Order Code RL32823
CRS Report for Congress
Received through the CRS Web
An Overview of the Administration’s
Strengthening America’s Communities Initiative
Updated February 27, 2006
Eugene Boyd (Coordinator), Bruce K. Mulock, and Pauline Smale
Government and Finance Division
Tadlock Cowan
Resources, Science, and Industry Division
Garrine P. Laney, Bruce E. Foote
Domestic Social Policy Division
Congressional Research Service ˜ The Library of Congress

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An Overview of the Administration’s Strengthening
America’s Communities Initiative
Summary
On February 7, 2005, the Bush Administration released its budget
recommendations for FY2006. Included in the budget was a proposal that would
consolidate the activities of at least 18 existing community and economic
development programs into a two-part grant proposal called the “Strengthening
America’s Communities Initiative” (SACI). As outlined by the Administration, the
proposal would realign several, but not all, federal economic and community
development programs. Responsibility for the programs now being carried out by
five federal agencies would be transferred to the Commerce Department, which
presently administers the programs of the Economic Development Administration.
The Department of Commerce would administer the core program and a bonus
program, which would award additional funds to communities that demonstrated
efforts to improve economic conditions. The Administration has stated that this new
program will emphasize flexibility, will be results oriented, and will be targeted to
communities based on need, but it has not yet submitted a detailed proposal for
congressional consideration.
Many of the 18 programs recommended for elimination and whose activities
would be consolidated have been judged by the Administration to be ineffective,
unable to demonstrate results, or duplicative of the efforts of other federal programs,
according to the Office of Management and Budget’s (OMB’s) Program Assessment
Rating Tool (PART). The programs cited for consolidation are administered by five
agencies — the Department of Housing and Urban Development, the Economic
Development Administration in the Department of Commerce, the Department of the
Treasury, the Department of Health and Human Services, and the Department of
Agriculture. As outlined in the Administration’s FY2006 budget requests, the SACI
proposal would have reduced aggregate funding for the 18 programs from $5.6
billion in FY2005 to $3.7 billion in FY2006. Congress rejected the Administration’s
SACI proposal and funded all 18 programs at an aggregate level of $5.3 billion for
FY2006. The program that could be most affected by the SACI proposal is the
formula component of the Community Development Block Grant (CDBG) program.
The Administration has signaled that it plans to reintroduce the proposal as part
of its FY2007 budget request. The agency that would be most affected by the
proposal is the Department of Housing and Urban Development (HUD). Programs
administered by HUD account for approximately 80% of the $5.3 billion in FY2006
funding for programs included in the SACI proposal, with the agency’s CDBG
formula grants representing nearly 70% of the total. As a general observation, the
82% of the FY2006 aggregate appropriations for programs proposed for
consolidation are allocated to local governments principally through two block grants
— CDBG and Community Services Block Grant (CSBG).
The Administration has also appointed an advisory committee to assist in
developing its legislative proposal. It issued its first report in July 2005. This report
will be updated as the Administration offers new details and as Congress reviews the
proposal.

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Contents
The Administration’s Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Program Assessment Rating Tool (PART) . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Congressional Jurisdiction and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Budget Resolution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Congressional Appropriations Action . . . . . . . . . . . . . . . . . . . . . . . . . . 5
House Hearing on the SACI Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Administration Advisory Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Current Distribution of Funds Proposed for Consolidation . . . . . . . . . . . . . . 9
CDBG Formula Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Policy Questions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Profile of Programs Proposed for Consolidation . . . . . . . . . . . . . . . . . . . . . 13
List of Figures
Figure 1. Percent Distribution of FY2006 Appropriations for Community
and Economic Development Programs Included in the Administration’s
SACI Proposal, by Administering Agency . . . . . . . . . . . . . . . . . . . . . . . . 10
List of Tables
Table 1. PART Score for Selected Programs Included in the Economic
Development Consolidation Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Table 2. Congressional Committees Which Have Exercised Jurisdiction
Over Programs Included in the Consolidation Proposal . . . . . . . . . . . . . . . . 6
Table 3. Distribution of Funds Proposed for Consolidation . . . . . . . . . . . . . . . . 12
Table 4. Profile of Community and Economic Development Programs Proposed
for Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14

