than the Administration’s request. The
difference in the amount between the Administration’s request and the Senate’s
recommended funding is found primarily in the suggested funding for incremental
vouchers in FY2003.

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CRS-24
Section 8 Expiring Contract Renewals. The HCF finances provisions of
Section 8 of the Housing Act of 1937 (as amended). Broadly referred to as Section
8 programs, these HUD programs subsidize rental housing for low-income families,
using several avenues for administering such assistance. Approximately 3 million
families will be assisted under Section 8 in FY2003. The largest portion of the
Administration’s request is $16.9 billion in new budget authority for funds to renew
expiring Section 8 rental contracts in FY2003. This amount will be used for the
renewal of approximately 817,000 project-based units and 2.1 million tenant-based
units in FY2003.
In addition to these contract renewals, $52 million of the $16.9 billion
appropriated under this heading will be used to fund Family Self-Sufficiency
Coordinators for a renewal term of 1 year.
The Senate bill, S. 2797, appropriates $17.4 billion for Section 8 contract
renewals in FY2003. This amount would also cover the costs of enhanced vouchers
for families that continue to live in multifamily housing that is undergoing a
refinancing of the mortgage or where owners have chosen to opt-out of the Section
8 program. There is no mention in the Senate bill of funding for Family Self-
Sufficiency Coordinators.
Section 8 Incremental Vouchers. The President’s budget request includes
$204 million to fund approximately 34,000 incremental vouchers in FY2003. These
vouchers will be provided to PHAs that have demonstrated their ability to use their
existing vouchers (having a utilization rate of at least 97%). Of the requested amount
for incremental vouchers, $164 million is targeted for specific use vouchers such as
assistance for homeless veterans, assistance for families on the road to self-
sufficiency and as downpayment assistance for homeownership. The Bush
Administration strongly supports the use of Section 8 vouchers as downpayment
assistance for homeownership by low-income families, and encourages PHAs to
strengthen their ability to assist such families in becoming homeowners.
The President’s budget request also earmarks $6 million of the $164 million for
incremental vouchers to fund 1,000 vouchers to be used for persons with mental
disabilities to assist states in meeting a federal court requirement that mentally
disabled individuals be housed in community settings with services whenever
possible.
The remaining $40 million is to be used to provide rental vouchers for non-
elderly disabled individuals who are now residing in public housing projects that
have been designated for occupancy by the elderly. The amount is expected to fund
approximately 6,000 vouchers which will help integrate them into mainstream
privately-owned housing.
The Administration’s budget request also provides $196 million for Section 8
contract administration. These contract administration funds would be provided to
the many state and local housing agencies that act as HUD’s agent in administering
the Section 8 project-based program. These agencies are responsible for the
oversight of the physical and financial condition of projects funded under nearly
20,000 contracts between HUD and individual project owners.

---

CRS-25
The Senate Committee did not provide the Administration’s request for 34,000
additional vouchers because it has ongoing concerns about the effectiveness of the
tenant-based voucher program, and it urges HUD to make voucher reform a top
priority. Instead, the Senate Appropriations Committee’s bill recommends $90
million to fund approximately 15,000 incremental vouchers in FY2003. This amount
is to provide $40 million for Section 8 tenant-based rental vouchers for disabled
families; $20 million for welfare-to-work vouchers in order to facilitate the transition
of working people off of income subsidies; and the remaining $30 million is to be
made available for incremental vouchers on a fair share basis to public housing
authorities that have no less than a 97% occupancy rate.
The Senate bill also provides $196 million for Section 8 contract administration.
Tenant Protection Vouchers. The President’s budget requests $260 million
for tenant protection vouchers in FY2003. HUD estimates that this amount would
finance approximately 43,000 vouchers for individuals who are currently receiving
rental assistance, but who are in danger of losing the subsidy because their units are
being demolished, the owner of their development is “opting out” of the program, or
for some other reason. As already stated above, the Senate Appropriations
Committee does not designate a specific amount for tenant protection in its bill, but
includes it in funding for enhanced vouchers which is provided by appropriations for
contract renewals.
Table 7 shows the Administration’s request for FY2003 funding for the
Housing Certificate Fund, using the Administration’s estimates, and estimates from
the Senate Appropriations Committee.
Table 7. Requested Spending for the Housing Certificate Fund
(HCF), Administration and Congressional Estimates, FY2003
($ in billions)
President’s
President’s
request
request
(HUD
(Cong.
FY2003 FY2003
HCF Programs
estimates)
estimates)
House
Senate Confer.
Housing Certificate Fund
17.527
17.527
–
17.412
–
FY2003 Appropriations
(Table 6)
16.887
13.327
–
13.212
–
Advance appropriations
from previous years
–
4.200
–
4.200
–
Carry-over of reserve funds
from previous fiscal years
.640
–
–
–
–
Housing Certificate Fund:
–
–
–
–
–
Expiring Sec. 8 Contracts
16.864
–
–
17.123
–
FFS Co-ordinators
(.052)
–
–
–
–
Incremental Vouchers
.204
–
–
.090
–
Fair-share (.158)
–
–
(.030
–

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CRS-26
President’s
President’s
request
request
(HUD
(Cong.
FY2003 FY2003
HCF Programs
estimates)
estimates)
House
Senate Confer.
Olmstead Decision
(.006)
–
–
–
–
Welfare-to-work
–
–
–
(.020)
Non-Elderly Disabled
(.040)
–
–
(.040)
–
Tenant Protection
.260
–
–
.000a
–
Contract Administration
.196
–
–
.196
–
Working capital fund
.003
–
–
.003
–
Source: Fiscal Year 2003 Budget Summary, Department of Housing and Urban Development; House
Committee on Appropriations; S Rept. 107-222.
a Tenant protection is provided under enhanced vouchers, a cost covered in contract renewals in the
Senate bill.
Note: Italics indicate lines subsumed under major heading for HCF in Table 6 and Table 7.
Public housing programs. There are about 3,050 public housing authorities
(PHAs) that manage 1.25 million public housing units across the nation. Public
housing has a history of public skepticism regarding its effectiveness; many envision
public housing as mismanaged, dilapidated projects housing very poor single-parent
households with few marketable skills, youth gangs, high crime rates, and drug use.
This perception of public housing has been accurate for a small number of the largest
inner city projects where the worst problems have been concentrated; however, many
projects are well run and in relatively good condition.
Legislation passed during the past half dozen years has begun to target problems
in the worst public housing sites. The HOPE VI program has been somewhat
successful in achieving its goal of tearing down the worst 100,000 units, largely high-
rise complexes in inner city areas, and replacing them with lower density garden
apartments and townhouses (see HOPE VI below). Recent legislation has also made
it easier to evict those involved in criminal activity under the “one-strike-and-you’re-
out” rule (Anti-Drug Abuse Act of 1988). On March 26, 2002, the Supreme Court
(HUD v. Rucker), unanimously upheld the one-strike rule, affirming that a PHA can
evict a tenant who may have no knowledge of drug-related activities committed by
another occupant or guest of the housing unit on or off the public housing premises.
Public Housing Operating Fund. HUD has requested $3.530 billion for the
FY2003 Public Housing Operating Fund, $35 million more than the $3.495 billion
enacted for FY2002. The Public Housing Operating Fund provides operating
subsidies for 3,050 local Public Housing Authorities (PHAs). These subsidies, which
cover a variety of expenses including maintenance, utilities and tenant and protective
services, enable PHAs to keep rents affordable for low-income families in 1.2 million
units.
The Senate Appropriations Committee agreed with the HUD budget request and
approved $3.53 billion for the FY2003 Public Housing Operating Fund on July 25,
2002.

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A note about calculating operating subsidies. The Quality Housing and
Work Responsibility Act of 1998 directed HUD to develop a new formula for
allocating operating funds to the Public Housing Authorities. However, developing
this new formula is proving difficult and controversial. An interim formula-based
approach for allocating operating funds was implemented in FY2001 following
regulatory negotiations as required by the 1998 Act. The current formula takes into
account size, location, age of housing stock, occupancy and other factors intended to
reflect the cost of operating a well-managed public housing development. HUD
hopes to complete action on a permanent formula in FY2003.
Public Housing Capital Fund. The HUD budget for FY2003 proposes to
cut the capital fund by $417 million, from $2.843 billion in FY2002 to $2.426
billion. This fund provides annual formula grants to PHAs for capital and
management activities including modernization and development of public housing.
HUD estimates that capital needs accrue at $2.2 billion annually, however, there is
also an estimated $20 billion backlog of rehabilitation and modernization needs faced
by Public Housing Authorities. The rehabilitation of this housing is important to
help ensure that these developments are not unsafe for residents and do not become
so obsolete that they must be demolished.
The justification for this cut in the face of a large backlog is the introduction of
what the administration terms, the Public Housing Investment and Financial Reform
Initiative. This proposal would allow up to $120 million of public housing capital
funds and $130 million of operating funds to be used to convert some public housing
units to Section 8 projected-based assistance. On a property-by-property basis, HUD
would consider requests from Public Housing Authorities to participate in this
initiative. HUD thinks that this would allow PHAs to secure private financing to
rehabilitate or replace aging properties by pledging project-based revenue (Section
8 rents are often higher than public housing rents) as collateral for private loans for
capital improvements. The agency believes that lenders will view the stream of
Section 8 renewals as more predictable than capital fund appropriations, therefore
making PHAs seem more credit-worthy. The Administration hopes that at least some
of the proposed cut of $417 million in capital funding can be replaced by private
sector loans.
Some housing organizations have already expressed concern about this proposed
experiment, asking that HUD wait for evidence on how well this new idea might
work before cutting capital funds. In response to this concern, HUD Secretary
Martinez told the Senate Banking Committee on February 13, 2002 that if this
program does not generate at least $400 million worth of capital improvements, HUD
will seek to restore the reduction of capital funds to the previous year’s level in
FY2004.
The Senate Appropriation Committee’s FY2003 HUD appropriation bill (S.
2729) funds the Public Housing Capital Fund at $2.783 billion, which is more than
$3.5 million above the Administration’s request. While the Committee rejects the
Administration’s proposal to reduce capital funds and to allow public housing units
to be converted to project-based Section 8 units, the Committee agrees with the
Administration’s assertion that PHAs should have the ability to leverage private
funds. As a result, the Committee includes a provision that would allow Public

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Housing Authorities to use public housing capital and operating funds to leverage
private funds for the modernization and rehabilitation of on- or off-site public
housing.
HOPE VI Revitalization of Distressed Public Housing. As noted above,
HUD is transforming public housing through the use of HOPE VI grants by
rehabilitating or demolishing severely distressed public housing units and replacing
them with low-density, garden-style apartments or townhouses. Since the inception
of the HOPE VI program, HUD has approved the demolition of approximately
140,000 units. Rather than filling new units with only the poorest of the poor, as had
usually been the case, the new housing has more mixed-income families – the poor,
the not quite so poor, and some moderate-income households – in an effort to change
the culture to one of more hope and opportunity for those residents who are willing
to take advantage of new opportunities.
The Administration is requesting $574 million for HOPE VI grants in FY2003,
the same as enacted for FY2002. Of this total, $5 million is designated for the
Neighborhood Networks Initiative. Under this initiative, competitive grants are
awarded to Public Housing Authorities for the establishment and initial operations
of computer centers to increase resident self-sufficiency, employability, and
economic self-reliance. Authority for the HOPE VI program is scheduled to end on
September 30, 2002. An omnibus housing bill, H.R. 3995, passed by the Financial
Services Committee on July 10, 2002, would reauthorize the program through
FY2004.
The Senate Appropriations Committee recommends an appropriation of $574
million for the HOPE VI program in FY2003, the same level as enacted in FY2002,
and as requested by the Administration. The Committee also designates $5 million
of this amount for the Neighborhood Networks Initiative. The Senate bill contains
language to reauthorize the program through September 20, 2003.
Native American Block Grants. This block grant provides tribes or tribally
designated housing entities with a flexible source of funding for affordable housing
and related activities. As provided in the Native American Housing Assistance and
Self-Determination Act, block grant funds may be used for a wide range of
homeownership and rental activities. The Administration’s FY2003 budget requests
$647 million The Senate Appropriations Committee recommends $649 million, the
same as enacted in FY2002, about $2 million more than the budget request. With
unemployment that often exceeds 80% in many Indian and Native communities, the
Committee directs HUD and its grantees to give primary consideration to qualified
Native owned firms in the design and construction of Indian housing.
Community Planning and Development
Housing for Persons with AIDS (HOPWA). President Bush requested
$292 million for HOPWA for FY2003, up $15 million from the $277 million enacted
in FY2002. The Senate Appropriations Committee concurs. HOPWA provides
housing assistance and related supportive services for low-income persons with
HIV/AIDS and their families. Funding is distributed both by formula allocation and
competitive grants to states, localities and nonprofit organizations. HOPWA funds