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An Overview of the Administration’s
Strengthening America’s
Communities Initiative
The Administration’s Proposal
The Bush Administration’s FY2006 budget request included a proposal that
recommended consolidating at least 18 existing community and economic
development programs1 into a two-part “Strengthening America’s Communities
Initiative.” The proposed base program would award funds in support of job creation
and economic development. According to Administration documents, the core
program would use such factors as job loss, unemployment, and poverty as criteria
when determining eligibility.2 A bonus program (Economic Development Challenge
Fund) modeled after the Millennium Challenge Account3 would allocate additional
grant funds to distressed communities that have demonstrated efforts to improve
economic conditions. As of this writing, the Administration has not proposed new
legislative authority for this initiative, nor has it released such details as the
following:
! eligible recipients;
! method of distributing funds;
! requirements for matching funds or leveraging;
1 The Administration’s budget documents identify 18 programs to be included in the
consolidation proposal. They include several programs under a single program or agency
heading instead of identifying specific programs. Distinguishing these smaller set-asides
from the core programs would yield 23 rather than 18 programs proposed for consolidation.
For instance, the Administration does not identify separately the four programs administered
by the Economic Development Administration that are proposed for consolidation, but
groups all of these programs under the agency. The Administration only includes funding
for the Neighborhood Initiative Grants and Economic Development Initiative Grants, both
congressional earmarks, when calculating the amount of CDBG set- aside funds that would
be consolidated under its proposal. It does not include FY2005 funding for all remaining
CDBG set-asides or earmarks. These include Housing Assistance Council ($3.3 million),
National American Indian Housing Council ($2.4 million), National Housing Development
Council ($4.8 million), National Council of LaRaza ($4.8 million), Technical Assistance
($1.4 million), and Working Capital Fund ($3.5 million).
2 White House Office of Management and Budget, “President Bush Proposes Strengthening
America’s Communities Initiative,” available online at [http://www.commerce.gov/SACI/
Talking%20Points_Strengthening%20Communities%20FINAL%202-03-05.pdf ], visited
Feb. 22, 2005.
3 For information about the Millennium Challenge Account, see [http://www.mca.gov/
compacts/guidance/Compact_Proposal_Guidelines_en.pdf], visited Feb. 22, 2005.

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CRS-2
! criteria for awarding bonus funds;
! performance measures for evaluating program effectiveness; and
! process for transition from existing programs to the new program.
In proposing the consolidation of various community development, community
service, and economic development programs, the Administration contends the
programs whose activities would be consolidated:
! have been judged to be ineffective, to be unable to demonstrate
results, or to duplicate the efforts of other programs;
! have unclear long-term objectives and are not focused on long-term
community outcomes; and
! include “many communities” that no longer need the assistance,
undermining the purpose of some programs — to help distressed
communities.
Using the Community Development Block Grant (CDBG) program to illustrate
the point, the Administration contends that 38% of the program’s funds currently are
allocated to communities and states with poverty rates below the national average.
This contention has drawn criticism from observers of the CDBG program. They
argue that using the national poverty rates as a basis for comparison masks the
community development needs of jurisdictions that have significant pockets of
poverty and urban blight even though their poverty rates may be less than the national
average.4 When challenging the Administration’s assertion concerning the lack of
need among such communities, supporters of the program could note that when
Congress designed the CDBG program and its grant allocation criteria and formula,
the intent was to award funds to states and communities based on such objective
measures as the state or community’s relative share of poverty, housing
overcrowding, aged housing stock, and population growth rates. Thus, states and
communities with relatively greater community development needs, as measured by
the formula factors, arguably receive a greater percentage of funds per capita than
communities with lesser community development needs. Moreover, CDBG
supporters also note that Congress requires each state and entitlement community to
allocate at least 70% of its funds to activities benefitting low- and moderate-income
persons.5
A 2005 study conducted by HUD on the effects of the 2000 Census on the
allocation of CDBG funds noted that although funding anomalies exist, in general,
the formula still provides more dollars per capita to needier communities than to less
4 U.S. Congress, House Committee on Government Reform, Subcommittee on Federalism
and the Census, “Strengthening America’s Communities — Is It the Right Step Toward
Grater Efficiency and Improved Accountability?”, statement of James C. Hunt on behalf
of the National League of Cities, hearing, 109th Cong., 1st sess., Mar. 1, 2005.
5 42 U.S.C. 5303(b)(3)(A)