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CRS-29
may be used for housing information services, resource identification to establish and
coordinate housing assistance resources, to acquire, rehabilitate or lease housing and
services, to construct single room occupancy dwelling and community residences, for
rental assistance and for short term rent. Funds may also be used for mortgage or
utility payments to prevent homelessness of a tenant or mortgagor and for supportive
services including health, mental health, drug and alcohol abuse treatment and
counseling, day care, nutritional services and assistance in gaining access to local,
state and federal government benefits.
In an evaluation released by HUD in December 2000, it was reported that the
HOPWA program predominately serves extremely low-income (54%) and very low-
income (27%) persons living with HIV/AIDS, and that in 1999 the HOPWA program
was providing housing assistance to approximately 49,000 low-income persons living
with HIV or AIDS. This is approximately one-sixth of the estimated 311,701 persons
living with AIDS in the United States as of June, 2000 as reported by the Centers for
Disease Control and Prevention (CDC). The CDC reported that through June 2001,
the number of HIV infections reported in states with confidential HIV reporting (34
states and two territories) was 134,505 for a cumulative total of 466,023 persons
identified as being HIV positive or of having AIDS. Since many states are not yet
reporting on HIV, the CDC estimates that 800,000 to 900,000 Americans are actually
living with HIV or AIDS.
For more information on HOPWA, see CRS Report RS20704, Housing
Opportunities for Persons with AIDS (HOPWA) by M. Ann Wolfe.
Rural Housing and Economic Development. The FY1999 HUD
Appropriations Act (P.L. 105-276) established within HUD an Office of Rural
Housing and Economic Development to support housing and economic development
in rural areas. It received $25 million in both FY2001 and FY2002. The
Administration is not requesting funds for this program for FY2003 (it did not ask
for funds for FY2002 either), arguing that many of the agency’s core programs, such
as CDBG, already serve rural communities, and because other Departments like the
U.S. Department of Agriculture have very large and effective programs already in
place to address rural housing and economic development issues. Last year, the
House agreed with the Administration and did not include any funds for this office.
The Senate recommended $25 million and the conferees approved $25 million. The
Senate Appropriations Committee recommends $25 million for FY2003, believing
that this housing program is sufficiently different from Department of Agriculture
programs to merit separate appropriations.
Empowerment Zones and Enterprise Communities. This initiative is
an interagency effort to promote economic development and community
revitalization in distressed areas, by directing tax relief and federal funds to
designated Empowerment Zones (EZs) and Enterprise Communities (ECs). EZs and
ECs are eligible for a variety of tax credits and other incentives intended to stimulate
investment, economic growth, and revitalization activities. Grants are used for
activities that assist residents and businesses, including workforce preparation and
job creation efforts linked to welfare reform; neighborhood development; support for
financing capital projects; financing of projects in conjunction with Section 108 loans

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CRS-30
or other economic development projects. Funds are also used for rental assistance
and other housing assistance.
To date, there have been three rounds of EZ/EC designations. In the first round,
nine communities (six urban and three rural) were designated as Empowerment
Zones and 95 communities were named as Enterprise Communities. Twenty new
Empowerment Zones – 15 urban and 5 rural – were designated in the Round II
competition, along with 20 new Enterprise Communities, all rural. The 2000
Community Renewal Tax Relief Act authorized the designation of 40 renewal
communities (28 urban and 12 rural) and nine new Round III Empowerment Zones
(seven urban, two rural) designated on December 21, 2001, which utilize only tax
incentive provisions.
In FY2002, $45 million was approved for urban EZs - $3 million each for the
15 Round II zones designated by HUD. The Administration’s FY2003 budget
proposes no funding for Round II Empowerment Zones because after 4 years of
funding, major balances of unused funds have been built up. To help develop the
economies of distressed urban and rural areas, HUD has recently designated 40
Renewal Communities (RZs) and seven additional Round II urban Empowerment
Zones. Private investors in both RZ and EZ areas are eligible for tax benefits over
the next 10 years tied to the expansion of job opportunities in these locations.
The Senate Committee recommends an appropriation of $30 million for this
program for FY2003, $15 million less than enacted for FY2002 and $30 million more
than the budget request. These funds are to be distributed. to the 15 communities that
received a second round EZ designation. The Committee urges the Senate Finance
Committee to fund this program as mandatory rather than an obligation of this bill.
The Committee also remains concerned over accountability in this program and notes
that the HUD Inspector General has been critical about how communities have
implemented this program and used EZ funds.
Community Development Block Grants. The Bush Administration’s
FY2003 budget proposes $4.716 billion for CDBG, including $279.5 million for
program set-asides, and $4.436 billion in formula-based grants to entitlement
communities, states, and insular areas. The Administration’s budget request would
increase the formula-based portion of the program by $95 million for FY2003 and
it would convert Section 107 funding for insular areas into a formula-based
allocation. The Senate Committee recommends an appropriation of $5.05 billion for
FY2003, an increase of $317.5 million above the budget request and $50 million
more than enacted for FY2002. The Committee has included $4.610 billion for
formula-based Community Development Block Grants.

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CRS-31
Table 8. Community Development Block Grants (CDBG):
Entitlement Communities with Per Capita Income At Least
Twice the National Average
Per capita income as a multiple of
Community
the national average
Newport Beach, California
3.2
Palo Alto, California
2.3
Santa Monica, California
2.0
Colorado Springs, Colorado
3.1
Greenwich, Connecticut
3.2
Naples, Florida
2.9
Brookline, Massachusetts
2.0
Malden, Massachusetts
2.2
Newton, Massachusetts
2.0
Westchester County, New York
2.1
Lower Merion, Pennsylvania
2.9
Penn Hills, Pennsylvania
2.8
Virginia Beach, Virginia
2.6
Source: HUD Budget Submission, FY2003
The Administration is requesting approval for its new Colonias Gateway
Initiative. This regional initiative would be targeted to communities in Texas, New
Mexico, Arizona, and California within 150 miles of the border with Mexico. Funds
would be used for housing, infrastructure, and economic development projects in
these distressed areas. The Administration is also proposing to fund this $16 million
initiative with the savings achieved from a proposed legislative change that would
reduce funding for CDBG entitlement communities with per capita incomes that are
twice the national average or higher. Currently, HUD estimates that there are 13
communities with per capita incomes that meet or exceed the proposed threshold,
although this could change as figures from the 2000 Census become available (see
Table 8). The Senate Committee rejects the Administration’s request for the
Colonias Initiative, but encourages HUD to seek authorization of legislation required
for this proposal and to perform a thorough review of the CDBG formula before
proposing adjustments.

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CRS-32
Table 9. Community Development Block Grants,
FY2002-FY2003
(funding in millions)
FY2002 FY2003 FY2003 FY2003 FY2003
Programs and set-asides
enacted request
House
S. 2797
Confer.
Subtotals:
set-asides (see below for details)
659.0
279.5
–
439.8
–
formula-based (entitlement
communities
3,038.7
3,100.3a
–
3,227.1
–
insular areas
–
7.0
–
–
–
formula-based state allocation
1,302.3
1,328.7
–
1,383.1
–
Set-asides:
Indian Tribes
70.0
72.5
–
72.5
–
Econ. Develop. Access Center
(1.0)
(1.5)
–
–
–
Housing Assistance Council
3.3
3.0
–
3.3
–
National American Indian
Housing Council
2.6
2.2
–
2.6
–
Nat’l Council of La Raza HOPE
5.0
0.0
–
–
–
technical assistance
(0.5)
0.0
–
–
–
HOPE Fund; other activities
(4.5)
0.0
–
–
–
Section 107
45.3
38.9
–
45.5
–
technical assistance
–
(3.0)
–
0.0
–
insular areas
(7.0)
0.0b
–
(7.0)
–
university programs
(34.3)
(31.9)
–
(28.5)
–

Historically Black

Colleges and Universities
(10.0)
(10.0)
–
(11.0)
–

Hispanic Serving Institutions
(6.5)
(5.5)
–
(7.5)
–

Community Dev. Work Study
(3.0)
(3.0)
–
(3.0)
–

Alaskan Native and Native
Hawaiian Serving Institutions
(4.0)
(2.4)
–
(4.0)
–

Tribal Colleges and Univ.
(3.0)
(3.0)
–
(3.0)
–

Comm. Outreach
Partnership Centers
(7.9)
(8.0)
–
–
–
management info. systems
(4.0)
(4.0)
–
–
–
Hawaiian Homelands
9.6
0.0
–
(10.0)c
–




Girl Scouts of the USA
–
–
–
2.0
–





Boys & Girls Clubs of America
–
–
–
2.0
–
Community Technology Center
0.0
0.0
–
–
–
Improving Access Initiative
0.0
0.0
–
–
–
Self-Help Housing Opportunity
22.0
65.0
–
22.0
–
National Housing Dev. Corp.
5.0
0.0
–
–
–
operating expenses
(2.0)
0.0
–
–
–

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CRS-33
FY2002 FY2003 FY2003 FY2003 FY2003
Programs and set-asides
enacted request
House
S. 2797
Confer.
Capacity Build. for Community
Develop. & Affordable Housing
29.0d
29.5d
–
35.5
–
National Com. Dev. Initiative
(25.0)e
(25.0)e
–
(31.5)e
–
Habitat for Humanity
(4.0)
(4.5)
–
(4.0)
–
Resident Opportunities and Self
Sufficiency (supportive services)
55.0
0.0f
–
–
–
Neigh. Initiative Demonstration
42.0
0.0
–
46.0g
–
Working Capital Fund for the
development of info. tech. systems
13.8
3.4
–
3.4
–
Youthbuild
65.0
65.0
–
65.0
–
- in rural and underserved areas
(10.0)
(10.0)
–
(10.0)
–
-USA capacity bldg.
(2.0)
(2.0)
–
(2.0)
–
Economic Develop. Initiative:
294.2
0.0
–
140.0
–
Total: CDBG
5,000.0
4,715.5
–
5,050.0
–
Source: Dept. of Housing and Urban Development.
Note: Totals may not add due to rounding. Italics indicates entries subsumed under CDBG line in
Table 6; parenthesis indicates entry subsumed in this table under line immediately above.
a The Administration’s $16 million Colonias Gateway Initiative is included in this amount since it
would be funded by a formula change for CDBG entitlement communities.
b Insular areas would be included in formula portion of the CDBG program and would not be included
as a set aside under Section 107 (Special Purpose Grants).
c The Senate Committee recommends this be funded as part of the Section 107 account; the
Administration had recommended it be funded as a separate account.
d FY2002 appropriations included $5 million for rural and tribal areas. The Administration’s FY2003
budget also recommends $5 million for rural and tribal areas.
e Includes funding for the Enterprise Foundation and the Local Initiative Support Corporation in
support of local community development corporations.
f Appropriations for this program would be transferred to Public Housing Capital Fund. The
Administration is requesting $55 million.
g Includes two earmarks: $1 million grant to National Housing Trust/Enterprise Preservation Corp.,
and $5 million to the Housing Partnership Network.
The CDBG is the largest source of federal financial assistance in support of
housing, neighborhood revitalization, and community and economic development
efforts of state and local governments. After funds are allocated for the various set
asides under CDBG, 70% of the remaining appropriated funds are allocated by
formula to entitlement communities. These include metropolitan cities with
populations of 50,000 or more, central cities, and urban counties. Currently, 1,023
communities (865 cities and 158 urban counties) meet the definition of entitlement
community. The remaining 30% of appropriated funds are allocated by formula to
states for distribution to nonentitlement communities.
These and other Community Development initiatives are to be offset by
eliminating funding for two community development fund-related set asides, notably,
the Neighborhood Initiative, which received $42 million for FY2002, and the
Economic Development Initiative, which received $294 million in FY2002. In past

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years the Economic Development Initiative (EDI) has routinely been used by
Members of Congress to earmark funding specific projects. Entitlement
communities, states, and previous Administrations have objected to these earmarks
on the grounds that they are noncompetitive, and reduce the amount of funds
available under the core CDBG program for distribution to entitlement communities
and states.
For FY2002, $294 million in EDI assistance was earmarked for more than 300
specific projects identified in the conference report (H.Rept. 107-272) accompanying
the VA-HUD-Independent Agencies Appropriations Act for FY2002, P.L. 107-73.
The Neighborhood Initiative supports projects intended to stimulate economic
diversification and investment in areas experiencing population out-migration,
improve conditions in blighted and distressed neighborhoods, or facilitate the
integration of housing assistance with welfare reform initiatives. For FY2002,
Congress appropriated $42 million for the program with all of the funds earmarked
for specific projects identified in the conference report. Congress also provided $2.7
billion in CDBG assistance to New York City to assist in post-September 11, 2001
recovery efforts.
Set-asides recommended by the Senate Committee for FY2003 include the
following: $72.5 million for Native Americans; $35.5 million for the National
Community Development Initiative; $45.5 million for section 107 grants; and $140
million for Economic Development Initiatives.
Brownfields Redevelopment. The Administration requests $25 million for
brownfields redevelopment projects for FY2003, the same amount appropriated in
both FY2001 and FY2002. Brownfields redevelopment funds are used to reclaim
abandoned and contaminated commercial and industrial sites. Administration
estimates place the number of eligible brownfield sites at 450,000 nationwide. Funds
are used to finance job creation activities that benefit low and moderate income
persons, and the Administration estimates that the $25 million requested could
support the cleanup of 25 brownfield sites and create approximately 5,400 jobs.
Funds have been used in conjunction with Section 108 loan guarantees and with EPA
brownfields cleanup efforts, but HUD will propose decoupling the brownfields
program from the Section 108 loan guarantee program, believing this will attract
more participants. The Senate Appropriation Committee recommends $25 million
for FY2003 and agrees to HUD’s proposed decoupling.
The HOME Investment Partnership Program. The Administration is
requesting $2.084 billion for FY2003, $238 million more than the $1.846 billion
enacted in FY2002. The Senate Committee is recommending $1.95 billion, about
$104 million less than the amount enacted in FY2002 and $134 million less than the
budget request.
The HOME block grant program makes funds available to participating
jurisdictions to increase the supply of affordable rental housing and homeownership
opportunities for low-income families. Jurisdictions have considerable flexibility in
the use of these funds but all households assisted must have incomes below 80% of
the area median and 90% of renters receiving assistance must have incomes below
60% of median. Funds can be used to help new homebuyers. Both homebuyers and

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CRS-35
renters can be helped through the rehabilitation of substandard housing and new
construction. Funds may also be used for tenant-based rental vouchers. Some
HOME funds are used with the HOPE VI program and with the Low-Income
Housing Tax Credit. According to HUD budget documents, since its beginning in
1992, HOME funds have been used to construct or rehabilitate more than 250,000
rental units, and have provided direct rental assistance (vouchers) to more than
73,000 households.
The Administration requests a $200 million set-aside for a “Downpayment
Assistance Initiative” to assist first-time low-income homebuyers, up from the $50
million enacted for FY2002. Funds would be provided on a competitive basis and
would be administered by state housing finance agencies, and be expected to assist
over 130,000 first-time buyers each year. Funds would be matched on a 3 to 1 basis
up to $1,500 per family. HUD made the same $200 million request last year, and
some organizations, including those representing the National Association of
Counties and the U.S. Conference of Mayors, testified before the House
Subcommittee on Housing and Community Opportunity last year (May 22, 2001), in
opposition to the $200 million set-aside, arguing that HOME funds may already be
used for downpayment and/or closing cost assistance. Further, they oppose it
because “it chooses one delivery system – state housing finance agencies – for no
proven programmatic purpose.” They argued that some communities already have
a high homeownership rate and that affordable rental housing is the critical need.
The Senate Committee does not include any funds for the Downpayment
Assistance Initiative. The Committee says that it supports the expansion of
homeownership opportunities, but notes its continued concern that the program
would constrain the ability of local communities to determine the best use of HOME
funds. The Committee notes its support of any HUD efforts to educate communities
on how to use HOME funds to expand homeownership. Last year’s Senate bill did
not include any funding for this downpayment assistance fund; the House
recommended the full $200 million. H.Rept. 107-43 noted that “downpayment
assistance is already permissible under the HOME program and therefore does not
require new or additional authorization.” The conferees provided $50 million,
subject to enactment of authorization legislation by June 30, 2002. Otherwise, the
$50 million would be available for any authorized purpose. No authorization
occurred and H.R. 4775, a fiscal 2002 supplemental appropriations bill, signed by
the President on August 2, 2002, (P.L. 107-206) rescinds the $50 million.
The Administration recommends that, instead of being funded within the
HOME program, Housing Counseling Assistance be funded at $35 million in a new
free-standing appropriation account under the Housing Programs section of the HUD
budget. The Administration makes several points as justification for the increased
funding level: (1) new research demonstrates that housing counseling can be effective
in reducing mortgage delinquencies, (2) the demand for housing counseling services
exceeds the funding availability, (3) it would complement the Administrations
homeownership initiative, (4) the availability of counseling is central to meeting the
goal of increasing minority homeownership rates, (5) counseling is an element of
community-based efforts to combat predatory lending, (6) it would further the goal
of developing a certificate program for housing counseling, and (7) it would enable
the more efficient use of HUD staff.

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The Senate Committee rejects the Administration’s request for separate funding
of housing counseling assistance outside of HOME, but recommends that housing
counseling remain within HOME and receive $40 million, a 50% increase over the
amount enacted in FY2002. In addition to using the program to expand
homeownership opportunities, the Committee urges HUD to use the program as a
means of educating homebuyers on the dangers of predatory lending.
Homeless Assistance Grants. President Bush’s FY2003 budget requests
$1.130 billion for homeless assistance, an increase of $7 million from the FY2002
appropriation of $1.123 billion The Senate Appropriations Committee recommends
$1.215 billion for FY2003 funding; that amount is $92.5 million more than FY 2002
appropriations and $85.5 million more than the Administration request for FY2003.
From the FY2003 Administration request of $1.130 billion, $1.109 billion would
fund Homeless Assistance Grants, $1.5 million would be for the Working Capital
Fund for homeless assistance projects, $11 million for homeless management
systems, $6.6 million for technical assistance and $1 million for the Interagency
Council on the Homeless. The Senate Committee specified that of the $1.215 billion
recommended, $193 million is to fund Shelter Plus Care renewals on an annual basis
while $17.6 million is for technical assistance and management information systems.
This leaves approximately $1.004 billion to fund the remaining three homeless
programs, i.e., supportive housing, emergency shelter grants and Section 8 single-
room occupancy. The Senate Committee recommends that a separate account be
established for the Interagency Council on the Homeless in the amount of $1.5
million.
For FY2003, the Administration has proposed that the Emergency Food and
Shelter program (EFSP), which is currently administered by the Federal Emergency
Management Agency (FEMA), be transferred to HUD. The Senate Committee does
not concur that there is a compelling reason to disrupt the EFSP by transferring it.
The Committee recommends that EFSP remain within FEMA and recommends
funding for FY2003 at $153 million. HUD’s FY2003 budget request is based on a
legislative proposal to consolidate the three competitive homeless assistance
programs under the Homeless Assistance Grants programs, i.e. Supportive Housing,
Shelter Plus Care and Single Room Occupancy. The fourth HUD program,
Emergency Shelter Care, is a formula program. The proposed consolidation is
intended to provide more consistent funding and eliminate the burden of
administering the current competitive programs.
The homeless assistance programs are intended to help homeless persons and
families break the cycle of homelessness and to move to permanent housing and self-
sufficiency. The Continuum of Care (CoC) process encourages the creation of
linkages to other housing and community development programs including public
housing, Section 8, Community Development Block Grants, HOME, Housing
Opportunities for Persons with AIDS and state and local programs. In addition, the
strategy promotes direct links to mainstream social service programs critical to the
success of homeless assistance efforts, such as Medicaid, State Children’s Health
Insurance Program, Food Stamps, Temporary Assistance for Needy Families (TANF)
and services funded through the Mental Health and Substance Abuse Block Grant,
Workforce Investment Act, and the Welfare-to-Work grant program.

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CRS-37
The FY2003 HUD justification included preliminary measurable performance
indicators which concentrate on the number of homeless persons who have attained
permanent housing. One of HUD’s strategic objectives is to end chronic
homelessness (20% of the homeless) in 10 years; one of the indicators of progress to
this goal is that at least 25,000 formerly homeless persons move into HUD
McKinney-Vento funded permanent housing through FY2003. The Senate
Committee is concerned that HUD is not taking the proper steps to ensure that
Shelter Plus Care units are targeted to chronically homeless individuals. The
committee directs HUD to report to the committee by June 15, 2003 on how it is
ensuring that Shelter Plus Care grants are made to providers serving chronically
disabled, chronically homeless people.
Another strategic objective is to help homeless individuals and families move
to permanent housing. Some of the indicators of successfully moving toward that
goal is that through FY2003, at least 29,000 homeless persons move from HUD
transitional housing to permanent housing; that at least 115,000 homeless people
move into HUD-funded transitional housing and that at least 19,000 homeless
persons become employed while in HUD’s homeless assistance project. Another
indicator of moving toward that goal is that the number of communities with
Homeless Management Information Systems increase from 12 in FY2001, to 25 in
FY2002, to 75 in FY2003; HUD has been charged by Congress to assist communities
in developing unduplicated counts of homeless persons and generating client-level
data nationally by 2004.
For more information on federal programs for the homeless, see CRS Report
RL30442, Homelessness: Recent Statistics, Targeted Federal Programs and Recent
Legislation, by M. Ann Wolfe.
Housing Program Administration
Housing for the Elderly and Disabled. These programs provide capital
grants for the development of additional new subsidized housing. The President
proposed $783 million (including the reprogramming of $9.7 million in unobligated
funds from previous years) for housing assistance for the elderly in FY2003, the same
as for the previous year. HUD points out that an increasing number of the elderly
living in these apartments have become frailer and less able to live in rental facilities
without some additional services. Of the $783 million, $30 million would be made
available for grants for construction to convert existing units to assisted living
facilities. This would allow individual elderly residents to remain in their units and
maintain their independence. Another $53 million would be targeted to service
coordinators who help the elderly obtain needed and eligible services from the
community. The Senate Appropriations Committee recommends $783 million for
FY2003 for the elderly (section 202 housing), including up to $50 million for the
conversion of section 202 housing to assisted living facilities and up to $53 million
for service coordinators.
The Administration has also requested $251 million for housing for the disabled
(Section 811), a $10 million increase over the $241 million provided in FY2002.
Like last year, up to 25% of the funds for the disabled could be used for vouchers to
give disabled individuals more flexibility and choice so they could live in mainstream

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CRS-38
rental housing. However, these vouchers must then be renewed each year, and in
FY2003, $32 million of the $251 million total would be to renew vouchers. In
addition, of the $204 million proposed for 33,400 additional vouchers, mentioned
earlier under the Housing Certificate Fund, $40 million would be allocated for
approximately 6,000 vouchers for non-elderly disabled individuals who are currently
living in public housing units that are now being converted to “elderly only” projects.
The Senate Appropriations Committee recommends $251 million for FY2003, up
about $9.7 million from the previous year. Of the $251 million, up to 25% could be
used to fund tenant-based rental assistance for the disabled.
The Committee expressed concern about the growing cost of renewal contracts
within both the elderly and disabled housing programs.
Federal Housing Administration (FHA). For FY2003, the Administration
requests and S. 2797 recommends an insurance commitment limitation of $160
billion for the FHA Mutual Mortgage Insurance and Cooperative Housing Mortgage
Insurance (MMI/CHMI) fund, the same level as appropriated for FY2002. Both the
Administration and S. 2797 request a $21 billion insurance commitment limitation
for the General Insurance and Special Risk Insurance (GI/SRI) fund, the same level
as approved for FY2002.
Since FY2002, the Office of Management and Budget (OMB) and the
Congressional Budget Office (CBO) have determined that FHA receipts under the
MMI account should be classified within the discretionary rather than the mandatory
part of HUD’s budget. According to CBO, the reclassification has no effect on the
amount of budgetary resources available to HUD, and the MMI program will
continue operating as it did prior to the reclassification. Mandatory spending must
comply with the pay-as-you-go rules of the Budget Enforcement Act (BEA) while
discretionary spending must comply with the BEA’s discretionary spending caps.
Spending for the MMI program will be determined by the annual appropriations acts.
The Budget requests a loan limitation of $50 million for direct loans under the
MMI/CHHI fund, a $200 million reduction from the FY2002 level. The Budget
states that the $250 million limitation in FY2002 was in anticipation of increased
demand for disposition of single family properties and the demand did not
materialize because of the availability of alternative financing. S. 2797 recommends
a direct loan limitation of $250 million, the same as enacted in FY2002.
Both the Administration and S. 2797 propose a direct loan limitation of $50
million for the GI/SRI fund, the same limit as in FY2002. The direct loans are used
to facilitate the sale to municipalities and nonprofit corporations of single family and
multifamily properties that have been acquired by the FHA insurance funds through
defaults and foreclosures by borrowers.
The Budget and S. 2797 request administration expenses of $336.7 million for
the MMI/CHMI accounts. S. 2797 would provide that, to the extent guaranteed loan
commitments exceed $65.5 billion on or before April 1, 2003, an additional $1,400
in administrative contract expenses would be available for each additional $1 million
in loan commitments, but the additional funds could total no more than $16 million.