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CRS-3
needy communities.6 The study noted that some communities with similar need
received different allocations, but, it also noted that for the 10% of communities with
the greatest need, the per capita CDBG allocation was four times greater than for the
10% of communities with the least need. In addition, the HUD study proposed
several optional formulas intend to fine tune the program’s targeting of funds.7
Program Assessment Rating Tool (PART)
In 2004, the Administration began using its Program Assessment Rating Tool
(PART) to evaluate the effectiveness of federal programs.8 According to the
Administration, it subjected 607 programs to the PART review process and found
that 33% of those programs received a score of “ineffective” or “results not
demonstrated.” The Administration’s PART process is not without its critics. While
some observers view the PART as an extension of the Government Performance and
Results Act (GPRA) designed to ensure that activities of federal agencies have
measurable outcomes, critics of the PART view it as political tool that shifts power
from Congress to the President. Some critics of the PART also ask whether
programs are reviewed in a consistent and value-neutral way. OMB Watch, for
instance, contends that the FY2006 PART outcomes are biased “against programs
that operate through grants, whether competitive grants or block grants.”9 “Of the
programs rated “ineffective and zeroed out completely,” adds OMB Watch, “89% are
competitive or block grants.”10
According to the Administration, of the 607 programs subject to its PART
review, the eight programs listed in Table 1, below, were among those proposed for
consolidation in the Administration’s “Strengthening America’s Communities
Initiative.”11 Three of the eight programs were rated “moderately effective” or
“adequate” while the remaining five were judged as “ineffective” or “results not
demonstrated.” Critics note that 10 of the programs included in the Administration’s
proposal have not been subject to PART review. Conversely, the Administration
may claim that the programs that have been reviewed comprise more than 90% of the
total FY2005 funding level for the programs included in the Administration’s
proposal.
6 U.S. Department of Housing and Urban Development, Office of Policy Development and
Research, CDBG Targeting to Community Development Need, Feb. 2005, p. x.
7 Ibid., p. 61.
8 For a review and analysis of the Administration’s PART, see CRS Report RL32663, The
Bush Administration’s Program Assessment Rating Tool (PART), by Clinton Brass.
9 OMB Watch, “Budget Includes Anti-Regulatory Proposal,” available online at
[http://www.ombwatch.org/article/articleview/2657/1/308?TopicID=1], visited Feb. 24,
2005.
10 Ibid.
11 Office of Management and Budget, Major Savings and Reforms in the President’s
FY2006 Budget, Feb. 11, 2005, p. 6, available at [http://www.whitehouse.gov/omb/
budget/fy2006/pdf/savings.pdf], visited Mar. 15, 2005.

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CRS-4
Table 1. PART Score for Selected Programs Included
in the Economic Development Consolidation Proposal
Program
FY2006 PART Score
Community Development Block Grant (formula grants)
ineffective
Rural Housing and Economic Development
ineffective
National Community Development Initiative
moderately effective
Economic Development Administration
moderately effective
Community Development Financial Institutions Fund
adequate
Rural Business Enterprise Grants
results not demonstrated
Bank Enterprise Award
results not demonstrated
Community Services Block Grants (CSBG)
results not demonstrated
Source: Office of Management and Budget, Program Assessment Rating Tool, available at
[http://www.whitehouse.gov/ omb/budget/fy2006/part.html], visited March 15, 2005.
Congressional Jurisdiction and Action
The programs whose activities would be consolidated under the new block grant
proposal are administered by five agencies: the Department of Housing and Urban
Development, the Economic Development Administration in the Department of
Commerce, the Department of the Treasury, the Department of Health and Human
Services, and the Department of Agriculture. Several congressional committees may
claim some level of jurisdiction over the programs proposed for replacement. In the
House, jurisdiction for the programs included in the proposal has been exercised by
four subcommittees of the House Appropriations Committee and by at least six
standing committees with authorizing or oversight responsibilities. In the Senate, in
addition to the Appropriations Committee, at least four committees have exercised
jurisdiction over some aspect of the Administration’s proposal.
Budget Resolution. The House and the Senate passed their respective
versions of the nonbinding concurrent budget resolution on March 17, 2005. The
House version was approved by a vote of 218 to 214 (Roll Call Vote 88). The report
accompanying H.Con.Res. 95, H.Rept. 109-17, included language that would have
provided an additional $1.1 billion in funding for the Community and Regional
Development budget function (450) to “accommodate higher appropriations for
programs such as the Community Development Block Grant. The resolution made
no assumption regarding the implementation of the President’s “Strengthening
America’s Communities Initiative” or transferring the Community Development