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CRS-39
The Budget and S. 2797 request administration expenses of $223.7 million for
the GI/SRI accounts. S. 2797 would provide that, to the extent guaranteed loan
commitments exceed $8.426 billion on or before April 1, 2003, an additional $1,980
in administrative contract expenses would be available for each additional $1 million
in loan commitments, but the additional funds could total no more than $14.4
million.
As in FY2002, the FY2003 Budget and S. 2797 request an appropriation of $15
million for credit subsidies to support loan guarantees under the GI/SRI programs.
The credit subsidy is based on the net cost to the government, exclusive of
administrative expenses, of a direct loan or loan guarantee over its full term,
discounted to the present value at the Treasury’s borrowing cost. FHA proposes to
reduce the annual mortgage insurance premium from 80 basis points to 57 basis
points on new construction loans insured under the Section 221(d)(4) program. That
program is the largest multifamily program insured in the GI/SRI fund. Interestingly,
the insurance premiums were raised from 50 to 80 basis points in FY2002, and that
was used as partial justification for the need of only $15 million in credit subsidies
instead of $101 million that had been appropriated in the prior year.
The Budget notes, however, that prior estimates were based on historic
performance over the past 40 years, including tax law changes in the 1980s that
adversely affected the performance of loans in the portfolio at the time. The Budget
argues that the new credit subsidy estimates are based on econometric models that
incorporate the improvements in recent years in underwriting, program monitoring,
and asset management.
The Senate Committee notes that it remains concerned that HUD has failed to
calculate adequately the amount of credit subsidy needed to support its multifamily
mortgage insurance programs. The Committee notes that it expects HUD to institute
a computer program that accurately identifies the risk of default and financial risk to
the insurance fund. The Committee also directs HUD to issue any changes in
insurance premiums through notice and comment rule making, as required by law.
Section 601 of P.L. 105-276, the FY1999 HUD Appropriations Act, amended
Section 204 of the National Housing Act to give HUD more flexibility in choosing
the most cost-effective way of paying insurance claims and disposing of acquired
notes or homes under the FHA single family programs. The amendment provides a
new claims payment procedure that permits HUD to pay a claim upon assignment of
the mortgage rather than upon conveyance of the property; authorizes HUD to take
assignment of the notes and transfer them to private parties for servicing, foreclosure
avoidance, foreclosure, property management, and asset disposition; allows FHA to
be an equity participant in private entities; and allows a structured financing for asset
disposition in which FHA retains an equity interest, thereby increasing the value of
the asset over simple asset sales.
In FY2003, HUD is proposing to use its Section 601 authority to transfer
defaulted notes to joint venture partners in the private sector. The partners would
make upfront payments to FHA at the time of transfer, FHA would retain an equity
interest in the notes until their disposition, and FHA would receive additional
payments for that interest. The proposal is expected to reduce foreclosures, eliminate

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CRS-40
much of the acquisition of property by FHA, and increase net recoveries to FHA.
This is regarded as a big step towards getting FHA out of the property management
business altogether.
The Senate Committee notes its concern about the accelerated claims
disposition demonstration program under which HUD bundles delinquent loans and
partners with a private bank to mitigate, or foreclose on, delinquent loans. The
Committee notes that HUD has not demonstrated how this program would benefit
very low-income communities, especially those with high incidences of predatory
lending. The Committee notes its concern that, in those communities, foreclosures
would occur more frequently than they do under the current system, and this would
contribute to the deterioration of those communities. The Committee directs HUD
to implement a system by which revitalization areas can be exempted from the
accelerated claims disposition process should they choose to be.
The FY2002 VA/HUD Appropriations Act included language authorizing
HUD’s Credit Watch program. This program allows HUD to identify FHA lenders
that originate a large number of loans that default quickly, which can be a key
indicator of underwriting problems or fraud, and take corrective actions. By
eliminating unqualified or unscrupulous lenders, the conferees hoped that HUD
would reduce the number of foreclosed properties.
The Senate Committee notes that Credit Watch is an excellent tool for
uncovering lenders after they have originated bad loans. By eliminating fraudulent
or unqualified lenders, the Committee and HUD hope to reduce the number of
foreclosed properties in the future. The Committee notes, however, that the Credit
Watch model is only effective after problem loans default.
The Committee notes that though FHA continues to contribute to
homeownership by low income, minority, and first time homebuyers, in some cases
and in certain neighborhoods, FHA has been misused to underwrite bad loans that
lead to defaults and foreclosed homes, and that this contributes to neighborhood
decline and destabilization. The Committee notes that faulty appraisals have
contributed to this problem, that HUD cancelled its appraisal oversight program, and
that HUD has yet to implement its proposed alternative, which is based on the Credit
Watch model.
Thus, the Committee directs the HUD to report to the appropriate Congressional
Committees on further actions that can be taken to protect homebuyers and
communities in census tracts that experience high rates of FHA defaults and
foreclosures. The Committee directs HUD to consider making FHA lenders
responsible for the appraisals on loans in these census tracts. The Committee further
directs that HUD should consider several other options: (1) requiring first time
homebuyers to receive counseling prior to the closing of an FHA loan; (2) requiring
home inspections on FHA-insured homes bought by first time homebuyers; and (3)
requiring the use of specially certified FHA appraisers for the purchase of homes.
The Committee urges HUD to consider these and other options while avoiding
proposals that create additional burdens for the FHA program or FHA homebuyers
as a whole.

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CRS-41
The Committee notes the receipt of complaints that, in areas affected by large
numbers of FHA foreclosures and property flipping, some investors are repeatedly
involved in buying FHA foreclosed properties, making superficial repairs, and then
reselling, or flipping them at inflated prices. The Committee asks HUD to explore
strategies to identify investors who are involved in such schemes and prevent their
purchasing FHA properties. While recognizing that HUD continues to address the
problems created by FHA property flipping, the Committee suggests that HUD must
become more aggressive in adopting the kind of preventive measures suggested by
the Committee. HUD is directed to submit a report that responds directly to the
issues raised by the Committee by January 3, 2003.
The Budget reiterates HUD’s commitment to eliminating predatory lending and
comprehensively reforming and simplifying the home-buying process. The Budget
stated that new regulations under the Real Estate Settlement Procedures Act will
require full disclosure of all fees that borrowers will pay at settlement, and make it
clear to borrowers that other finance options are available. A proposed rule on the
subject was published in the Federal Register on July 29, 2002.
A proposed rule was published in 2001which would prevent the issuance of
FHA insurance on properties that have been transferred by a previous sale within 6
months. The Budget notes that the rule will be implemented in 2003. FHA also
proposes to publish a rule in 2003 which would restrict excessive points and fees on
FHA-insured loans. A rule will be proposed in 2002 and, if implemented, would
hold lenders accountable for the selection and performance of appraisers for FHA-
insured mortgages.
In the administrative provisions, S. 2797 would amend the National Housing
Act to extend the FHA downpayment simplification program through December 31,
2004.
Office of Federal Housing Enterprise Oversight (OFHEO). OFHEO
is the safety and soundness regulator for Fannie Mae and Freddie Mac. The FY2003
Budget proposes $30 million in budget authority compared to $27 million in
FY2002. Legislation would be proposed to remove OFHEO from the annual
appropriations process, and fund the organization directly. That would place OFHEO
on a par with other safety and soundness regulators such as the Federal Reserve
Board, the Office of Thrift Supervision, and the Federal Housing Finance Board. The
Senate Appropriations Committee recommends $30 million for FY2003. Since the
cost of the oversight is paid by fees from Fannie Mae and Freddie Mac, there are no
budget implications.
Fair Housing. The Fair Housing Act makes it illegal to discriminate in the
sale, rental, or financing of housing based on race, color, religion, sex, national
origin, disability, or family status. HUD’s FY2002 budget promises vigorous
enforcement of fair housing laws and increased educational activities to combat
discrimination in housing. For FY2003, HUD requests $46 million, level with
FY2002 appropriations.
Two programs comprise HUD’s fair housing efforts: the Fair Housing
Assistance Program (FHAP) and the Fair Housing Initiatives Program (FHIP).

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CRS-42
FHAP strengthens nationwide enforcement efforts by providing grants to state and
local agencies to enforce laws that are substantially equivalent to the federal Fair
Housing Act. For FY2003, HUD is requesting $25.7 million for FHAP. FHIP
provides funds for public and private fair housing groups, as well as state and local
agencies, for activities that educate the public and housing industry about the fair
housing laws, including accessibility requirements; investigate allegations of
discrimination; help to combat predatory lending practices, and reduce barriers to
minority homeownership. FHIP would be funded at $20.3 million in FY2003.
In its FY2002 budget for Fair Housing, HUD pledged to continue its efforts to
combat predatory lending by working closely with interested parties, including
consumer groups, federal, state and local regulators, and the industry to put an end
to predatory lending. As part of this effort, it supports programs to increase financial
literacy. Its proposed budget for FY2003 promised to continue these efforts.
The Senate Appropriations Committee recommends $46 million for HUD’s fair
housing programs for FY2003, level with FY2002 funding and the same as the
budget request.
Lead-Based Paint Hazard Reduction. Title X of the Housing and
Community Development Act of 1992 (P.L. 102-550), authorized HUD to establish
the Lead-Based Paint Hazard Control Grant program. Before 1997, funding for the
lead hazard control grant program was provided under the Annual Contributions for
Assisted Housing Account. In 1997 and 1998, the program was funded as a set-aside
under the Community Development Block Grant account. Starting in 1999, the
program was funded as a separate, stand-alone program.
Over the past decade, HUD has worked with local governments and agencies
to increase the number of lead hazard control programs, and measurable lead levels
in children have declined. However, millions of housing units occupied by lower
income households remain contaminated with lead-based paint. To further reduce
lead paint health hazards, the FY2003 HUD budget requests a $16 million increase
over FY2002, bringing the total to $126 million. Funds are distributed through
competitive grants to entities that agree to match those federal grants. The $126
million supports a 10-year strategy to eliminate lead paint hazards, with funds
targeted to the 1.8 million homes that are at risk of not being modified through
normal renovation or demolition activities.
Citing lead poisoning from lead-based paint as the highest public health threat
to children under the age of 6, the Senate Committee recommends $201 million for
the program for FY2003, $75 million more than requested by the Administration and
$91 million more than enacted for FY2002. While the Committee reports dramatic
reductions in lead hazzards in low-income public housing, it says progress has not
been as great in privately-owned unsubsidized low-income units, and thus
recommends $75 million to establish a new lead hazard reduction demonstration
program focused on major urban areas where children are disproportionately at risk.

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CRS-43
Title III: Independent Agencies
Environmental Protection Agency
The President’s FY2003 request for the Environmental Protection Agency
(EPA) is $7.621 billion in budget authority or 6% less than the $8.079 billion
appropriated for FY2002. The Senate Committee on Appropriations has
recommended $8.299 billion.
Accounting for the proposed decrease is the Administration’s decision not to
seek continued funding for about $500 million earmarked for numerous activities in
the FY2002 conference report. This includes some $300 million for specific
wastewater grants, numerous research grants, and other special grants. Other prime
issues include the adequacy of funds to capitalize wastewater needs; funding of state
programs including the shifting of enforcement responsibility to the states; and future
funding of the Superfund program.
Table 10. Environmental Protection Agency Appropriations,
FY1998-FY2002
(budget authority in billions)
FY1998
FY1999
FY2000
FY2001
FY2002
$7.4
$7.6
$7.4
$7.8
$8.08
Source: Figures for FY1998-FY2001 are from administration budget submissions of subsequent
years; figures for FY2002 are from the House Committee on Appropriations, and are the latest
available estimates for that fiscal year. Final spending levels remain uncertain until all program
experience has been recorded, and any supplemental appropriations or rescissions have been included.
State and Tribal Assistance Grants. How to meet the Nation’s water
infrastructure capital needs remains a primary appropriations issue for EPA. The
Administration’s proposed FY2003 level of $3.464 billion for the State and Tribal
Assistance Grants account (STAG) is $269 million, or 7% less than the $3.733
billion allocated in FY2002. The major reason for the proposed decrease is the
Administration’s decision not to seek continued funding for over $300 million
designated for specific water grants in FY2002. S. 2797 recommends $4.01 billion.
Within the STAG account, the budget proposes $1.2 billion for wastewater
funding, $150 million less than the $1.35 billion for FY2002. Another major account
activity, drinking water state revolving funds, is projected to receive $850 million,
the same as funding for FY2002. The Senate Committee bill proposes an additional
$25 million.

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CRS-44
Table 11. Appropriations: Environmental Protection Agency,
FY2002-FY2003
(budget authority in billions)
FY2002
FY2003
FY2003
FY2003
FY2003
Program
enacted
request
House
S. 2797
Conf.
Science and Technology
.735
.781
–
.796
–
(transfer in from Superfund)
(.037)
(.111)
–
(.086)
–
Emergency supplemental
.090
–-
–
–
–
Environmental programs,
compliance (management)
2.055
2.048
–
2.140
–
Emergency supplemental
.039
–-
–
–
–
Office of Inspector General
.046
.048
–
.048
–
(transfer in from Superfund)
(.012)
(.013)
–
(.013)
Buildings and facilities
.025
.043
–
.043
–
Superfund (net, after transfers)
1.221
1.149
–
1.174
–
direct appropriations
1.270
1.273
–
1.273
–
transfers out from Superfund
.049
.124
–
.099
Emergency supplemental
.041
–
–
–
–
Leaking Underground Storage
Tank Trust Fund
.073
.072
–
.072-
–
Oil spill response
.015
.016
–
.016
–
State and tribal assistance
3.733
3.464
–
4.010
–
Emergency supplemental
.005
–-
–
–
–
Subtotal (EPA)
8.079
7.621
–
8.299
–
Source: S.Rept. 107-222
Note: Rounding may cause discrepancies in subtotals.
For state and tribal administrative grants, the budget seeks $1.2 billion, $84
million more than current funding; most state administrative grants would remain the
same as in the current year. One new grant program would provide $15 million in
grants to assist states in enforcing environmental laws and regulations. This
represents a shift in policy, moving more enforcement to the states, and is
accompanied by a related $15 million decrease in EPA’s own enforcement efforts.
A similar proposal in the FY2002 proposal was not agreed to by the appropriators.
The Senate Committee on Appropriations continues to disagree with the limitations,
and added $15 million to the agency’s enforcement budget. Also part of the
proposal, and approved by the Senate action, is $170 million in Brownfields Grants
for contaminated sites with development potential. And, the proposal seeks $20
million for Targeted Watersheds Project grants to implement restoration in priority
watersheds.

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CRS-45
Superfund. The future of the Superfund, and its purpose of cleaning up toxic
waste sites remains an issue. The FY2003 budget request of $1.149 billion is a
proposed $72 million decrease compared to FY2002. S. 2797 recommends $1.174
billion. There is concern over the ability of the declining trust fund, which is
financed by chemical fees and other taxes, to finance the program beyond FY2003.
The available balance of the fund has been declining since its taxing authority
expired on December 31, 1995. The President’s FY2003 budget does not propose
renewing the taxes that support Superfund, and its balance at the beginning of
FY2003 was projected to be $427 million, a level sufficient to accommodate the
fund’s share of the projected spending authority of $1.2 billion needed for FY2002,
46% of which would come from the fund and 54% from general appropriations.
Historically, the share paid by the trust fund has been declining. In the past, the
trust fund paid for the majority of Superfund activities; in the current year, the fund
supports 50% of the program costs, in future years, general appropriations may have
to pay the majority of costs. Some have criticized this fundamental change in policy,
which lessens the responsibility of polluters, under the principle that the “polluter
pays,” and instead socializes pollution costs across the economy, by funding them as
costs to the general Treasury.
For more detailed information on the Superfund, see: CRS Issue Brief
IB10078, Superfund and the Brownfields Issue in the 107th Congress. For
information on wastewater treatment issues, see CRS Report 98-323, Wastewater
Treatment: Overview and Background. For an in-depth discussion of the EPA
budget proposal, see CRS Issue Brief IB10101, The Environmental Protection
Agency’s FY2003 Budget.
Federal Emergency Management Agency
The Federal Emergency Management Agency (FEMA) helps states and
localities prepare for and cope with catastrophic disasters. FEMA administers
policies related to emergency management, including: disaster relief, fire prevention,
earthquake hazard reduction, emergency broadcasting services, flood insurance,
mitigation programs, and dam safety. The Bush Administration and Congress have
emphasized FEMA’s role in preparing for and responding to terrorist attacks since
September 11.
At least 28 statutes and executive directives set forth the responsibilities of
FEMA. (These authorities are summarized in CRS Report RL31285, FEMA’s
Mission: Policy Directives for the Federal Emergency Management Agency.) The
Robert T. Stafford Disaster Relief and Emergency Assistance Act (42 U.S.C. 5121
et seq.) authorizes the President to declare major disasters or emergencies (the latter
provide considerably less federal assistance than the former), sets out eligibility
criteria for federal aid, and specifies the types of assistance that may be provided by
FEMA and other federal agencies.

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CRS-46
Table 12. Appropriations: Federal Emergency Management
Agency, FY2002-FY2003
(budget authority in billions)
FY2002
FY2003 FY2003
FY2003
FY2003
Program
enacted
request
House
S. 2797
Conf.
Disaster relief a
6.521
1.843
–
1.843
–
Direct appropriations
.664
1.843
.343
Contingent emergency funds
1.500
.000
–
1.500
–
Emergency Response Fund
4.357
.000
–
.000
–
Nat’l pre-disaster mitigation
.000
.300
–
.025
–
Disaster assist. loan; admin.
.001
.001
–
.001
–
Radiological emergency prep.
-.001
-.001
–
-.001
–
Salaries and expensesa
.266
.240
–
.240
–
Emergency Response Fund
.025
.000
–
.000
–
Inspector General
.010
.011
–
.018
–
Emergency management,
planning assistancea
.637
3.747
–
1.747
–
Emergency Response Fund
.220
.000
–
.000
–
Emergency food, shelter
.140
.153
–
.153
–
Flood map modernization
.000
.300
–
.300
–
Nat’l Flood Insurance Fundb
.105
.110
–
.110
–
Subtotal (FEMA)
7.925
6.704
–
4.435
–
Source: S.Rept. 107-222
Note: Rounding may cause discrepancies in subtotals.
a According to the Office of Management and Budget, as of March 31, 2002, a total of $5.8 billion in
budget authority was available to FEMA through the Emergency Response Fund, as follows: $5.6
billion for disaster relief, $30 million for salaries and expenses, and $215 million for emergency
management planning and assistance.
b National Flood Insurance Fund data includes salaries and expenses and flood mitigation funding.
Disaster assistance funding varies from year-to-year by the severity and
frequency of declared catastrophes. In recent years, billions have been appropriated
to help communities recover from tornados, hurricanes, floods, earthquakes, and
other incidents. For detailed information see CRS Report RL31359, Federal
Emergency Management Agency Funding for Homeland Security and Other
Activities.

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CRS-47
The FEMA budget requests for each year include funds for normal agency
operations and grant-in-aid assistance to nonfederal entities, in addition to emergency
disaster relief. Should funds appropriated in annual legislation for disaster relief
prove insufficient, supplemental funds are requested. The terrorist attacks of
September 11 had a significant impact on funding for the agency. Through P.L. 107-
73, a total of $2.9 billion was appropriated for FEMA for FY2002. In addition,
through supplemental appropriations legislation (P.L. 107-38, P.L. 107-117) enacted
in response to the terrorist attacks, another $6.6 billion was made available to the
agency, resulting in a total of $9.5 billion for FY2002.
Perhaps the most significant change in funding requested by the Administration
for FY2003 involves funding terrorism preparedness activities. The First Responder
Initiative, proposed to be funded at $3.5 billion, would provide funds for state and
local governments to purchase equipment, conduct simulations and drills on
responses to terrorist incidents, and undertake other preparedness activities. As
envisioned by the Administration, these funds would be administered by the
Emergency Preparedness and Response Directorate of the proposed Department of
Homeland Security (H.R. 5005/S. 2452) now the subject of debate in the 107th
Congress.
S. 2797 recommends $4.435 billion for FEMA for FY2003, and assumes that
$1.5 billion will be available as Contingent Emergency appropriations. S. 2797
recommends $2 billion less than the request for Emergency Planning and Assistance.
To reduce future losses from disasters, in recent years FEMA has sought
increased funding for mitigation activities. Legislation to establish a new hazard
mitigation program was approved by the 106th Congress (P.L. 106-390). For
information on the legislation, see: CRS Report RS20736, Disaster Mitigation Act
of 2000 (P.L. 106-390): Summary of New and Amended Provisions of the Stafford
Disaster Relief Act.
National Aeronautics and Space Administration
The National Aeronautics and Space Administration (NASA) receives
appropriations within two accounts: Human Space Flight (HSF); and Science,
Aeronautics and Technology (SAT). Funding for the Office of Inspector General is
identified separately. In the FY2003 budget, the HSF account includes funding for
the International Space Station; Space Shuttle; Payload and Expendable Launch
Vehicle Support; Investments and Support; Space Communications and Data
Systems; and Safety, Mission Assurance, and Engineering. The SAT account
contains the bulk of NASA’s research and development activities, including Space
Science; Biological and Physical Research; Earth Sciences; Aero-Space
Technologies; and Academic Programs.
NASA requested $15.000 billion for FY2003, compared to $14.902 billion
appropriated in FY2002 ($14.793 billion in the FY2002 VA-HUD-IA Appropriations
Act, and $108.5 million in the FY2002 DOD and Supplemental Appropriations Act),
an increase of 0.66%. According to OMB, the NASA request for FY2003 is $15.117
billion, because OMB includes $117 million in federal retiree costs in the request

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CRS-48
(see explanation below). The Senate Appropriations Committee has recommended
(S. 2797, S.Rept 107-222) an additional $200 million for NASA for FY2003.
NASA’s budget structure is changing, complicating efforts to track funding for
specific programs or enterprises. First, NASA is moving to full cost accounting
where costs for personnel and construction of facilities eventually will be included
in individual program costs, instead of grouped together at a broader level. The
accounting changes began in the FY2002 budget and are continued in FY2003.
Second, NASA shifted some of the funding for “Space Operations” from HSF
to SAT. (Space Operations involve activities related to tracking and communicating
with spacecraft in Earth orbit and beyond, and with aeronautics and aerospace
vehicles within Earth’s atmosphere. It also includes the telecommunications
networks used by the agency for its internal operations.) Thus, some of the apparent
decline in the HSF budget, and the increase in the SAT budget, is attributable to these
transfers rather than a reduction or increase in programs. Also, beginning in FY2002,
NASA shifted funds for space station research out of HSF and into SAT, specifically
the Office of Biological and Physical Research (OBPR). Total space station program
funding now is the sum of the funds in the International Space Station (ISS) line plus
the “ISS research” portion of OBPR.
Table 13. National Aeronautics and Space Administration
Appropriations, FY1998-FY2002
(budget authority in billions)
FY1998
FY1999
FY2000
FY2001
FY2002
$13.65
$13.67
$13.60
$14.29
$14.90
Source: Figures for FY1998-FY2001 are from administration budget submissions of subsequent
years; figures for FY2002 are from the House Committee on Appropriations, and are the latest
available estimates for that fiscal year. Final spending levels remain uncertain until all program
experience has been recorded, and any supplemental appropriations or rescissions have been included.
Third, the President proposed legislation under which federal departments and
agencies, beginning with the FY2003 budget, would pay the government share of
federal retiree (pensions and health insurance) costs for their employees on an accrual
basis, thereby increasing current year costs. Although the legislation is not being
considered, NASA’s FY2003 budget was presented with $117 million in federal
retiree costs included. Thus, when discussing NASA’s FY2003 request, some refer
to $15.000 billion, while others use $15.117 billion. The difference is whether the
retiree costs are included. This report uses the $15.000 billion figure, following the
practice of the Appropriations Committees, which have criticized the Administration
for including the legislative proposal in the details of account requests.
More details on NASA’s FY2003 request are available in CRS Report
RL31347. Information on NASA’s FY2002 budget is contained in CRS Report
RL31037.