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CRS-5
Block Grant program from the Department of Housing and Urban Development to
the Department of Commerce.”12
The Senate version of the concurrent budget resolution, S.Con.Res. 18, included
an amendment (SA 230), approved by a vote of 68 to 31 (Record Vote No. 66) that
would have restored $2 billion in funding the CDBG and related programs that would
have been eliminated under the Administration’s economic development proposal.
On April 28, 2005, the House and Senate approved the conference version of
the budget resolution, H.Con.Res. 95 and its accompanying report (H.Rept. 109-62).
The conference version of the budget resolution assumed an increase of $1.5 billion
above the President’s request for the community and regional development budget
function. According to the manager’s statement in the accompanying conference
report, the increase is “to maintain economic and community development programs
such as CDBG at FY2005 levels.” The conference report also noted that the budget
resolution assumed an increase of $0.6 billion above the President request to fund the
Community Services Block Grant at its 2005 funding level. It should be noted that
the budget resolution is a nonbinding blueprint for the appropriation committees,
who consider appropriation levels for specific program, including whether to fund
the President’s new economic development proposal or any of the 18 existing
programs that the proposal would replace.
Congressional Appropriations Action. During consideration of FY2006
appropriations, Congress rejected the Administration’s SACI proposal and included
funding for the 18 programs targeted for elimination in four appropriations acts.
They included the Agriculture, Rural Development, Food and Drug Administration,
and Related Agencies Appropriations Act for FY2006, P.L. 109-97; Science, State,
Justice, Commerce, and Related Agencies Appropriations Act for FY2006, P.L. 109-
108; Transportation, Treasury, Housing and Urban Development, the Judiciary, the
District of Columbia, and Independent Agencies Appropriations Act for FY2006,
P.L. 109-115; and Labor, Health and Human Services, Education, and Related
Agencies Appropriations Act for FY2006, P.L. 109-149. The four appropriations
acts include a total of $5.3 billion in funding for FY2006 for the 18 programs the
Administration sought to eliminate. This is approximately $300 million less than the
aggregate amount appropriated for FY2005, with most of the reduction being borne
by the CDBG formula grants program. The reduction in CDBG formula grants
totaled approximately $400 million, but was countered, most notably, by a $179
million increase in funding for CDBG set-asides (See Table 3).
12 U.S. Congress, House Committee on the Budget, Concurrent Resolution on the Budget
— FY2006, report to accompany H.Con.Res. 95, 109th Cong., 1st sess, H.Rept. 109-17
(Washington: GPO, 2005), pp. 18-19.

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CRS-6
Table 2. Congressional Committees Which Have Exercised
Jurisdiction Over Programs Included in
the Consolidation Proposal
House
Senate
Appropriations Committee
Appropriations Committee
! Subcommittee. on Agri-
! Subcommittee on Agri-
culture, Rural Development,
culture, Rural Develoment,
Food and Drug Administra-
and Related Agencies
tion, and Related Agencies
! Subcommittee on Com-
! Subcommittee on Labor,
merce, Justice, and Science
Health and Human Services,
! Subcommittee on Labor,
Education, and Related
H e a l t h a n d H u ma n
Agencies
Services, Education, and
! Subcommittee on Science,
Related Agencies
State, Justice, Commerce,