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CRS-49
International Space Station (ISS). For FY2003, NASA is requesting
$1.839 billion for the ISS program: $1.492 billion in the HSF account; and $347
million in the Office of Biological and Physical Research (OBPR) budget, part of the
SAT account. The HSF funding is for building the space station. The OBPR funding
is for the scientific facilities to enable research to be conducted aboard it (often called
the “space station research” or “space station science” budget). For FY2002, NASA
received $2.093 billion in total for the ISS program. The FY2003 request is $254
million less than the comparable figure for FY2002, reflecting the fact much of the
hardware has been built and the Bush Administration has decided to truncate
construction at a stage it calls “core complete.” The FY2003 request is slightly
higher than the $1.818 billion NASA projected that it would need for FY2003. The
Senate Appropriations Committee approved the requested amount.
The space station is under construction in orbit and the facility has been
permanently occupied by successive crews on 4-6 month shifts since November
2000. Much remains to be built, however, and in early 2001, NASA revealed
significant cost growth for completing the station. The new estimate would exceed
a congressionally imposed cap of $25 billion. In response, the Bush Administration
directed NASA to stop construction at core complete in FY2004. At that point, the
U.S. hardware now awaiting launch will be in orbit. The Bush Administration then
plans to proceed with launch of the European and Japanese laboratory modules now
under construction, and another scientific module being built by Japan for NASA as
part of a barter agreement (the Centrifuge Accommodation Module).
Table 14. Appropriations: National Aeronautics and Space
Administration, FY2002-FY2003
(budget authority in billions)
FY2002
FY2003
FY2003
FY2003
FY2003
Program
enacted
request
House
S. 2797
Conf.
Human space flight
6.912
6.131
–
6.131
–
Emergency supplemental
.076
.000
–
.000
–
Science, aeronaut., tech.
7.857
8.845
–
9.045
–
Emergency supplemental
.033
.000
–
.000
–
Inspector General
.024
.025
–
.025
–
Subtotal (NASA)
14.902
15.000
–
15.200
–
Source: S.Rept. 107-222.
Note: Rounding may cause discrepancies in subtotals.
The Bush Administration cancelled plans to build a Propulsion Module, and
indefinitely deferred two other U.S. ISS elements: the Habitation Module and the
Crew Return Vehicle (CRV). Without the CRV, ISS crew size may be limited to
three astronauts, which could severely restrict the amount of scientific research
conducted there. NASA hopes to have a new, independently verified cost estimate

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CRS-50
for completing the “core complete” configuration by September 2002. Subsequently,
the Bush Administration will make recommendations on what, if any,
“enhancements” to make, such as adding back capabilities for a larger crew.
Europe, Japan, Canada, and Russia are all partners with the United States in
building the space station, and all have expressed deep concern with the revised U.S.
plan. They point out that the term “core complete” does not appear in the
international agreements that govern the station program and hence are not formally
recognized. The Intergovernmental Agreement (IGA) is considered a treaty in all the
countries that are partners in the ISS program, except the United States where it is an
Executive Agreement. The international partners want the Bush Administration to
commit to building the space station as agreed in the IGA and associated Memoranda
of Understanding (MOUs) between NASA and its counterpart agencies, but the
Administration is not willing to make that commitment. See CRS Issue Brief
IB93017 for more on the space station program.
Space Shuttle. For FY2003, NASA is requesting $3.208 billion for the shuttle
program, slightly less than the $3.273 billion it received in FY2002. The Senate
Appropriations Committee approved the full request.
NASA insists that shuttle safety is a top NASA priority, but the aging of the
shuttle systems, and concern about the skill mix of the shuttle workforce as the
shuttle program transitions to a “single prime contractor,” makes safety an ongoing
issue. In testimony to the House Science Committee on April 18, 2002, Richard
Blomberg, who recently completed his term as chairman of an independent panel that
oversees human space flight safety at NASA, said that in all his years of involvement,
“I have never been as concerned for Space Shuttle safety as I am right now.” NASA
has grounded the fleet of four space shuttle orbiters because cracks were found in
liners of hydrogen fuel lines in each of the orbiters. NASA is investigating the cause
of the cracks and determining what needs to be done in response. The agency says
that September 26, 2002, is the earliest the next shuttle could be launched. Two
more shuttle missions to the space station—including one to replace the current
“Expedition 5" crew with “Expedition 6"—are scheduled in 2002, plus a scientific
research mission. The impact of the grounding on the space station program is not
yet clear.
Decisions on how much to spend on safety and supportability upgrades for the
shuttle are partially dependent on the length of time the shuttle is required to be in
service. NASA is developing technologies for a vehicle to replace the shuttle (see
Aero-Space Technology below). NASA’s current plans are to operate the shuttle
until 2012, but the agency is assessing what further upgrades would be required if the
shuttle is needed through 2020 should the new program not proceed as planned. In
its FY2003 budget, NASA is proposing a 43% reduction for the period FY2002-2006
in funding for shuttle upgrades. In response to questions at a House Science
Committee hearing on February 27, 2002, NASA Administrator O’Keefe assured the
committee that the funding level proposed in the FY2003 budget will not
compromise shuttle safety. For more on the shuttle program, see CRS Issue Brief
IB93062.

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CRS-51
Space Science. For FY2003, NASA is requesting $3.414 billion for the
Office of Space Science (OSS), compared with $2.867 billion in FY2002. Of the
$547.2 million increase, $165.5 million is a transfer from the HSF account for the
Deep Space Network (DSN), and another $73.9 million is to cover a shortfall in the
DSN line item. Thus, $239.4 million of OSS’s FY2003 budget request is due to the
transfer of DSN, not new program initiatives. Funding for OSS programs would
increase overall by $308 million, reflecting funding increases in some areas, but
decreases in others. The budget proposes $124 million for a new Nuclear Systems
Initiative to develop nuclear power units for spacecraft and perform research on
nuclear propulsion, $704 million for advanced technology development (an increase
of $264 million over FY2002), and $15 million to create a “New Frontiers” program.
The Senate Appropriations Committee recommended a net increase of $78
million for space science: an addition of $105 million to continue the Pluto-Kuiper
Belt mission, a reduction of $13 million from the Nuclear Systems Initiative, an
addition of $2.5 million in congressionally directed spending, and a reduction of
$16.5 million because of the decision to delay construction of a flight projects
building at the Jet Propulsion Laboratory.
Some planetary scientists believe NASA’s next solar system exploration priority
should be Pluto, since it has not yet been observed at close range. They argue that
a spacecraft must be launched quickly (by 2006) so it can receive a “gravity assist”
from Jupiter and reach Pluto before Pluto’s atmosphere collapses (around 2020) as
the planet moves further from the Sun. The spacecraft would also study objects in
the Kuiper Belt, thought to be the “home” of some comets. Other scientists believe
Europa, a moon of Jupiter, is more scientifically interesting and should have higher
priority. Scientists are intrigued by Europa because it appears to have a surface of
frozen water, with liquid water underneath. Water is essential to life, and the
discovery of liquid water suggests the possibility that life could exist there. A
spacecraft designed to study Europa is more technically challenging and expensive
than the Pluto/Kuiper Belt (PKB) mission.
NASA’s cost estimate for the Europa mission is $1.2 billion, compared to
approximately $500 million for PKB. NASA tried to cancel the PKB mission last
year, but Congress added funding to continue its development in FY2002. Congress
also approved the Europa mission, capping funding at $1 billion.
In the FY2003 budget, the Bush Administration proposed cancellation of both
programs because they are too expensive. Instead, the Administration proposed a
“New Frontiers” program in which planetary exploration proposals would be
competitively selected, with a cost cap of $650 million. The FY2003 request
includes $15 million for New Frontiers. The Administration also plans to initiate
development of nuclear power and propulsion that could enable spacecraft to reach
their destinations more quickly and operate for longer periods of time (discussed
below).
In a July 2002 report, the National Research Council (NRC) identified a mission
to the Kuiper Belt and Pluto (but not necessarily the PKB mission currently being
developed) as the top priority mission in the $650 million cost category. The NRC
identified a Europa mission as the top priority in a “flagship” class of more expensive

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CRS-52
probes, but concluded the Europa mission is behind the Pluto mission in terms of
technical readiness. The Senate Appropriations Committee recommended adding
$105 million for FY2003 to continue development of the PKB mission as the first
New Frontiers program. It also approved the $15 million requested for New
Frontiers, making a total of $120 million available for PKB. The committee did not
recommend funding a Europa mission.
Biological and Physical Research. For FY2003, NASA requested $842.4
million for the Office of Biological and Physical Research (OBPR), compared with
$820 million in FY2002. As noted, funding responsibility for scientific research
aboard the International Space Station (ISS) shifted from HSF to this office in
FY2002. OBPR’s FY2003 request includes $347 million for ISS research. It also
funds two new initiatives: the Space Radiation Initiative ($10.1 million) to better
understand radiation effects on astronauts in space; and the Generations Initiative
($11.2 million), to learn how organisms evolve in space.
In FY2002, NASA cut space station research funding by $1 billion over the
FY2002-2006 time period to compensate partially for the cost growth in the ISS
program (discussed earlier). Also the expected reduction in crew size from seven to
three will affect how much research can be conducted. A special task force,
REMAP, reported to the NASA Advisory Council in July 2002 with
recommendations on reprioritizing the space station research strategy.
The Senate Appropriations Committee approved all the NASA-requested OBPR
funding, and added $10.6 million in congressionally directed funding.
Earth Science. For FY2003, NASA requested $1.629 billion for the Office
of Earth Science (OES), virtually identical to its FY2002 funding level of $1.626
billion. For FY2003, $42.4 million was transferred from the HSF account to OES
for the Ground Network, and another $37.6 million is needed to cover a shortfall
because of that transfer, so a total of $80.6 million of OES’s FY2003 budget request
is proposed for the transfer of the Ground Network. Some therefore may view the
FY2003 funding level as a decrease compared to FY2002 in terms of program
content.
OES is continuing to launch its first series of Earth Observing System (EOS)
satellites and Earth Probes. OES developed a plan for the “EOS Follow-On”
program through 2010 that was endorsed by the Space Studies Board of the National
Academy of Sciences. However, in 2001, the Bush Administration announced a new
Climate Change Research Initiative (CCRI). The Department of Commerce is
responsible for scoping the CCRI and determining how it will interact with the
existing U.S. Global Change Research Program. Those decisions ultimately will lead
to choices about what satellites NASA should launch to support CCRI’s goals.
Thus, plans for the EOS program are uncertain. NASA is moving forward,
however, with development of the Ocean Topography Mission, the NPOESS
Preparatory Project (NPP), and the Landsat Data Continuity Mission (LDCM).
LDCM is intended to continue producing data similar to that from the Landsat series
of satellites that have been launched since 1972 (two are still operating). The Bush
Administration directed NASA to purchase Landsat-type data from the private sector

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CRS-53
rather than build its own satellite. Two companies were selected by NASA in March
2002 to develop proposals to accomplish that goal.
The Senate Appropriations Committee made a net addition of approximately
$54 million to the Earth Sciences budget: additions of $25 million for the EOS Data
Information System (EOSDIS), $20 million for pre-formulation studies for several
Earth science activities, and $22 million in other congressionally directed spending;
and a reduction of $3.4 million because of the delayed construction of the flight
projects building at the Jet Propulsion Laboratory.
Aero-Space Technology. For FY2003, NASA requested $2.816 billion for
Aero-Space Technology, compared with $2.508 billion in FY2002. The Office of
Aero-Space Technology (OAST) supports NASA’s aeronautical research and
development (R&D) program, the advanced space transportation technology
program, information technology, and technology transfer. The Senate
Appropriations Committee recommended a net reduction of $1.25 million from this
account—adding $28.75 million for various aeronautics programs and
congressionally directed spending, and reducing the Space Launch Initiative by $30
million.
The total requested funding for Aeronautics R&D is $541.4 million, a decrease
of 10% from the FY2002 appropriation. In February 2002, NASA presented its
technology vision for aviation in the report The NASA Aeronautics Blueprint
[www.aerospace.nasa.gov/aero_blueprint/]. The report identifies a variety of
challenges that could be addressed by advances in aeronautics technology, but it does
not address funding for R&D. Although FY2002 saw a 5% increase compared with
FY2001, funding for aeronautics R&D is still down considerably from its FY1998
peak of $920 million, and the proposed further reduction may be contentious.
Among the more controversial issues are funding for the rotorcraft program and
the Small Aircraft Transportation System (SATS). The FY2003 budget request
provides no funding for the rotorcraft program, which was funded at congressional
direction in FY2002 ($12.5 million). SATS would increase by 29% to $20 million.
A review of SATS by the National Academy of Sciences was completed in March
2002, after release of the President’s budget. The report endorsed NASA R&D on
small aircraft and small airports, but it was skeptical about NASA’s long-range
vision for the SATS concept in particular. The Senate Appropriations Committee
recommended the full requested amount for aeronautics, plus an additional $7
million for the Ultra Efficient Engine Technology and Quiet Aircraft Technology
programs, and $22 million for other congressionally directed funding.
A primary focus of NASA’s advanced space transportation effort is the Space
Launch Initiative (SLI) to develop technologies for a new Reusable Launch Vehicle
(RLV) to replace the space shuttle. SLI replaces the unsuccessful X-33 and X-34
programs. SLI is intended to reduce the technical risk involved in building a 2nd
generation RLV (the shuttle is the 1st generation RLV), and provide the necessary
technical and cost information to enable a decision in 2006 as to what RLV to build.
The SLI program itself does not involve development of the launch vehicle, only of
the technologies that will permit a design choice to be made. NASA is focusing on
technologies that would meet NASA requirements, but also is trying to “converge”

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CRS-54
its requirements with those of the commercial space launch services market and the
Department of Defense to determine if a single vehicle could meet all requirements.
Although the original intent was for the private sector to fund development of,
own, and operate the new RLV, NASA concedes that current market conditions make
it unlikely that the private sector will fund development. NASA still hopes the new
vehicle will be owned and operated by the private sector. Informal cost estimates for
development are in the $10 billion range (in addition to the $5 billion being spent on
SLI), though actual cost estimates will not be available until the SLI program is
completed. NASA intends that the new vehicle will be operational by 2012, meaning
that a substantial commitment of government funding would be required for the
FY2007-FY2012 time period. Some observers are skeptical that a new vehicle can
be developed in such a short time, an important consideration in terms of deciding
how long the shuttle will be needed and therefore how much to spend on shuttle
upgrades (discussed earlier). For more on the SLI program, see CRS Issue Brief
IB93062.
The FY2003 request for SLI is $759 million, compared with $467 million in
FY2002. The Senate Appropriations Committee cut $30 million from the FY2003
request.
National Science Foundation
The FY2003 request for the National Science Foundation (NSF) is $5.029
billion, a 5% increase ($240 million) over the FY2002 estimate of $4.789 billion.
The FY2003 request provides support for several interdependent priority areas:
biocomplexity in the environment ($79 million, 36% above FY2002), information
technology research ($286 million, 3% above FY2002), learning for the 21st century
($185 million, 27.5% above FY2002), nanoscale science and engineering ($221
million, 11% above FY2002), mathematical sciences ($60 million, 100% increase
above FY2002), and social, behavioral and economic sciences ($10 million, new in
the FY2003 request).
The request provides a second installment of $200 million for the President’s
Math and Science Partnerships program (MSP). Additional FY2003 highlights
include increased funding for graduate students ($26 million), continued support of
plant genome research ($75 million), increased investment in NSF’s administration
and management portfolio ($268 million), and funding for the Partnerships for
Innovation program ($5 million). As part of the Administration’s new multi-agency
Climate Change Research Initiative, the NSF will provide $15 million for research
to advance understanding in the highly focused areas of climate science and to
facilitate policy-decision making in climate research.
In FY2003, the Administration proposes the transfer of three programs from
other agencies to the NSF. The proposed transfers include the National Sea Grant
program, currently at the National Oceanic and Atmospheric Administration ($57
million), Environmental Education, currently at the Environmental Protection
Agency ($9 million), and Hydrology of Toxic Substances, currently at the United
States Geological Survey ($10 million).

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CRS-55
Research and Related Activities. Included in the FY2003 request is
$3.783 billion for Research and Related Activities (R&RA), a 5% increase ($185
million) over the FY2002 estimate of $3.599 billion. R&RA funds research projects,
research facilities, and education and training activities. In the FY2003 request, the
NSF has placed an emphasis on funding rates for new investigators and on increasing
grant size and duration. The R&RA includes Integrative Activities (IA), created in
FY1999. IA funds major research instrumentation, Science and Technology Centers,
Science of Learning Centers, Partnerships for Innovation, disaster response research
teams, and the Science and Technology Policy Institute. The FY2003 request for IA
is $111 million, an increase of $4 million over FY2002.
Research project support in the FY2003 request totals $2.560 billion, an
increase of 5% over FY2002. Support is provided to individuals and small groups
conducting disciplinary and cross-disciplinary research. Included in the total for
research projects is support for centers, proposed at $380 million. NSF supports a
variety of individual centers and center programs. The request provides $45 million
for Science and Technology Centers, $53 million for Materials Centers, $62 million
for Engineering Research Centers, and $13 million for Physics Frontiers Centers.
Research facility support in FY2003 is $1.122 billion, a 2% decrease from the
FY2002 estimate.
Table 15. National Science Foundation Appropriations,
FY1998 to FY2002
(budget authority in billions)
FY1998
FY1999
FY2000
FY2001
FY2002
$3.67
$3.90
$4.43
$4.79
$4.79
Source: Figures for FY1998-FY2001 are from administration budget submissions of subsequent
years; figures for FY2002 are from the House Committee on Appropriations, and are the latest
available estimates for that fiscal year. Final spending levels remain uncertain until all program
experience has been recorded, and any supplemental appropriations or rescissions have been included.
Major Research Equipment; Facilities Construction. The Major
Research Equipment and Facilities Construction (MREFC) account is funded at
$126.3 million in FY2003, a 9% decrease ($12.5 million) from the FY2002 level.
The MREFC, established in FY1995, supports the acquisition and construction of
major research facilities and equipment that extend the boundaries of science,
engineering, and technology. Seven projects are supported in this account for
FY2003, five ongoing projects and two new projects – construction of the Atacama
Large Millimeter Array ($30 million), the Large Hadron Collider ($9.7 million), the
Network for Earthquake Engineering Simulation ($13.6 million), the South Pole
Modernization Project ($6 million), Terascale Computing Systems ($20 million),
Earthscope ($35 million), and the National Ecological Observatory Network, Phase
I ($12 million). No funds are requested in FY2003 for the High-Performance
Instrumented Airborne Platform for Environmental Research (HIAPER) or the
IceCube R&D project because they have been determined to be of lower priority.

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CRS-56
Table 16. Appropriations: National Science Foundation,
FY2002-FY2003
(budget authority in billions)
FY2002 FY2003
FY2003
FY2003
FY2003
Program
enacted request
House
S. 2797
Conf.
Research, related activities
3.598
3.783
–
4.132
–
Major research equipment
.139
.126
–
.079
–
Education, human resources
.875
.908
–
.948
–
Salaries and expenses
.170
.203
–
.182
–
National Science Board
–
–
–
.004
Office of Inspector General
.007
.008
–
.009
–
Subtotal (NSF)
4.789
5.028
–
5.353
–
Source: House Committee on Appropriations.
Note: Rounding may cause discrepancies in subtotals.
Education and Human Resources. The FY2003 request for the Education
and Human Resources Directorate (EHR) is $908.1 million, a 3.8% increase ($33.1
million) over FY2002. Support at the various educational levels in the FY2003
request is as follows: precollege, $359.6 million; undergraduate, $157.4 million; and
graduate, $136.9 million. Support at the precollege level includes $200 million for
the Math and Science Partnership (MSP), a cornerstone of the President’s education
reform agenda. The MSP will provide funding for states and local school districts
to join with colleges and universities to strengthen K-12 science and mathematics
education.
Funding increases to $27 million for Centers for Learning and Teaching (CLT).
The focus of the CLTs will be on developing the next generation of professionals to
manage and direct the development of instructional materials, large scale
assessments, and education research and evaluation. Support will continue for
Systemic Reform Initiatives and Instructional Materials Development. Selected
programs at the undergraduate level are Advanced Technological Education, Louis
Stokes Alliances for Minority Participation, Scholarship for Service, Historically
Black Colleges and Universities-Undergraduate Program, and Tribal Colleges and
Universities Program.
An increase of 21.7% in FY2003 for graduate level programs will allow NSF
to raise the stipend of graduate fellows and to increase the number of offers to new
fellowships. Support at this level is directed at the Graduate Research Fellowship,
Graduate Teaching Fellows in K-12 Education, Integrative Graduate Education and
Research Traineeships, and Alliances for Graduate Education and the Professoriate.
Funding for the Experimental Program to Stimulate Competitive Research (EPSCoR)
is $75 million. (An additional $30 million from R&RA will support EPSCoR
activities.)

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CRS-57
It is anticipated that the H-1B nonimmigrant petitioner fees collected in FY2003
will approximate $92.5 million, $2.5 million above the FY2002 estimate. (P.L. 106-
313, The American Competitiveness in the 21st Century Act, stipulates that H-1B
receipts be used for computer science, engineering, and mathematics scholarships for
disadvantaged students and precollege private and public sector partnerships).
For additional information on NSF, see: CRS Report 95-307, U.S. National
Science Foundation: An Overview.
Other Independent Agencies
In addition to funding for VA, HUD, EPA, FEMA, NASA and NSF, several
other smaller “sundry independent agencies, boards, commissions, corporations, and
offices” will receive their funding through the bill providing appropriations for VA,
HUD, and Independent Agencies for the fiscal year beginning October 1, 2002.
Agency for Toxic Substances and Disease Registry. This agency,
which is placed in the Department of Health and Human Services (HHS), manages
the Toxic Substances and Environmental Public Health program, which issues
toxicological profiles of possible toxic substances. The Agency conducts health
studies, evaluations, or other activities, using biomedical testing, clinical evaluations,
and medical monitoring. The agency was funded (via earmark) through EPA’s
Hazardous Substance Superfund through FY2000. P.L. 106-377 provided a separate
line of $75 million for the agency for FY2001, although the Agency continued to be
financed through the structure of the Superfund. The Administration proposed, and
P.L. 107-73 provided $78.235 million for FY2002, continuing the separate funding
line for its appropriations. The conference report requested that adequate funds be
used for minority health professions, and for studies of the health effects of
consuming Great Lakes fish.
For FY2003, the Administration’s requested $77.388 million. S. 2797
recommends an increase over the request to a total of $81 million, and asks for a
continuation of the Great Lakes Fish Consumption Study. The bill also would direct
the agency to “implement a multi-faceted health study of polychlorinated biphenyl
(PCB) exposure in Anniston, Alabama [and] monitor and assess the long-term health
status of children, adolescents, and young adults in Herculaneum, Missouri regarding
their potential exposure to lead.”
American Battle Monuments Commission. The Commission is
responsible for the construction and maintenance of memorials honoring Armed
Forces battle achievements since 1917. Included among the Commission’s functions
are the maintenance of 24 American military cemeteries and 31 memorializations in
15 foreign countries, as well as three large memorials in the United States.

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CRS-58
Table 17. Appropriations: Other Independent Agencies,
FY2002-FY2003
(budget authority in billions)
FY2002 FY2003 FY2003
FY2003
FY2003
Program
enacted request
House
S. 2797
Conf.
Agency for Toxic Substances and
Disease Registry
.078
.078
–
.081
–
American Battle Monuments
Commission
.035
.030
–
.030
–
Chem. Safety and Hazard
Investigations Board
.008
.008
–
.008
–
Cemetery Expenses, Army
.023
.024
–
.024
–
Community Development
Financial Institutions
.080
.068
–
.073
–
Consumer Product Safety Comm.
.055
.057
–
.057
–
Corporation for National and
Community Servicea
.407
.636
–
.521
–
Council, Environ. Quality;
Office, Environ. Quality
.003
.003
–
.003
–
Court of Appeals for Veterans
Claims
.013
.015
–
.015
–
Fed. Consumer Inform. Center
.007
.013
–
.015
–
Federal Deposit Insurance
Corporation (transfer)
(.034)
(.031)
–
(.031)
–
Interagency Council on Homeless
–
–
–
.002
National Credit Union Admin.
.001
.001
–
.001
–
National Institute, Environmental
Health Sciences
.070
.074
–
.076
–
Emergency Supplemental
.011
.000
–
.000
–
Neighborhood Reinvestment
Corporation
.105
.105
–
.110
–
Office, Science &Tech.
.005
.005
–
.005
–
Selective Service System
.025
.026
–
.026
–
Subtotal: 0.926
1.143
–
1.047
–
Source: S.Rept. 107-222
Note: Rounding may cause discrepancies in subtotals.
a Totals for CNCS include $5 million, specified for the Corporation’s Office of Inspector General, for
each fiscal year.

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S. 2797 endorses the Administration request of $30.4 million for the
Commission for FY2003. P.L. 107-73 added $7 million to the Administration’s
FY2002 request (bringing the total to $35.466 million), in part to complete scheduled
but delayed maintenance. Also, $5 million of the added amount was to provide for
development of a visitor’s center at the site of the D-Day invasion in Normandy.
In recent years, the Commission has received considerable attention as the
agency that collects funds for the construction of a memorial in Washington, D.C. to
honor those who served during World War II. The Commission projects that the
World War II Memorial Fund will reach $175 million during FY2002. Congress has
given the Commission authority to borrow up to $65 million from the U.S. Treasury
to facilitate a more rapid completion of the memorial. P.L. 106-377 appropriated $28
million for the Commission for FY2001.
Cemeterial Expenses, Army. Arlington National Cemetery and the
Soldiers’ and Airmen’s Home National Cemetery are administered by the U.S. Army.
By FY2002, 289,494 persons were interred/inurned in these cemeteries. In addition
to 6,625 interments and inurnments estimated for FY2003, Arlington is the site of
approximately 3,000 other ceremonies, and 4 million visitors, annually.
S. 2797 endorses the Administration request of $24.445 million for these
expenses for FY2003. P.L. 107-73 provided $22.537 million for FY2002, continuing
with the expansion of Arlington National Cemetery into contiguous land sites
previously used for military commands, and to fund another increment of the
Columbarium Complex.
Chemical Safety and Hazard Investigation Board. The Board, which
was authorized by the Clean Air Act Amendments of 1990, investigates hazardous
substance spills or releases. Congress appropriated $7.85 million for FY2002. The
Administration requests $7.85 million for FY2003, and S. 2797 endorses that
amount.
S.Rept. 107-222 indicates the Committee is “deeply concerned” about
management deficiencies outlined in a March, 2002 report by the Federal Emergency
Management Agency (FEMA) Inspector General (IG), and instructs the Board to
comply with the FEMA IG’s recommendations, and submitting annually to that IG
a report showing compliance.
Community Development Financial Institutions fund. The Community
Development Financial Institutions (CDFI) fund was created by P.L. 103-325. The
CDFI fund program was a Clinton Administration initiative to provide credit and
investment capital to distressed urban and rural areas. The program also provides
training and technical assistance to qualifying financial institutions. P.L. 104-19
modified the original Act by giving the Department of the Treasury the authority to
manage the CDFI program, although the program continues to be funded through the
VA/HUD bill. The program has survived despite attempts to eliminate it.
The Community Renewal Tax Relief Act of 2000 (P.L. 106-554) created the
New Markets Tax Credit Program, administered by the Fund. Through this program
the Fund allocates tax credits as part of an effort to expand incentives for business

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investment in low-income communities. The Administration requested $68 million
for the Fund for FY2003, $12 million less than the $80 million appropriated for
FY2002, which was a decrease of 32% from the $118 million appropriated in
FY2001. Included in the FY2002 appropriation was language providing a set-aside
of $5 million for Native American, Alaskan Natives, and Native Hawaiian
communities.
S. 2797 proposes $73 million for CDFI for FY2003, adding $5 million to the
Administration request. S.Rept. 107-222 recommends a set-aside of $5 million for
“grants, loans, and technical assistance and training programs” to assist Native
American, Alaskan Natives, and Native Hawaiian communities with capital
development and equity investment strategies, citing a Treasury finding that an
“investment gap” of $44 billion exists between Native American economies and the
overall U.S. economy.
Consumer Product Safety Commission (CPSC). S. 2797 recommends
$56.767 million for the CPSC for FY2003. The Commission is an independent
regulatory agency charged with protecting the public from unreasonable product risk
and to research and develop uniform safety standards for consumer products. The
Administration has requested $57 million for FY2003 for this Commission. P.L.
107-73 provided $55 to the Commission for FY2002.
Corporation for National and Community Service (CNCS). The
Corporation administers programs authorized under the National and Community
Service Act of 1990 (NCSA) and the Domestic Volunteer Service Act of 1973
(DVSA). The DVSA programs — e.g., Foster Grandparents Program and Senior
Companion Program — are funded under the Labor/HHS Appropriation bill.
Authorization for CNCS, and programs and activities authorized by NCSA, expired
at the end of FY1996. Since then, continued program authority has occurred through
the appropriations process.
In past Congresses, the key issue concerning the Corporation and the NCSA
programs has been budgetary survival. Concerns expressed by some Members have
included the issues of partisan activities, program costs, and federally funding a “paid
volunteer” program. In recent years, concerns were specifically expressed about
whether CNCS could be audited and whether the audits were “clean.” The
Corporation has now received its second consecutive unqualified or “clean” opinion
on its financial statements audit.
On April 9, 2002, the President released “Principles and Reforms for a Citizen
Service Act,” to guide the reauthorization of NCSA and DVSA. On June 12, 2002,
the House Committee on Education and the Workforce approved H.R. 4854, the
Citizen Service Act of 2002. H.R. 4854 is based on the President’s principles for
reforming and enhancing these programs.
The Administration’s FY2003 budget requested $636 million, including $5
million for the CNCS Office of the Inspector General (OIG). For FY2002, P.L. 107-
73 provided total funding of $407.5 million, including $5 million for the OIG. The
Senate Appropriations Committee approved $521 million for CNCS, including $6
million for the OIG. For the AmeriCorps Grants program, the Committee approved

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$290.3 million, an increase of 21% over FY2002 funding of $240.5 million and a
decrease of 28% from the budget request of $403.3 million.
For further information on the Corporation and its programs see: CRS Report
RL30186, Community Service: A Description of AmeriCorps, Foster Grandparents,
and Other Federally Funded Programs, and CRS Report RS21246, National and
Community Service: Reauthorization rf the National and Community Service Act of
1990 and the Domestic Volunteer Service Act of 1973.
Council on Environmental Quality; Office of Environmental Quality.
These two entities are within the Executive Office of the President. The Council
oversees and coordinates interagency decisions in matters affecting the environment;
the Office provides the professional and administrative staff for the Council.
Congress appropriated $2.974 million for these activities for FY2002. The
Administration requested $3.031 million for FY2003; S. 2797 endorses the request.
U.S. Court of Appeals for Veterans Claims. The U.S. Court Appeals for
Veterans Claims has exclusive jurisdiction to review decisions of the Board of
Veterans’ Appeals, and has the authority to decide relevant conflicts in the
interpretation of law by VA and the Board of Veterans’ Appeals. The Court’s
decisions constitute precedent to guide subsequent decisions by that Board. Congress
provided $13.221 million for FY2002; the Administration requested $14.326 million
for FY2003. S. 2797 recommends $14.612 (an adjusted request level) for FY2003.
Federal Consumer Information Center (FCIC). The Center, administered
through the General Services Administration (GSA), helps federal agencies distribute
consumer information and promotes public awareness of existing federal publications
through publication of the quarterly Consumer Information Catalogue, and the
Consumer’s Action Handbook.
Congress provided $7.276 million for FY2002, and the Administration
requested $12.541 million for FY2003. The increased funding would facilitate the
development of a new Office of Civilian Services, which would act as a “portal”
through which citizens could access an array of federal information and services, of
which the FCIC would be an important part. S. 2797 proposes adding to the request,
bringing it to $15 million for FY2003, with the added amounts to begin the process
of responding to fax and email inquiries to the FirstGov.gov website, which becomes
operational during FY2003.
Federal Deposit Insurance Corporation. The FDIC’s Office of the
Inspector General is funded from deposit insurance funds, and has no direct support
from federal taxpayers. Before FY1998, the amount was approved by the FDIC
Board of Directors; the amount is now directly appropriated to ensure the
independence of the IG office. P.L. 107-73 included the Administration’s estimate
of $33.66 million for FY2002; the Administration estimates $30.848 million for
FY2003; S 2797 endorses the requested level.
Interagency Council on the Homeless. The Interagency Council on the
Homeless (ICH) is an independent agency established by the McKinney-Vento
Homeless Assistance Act of 1987, to oversee the efforts of federal agencies and

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others involved in addressing the issues of homelessness. The Council has been
funded through HUD’s Homeless Assistance Grants, but the Committee contends
that a separate account would achieve the independence entailed by the law creating
the Council. The Committee asserts that the Council should develop and lead the
effort to end homelessness, and “[i]n order for the ICH to be successful in this
endeavor relevant Federal departments and agencies should defer to the ICH on
policy and funding proposals that affect homelessness.”
The Council received $.5 million for activities in FY2002, and the
Administration requested $1 million for FY2003. S. 2797 recommends $1.5 million.
National Credit Union Administration. The purpose of this administrative
office, created under the National Credit Union Central Liquidity Facility Act (P.L.
95-630), is to improve the general financial stability of credit unions. Subscribing
credit unions may borrow from the agency to meet short-term requirements.
Congress approves a limitation on administrative expenses, which are financed from
the revolving fund ($309 thousand in FY2002, and estimated for FY2003). Congress
also approved a revolving loan program for credit union risk pooling for FY2000,
with a subsidy of $1 million; P.L. 106-377 repeated that amount for FY2001, P.L.
107.73 approved that amount for FY2002, and the Administration requested the same
level for FY2003; S. 2797 endorses that proposed level.
National Institute of Environmental Health Sciences. This Institute is
within the National Institutes of Health, administered by the Department of Health
and Human Services (HHS). P.L. 107-73 included $70.2 million for FY2002;
subsequent to the events of September 11, Congress added $10.5 million in
supplemental emergency funds, for “worker training, education, and research”
activities bring the total enacted level to $80.728 million. The Administration
requested $74.471 million for FY2003. S. 2797 has recommended $76.074 million,
with the additional amount expected to be added to amounts for training and
education of workers who may be engaged in hazardous waste removal or
containment, or emergency responses.
Neighborhood Reinvestment Corporation (NRC). The NRC leverages
funds for reinvestment in older neighborhoods through community-based
organizations called Neighbor Works. Among projects supported by the financing
activities of the NRC are lending activities for home ownership of low-income
families. Nationwide, there are 184 of these organizations, serving 825 communities
in 45 states, with 70% of the people served living in very low and low-income
brackets.
P.L. 107-73 provided $105 million for FY2002, including an Administration
proposal that the NRC become more involved in combining Section 8 housing
assistance, counseling, conventional mortgages, and NRC revolving funds to help
low-income families to purchase their own homes, and designating $10 million to
support the Section 8 home ownership program. The conference agreement also
endorsed the Corporation’s efforts to expand the available stock of “mixed-income”
affordable rental housing through the use of “mutual housing,” as well as acquisition
and preservation of existing units. The Corporation was directed to provide a

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detailed accounting of how many families are being helped through the activities of
the Corporation’s program to expand affordable housing.
The Administration requested $105 million for FY2003, to continue NRC
efforts to stimulate low-income home ownership. S. 2797 recommends $110 million,
with the $5 million added to the request to be set aside to continue with the NRC’s
multi-family rental housing initiative, citing evidence that 110 “extremely low-
income people” received the benefit of new multi-family housing units resulting
through the initiative.
Office of Science and Technology Policy. The Office of Science and
Technology Policy coordinates science and technology policy for the White House.
The Office provides scientific and technological information, analysis and advice to
the President and the executive branch, and reviews and participates in the
formulation of national policies affecting those areas. Congress provided $5.267
million for the Office for FY2002, and directed the Office to make a priority its effort
to clarify the International Traffic in Arms Regulation. The Administration requested
$5.368 million for FY2003.
S. 2797 endorses the request, and S.Rept. 107-222 elaborates a Committee view
that more needs to be done to coordinate interagency research to focus attention on
environmental concerns, technological development, the balance between the
physical sciences and engineering, and the effort to encourage more students to
increase academic concentrations in the science and engineering fields.
Selective Service System (SSS). The Administration requested $26.48
million for this function for FY2003. S. 2797 endorses the requested level. Congress
appropriated $25.003 million for FY2002. The SSS was created to supply manpower
to the U.S. Armed Forces during time of national emergency. Although since 1973,
the Armed Forces have recruited personnel through voluntary enlistment incentives,
the SSS remains the primary vehicle for conscription should it become necessary.
In 1987, the SSS was given the task of developing a post-mobilization health care
system that would assist with providing the Armed Forces with health care personnel
in time of emergency.
Selected World Wide Web Sites
Federal Consumer Information Center (FCIC) [http://www.pueblo.gsa.gov] and
[http://www.info.gov/]
Environmental Protection Agency (EPA), Summary and Justification of Budget.
[http://www.epa.gov/ocfopage]
Corporation for National and Community Service
[http://www.cns.gov/]
Department of Housing and Urban Development (HUD).
[http://www.hud.gov]

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Federal Emergency Management Agency (FEMA)
[http://www.fema.gov]
National Aeronautics and Space Administration (NASA).
[http://www.hq.nasa.gov]
National Science Foundation (NSF).
[http://www.nsf.gov]
Office of Management and Budget (OMB).
[http://www.whitehouse.gov/omb/]
Department of Veterans Affairs (VA).
[http://www.va.gov]
Additional Reading
CRS Report RL30803, Veterans Issues in the 107th Congress, by Dennis Snook.
CRS Report RL30916, Housing Issues in the 107th Congress, by Richard Bourdon.

CRS Report RL30486, Housing the Poor: Federal Programs for Low-Income
Families, Morton J. Schussheim.
CRS Report RL30589, HOPE VI: The Revitalization of Severely Distressed Public
Housing, by Susan M. Vanhorenbeck.
CRS Report RS20704, Housing Opportunities for Persons with AIDS(HOPWA) by
M. Ann Wolfe.
CRS Report RL30442, Homelessness: Recent Statistics and Targeted Federal
Programs, by M. Ann Wolfe.
CRS Report RS20670, Temporary Suspension of New Mortgages under the FHA
General and Special Risk Insurance Funds, Bruce E Foote.
CRS Issue Brief IB10078, Superfund and the Brownfields Issue in the 107th
Congress, Mark Reisch.
CRS Report 98-323, Wastewater Treatment: Overview and Background, by Claudia
Copeland.
CRS Issue Brief IB10101, The Environmental Protection Agency’s FY2003 Budget,
by Martin R. Lee.
CRS Report RL31359, Federal Emergency Management Agency Funding for
Homeland Security and Other Activities, by Keith Alan Bea.

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CRS Report RS20736, Disaster Mitigation Act of 2000 (P.L. 106-390): Summary of
New and Amended Provisions of the Stafford Disaster Relief Act, by Keith Alan
Bea.
CRS Report 95-307, U.S. National Science Foundation: An Overview, by Christine
M. Matthews R. Lee.
CRS Report RL30186, Community Service: A Description of AmeriCorps, Foster
Grandparents, and Other Federally Funded Programs, by Ann M. Lordeman.
CRS Report RL31037, The National Aeronautics and Space Administration’s
FY2002 Budget Request: Description and Analysis, by Richard E. Rowberg,
and Marcia S. Smith.

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