! Subcommittee on Trans-
and Related Agencies
portation, Treasury, the
! Subcommittee on Trans-
Judiciary, and Housing and
portation, Treasury, Housing
Urban Development
and Urban Development, the
Judiciary, and the District of
Columbia
Authorizing Committees
Authorizing Committees
! Committee on Agriculture
! Committee on Banking,
! Committee on Financial
Housing, and Urban Affairs
Services
! Committee on Commerce,
! Committee on Government
Science, and Trans-
Reform
portation
! Committee on Transporta-
! Committee on Environment
tion and Infrastructure
and Public Works
House Hearing on the SACI Proposal. On March 1, 2005, the House
Government Reform’s Subcommittee on Federalism and the Census held a hearing
on the Administration’s consolidation proposal. Witnesses included Administration
officials from the Department of Housing and Urban Development, the Office of
Management and Budget, and the Department of Commerce, and officials from
organizations representing local governments.13 Administration witnesses testified
that the fragmented nature of the 18 programs reduces coordination, encourages
duplication, and may provide assistance to communities that have sufficient resources
and modest needs at the expensive of communities with the greatest needs. It was
also mentioned that most of the approximately 1,100 communities currently eligible
for CDBG would be eligible under the proposed base and bonus programs, with the
aim of “graduating” the wealthiest communities from the program. Noting that the
proposal was a work in progress, the witnesses for the Administration outlined broad
concepts that could be important components of its proposal. One witness noted that
the March 1, 2005, Federal Register includes a notice concerning the formation of
an advisory panel to assist in the development of a formal legislative proposal.
13 Organizations representing the views of local officials included U.S. Conference of
Mayors, National Association of Counties, National League of Cities, and National
Community Development Association.

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CRS-7
Witnesses representing the interests of local governments voiced unanimous
opposition to the Administration’s proposal. Among concerns they raised during the
hearings was the lack of consultation by the Office of Management and Budget in the
development of the proposal. They were briefed on the proposal after it had been
developed. Representatives of local governments also objected to:
! transferring of the community development function to the
Department of Commerce, particularly from the Department of
Housing and Urban Development, whose CDBG component
represents 74% of the funds that would be terminated under the new
program;
! reducing program funding; and
! narrowing the focus of the new program to economic development
and job creation at the expense of the wider mission of the CDBG
program.
In addition, witnesses objected to the Administration’s contention that some
percentage of communities currently eligible for CDBG should be removed as grant
recipients because their poverty rates are below the national average. They countered
that using the national poverty rate as a basis for comparison does not recognize that
communities whose poverty rates fall below the national average may have
substantial pockets of poverty. According to the Census Bureau’s poverty estimates
for 2000, the national poverty rate was 12.4%, excluding the population living in
institutions, college dormitories, and other group quarters. If the 2000 national
poverty rate were used as a qualifying threshold for eligibility, 18 states and Puerto
Rico, 35 urban counties, and approximately 541 entitlement cities would be
eligible.14 The 576 entitlement cities and urban counties whose poverty rates meet
or exceed the national poverty rate of 12.4% represent 51% of the approximately
1,130 communities currently receiving CDBG formula grant allocations. Thus, using
the national poverty rate as a threshold for eligibility would result in approximately
half of the current CDBG-eligible communities qualifying for the new program. It
should be noted that the Administration has stated that poverty is but one factor that
will be considered in determining program eligibility, and that other criteria such as
unemployment and income may be used as eligibility criteria allowing additional
communities to qualify for the new program.
14 U.S. Census Bureau, Income and Poverty in 1999, Census 2000 Summary File 3 (SF3)
Sample Data, United States — County by State, and for Puerto Rico, available at
[http://factfinder.census.gov/servlet/GCTTable?_bm=n&_lang=en&mt_name=DEC_200
0_SF3_U_GCTP14_CO1&format=CO-1&_box_head_nbr=GCT-P14&ds_name=DEC_2
000_SF3_U&geo_id=05000US40143], visited Mar. 15, 2005, and Income and Poverty in
1999, Census 2000 Summary File 3 (SF3) Sample Data, United States — Places and County
Subdivisions with 50,000 or More Population and for Puerto Rico, available online at
[http://factfinder.census.gov/servlet/GCTTable?_bm=y&-geoid=&-ds_name=DEC_2000
_SF3_U&-_lang=en&-mt_name=DEC_2000_SF3_U_GCTP14_US25&-format=US-25&
-CONTEXT=gct], visited Mar. 15, 2005, and Census 2000 Demographic Profile Highlights
Fact Sheets available online at [http://factfinder.census.gov/servlet/SAFFFacts?] visited
Mar. 15, 2005.

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CRS-8
Administration Advisory Group
To assist the Administration in developing a detailed legislative proposal, the
Secretary of Commerce established the Strengthening America’s Communities
Advisory Committee (SACAC).15 The 17-member SACAC is composed of
individuals from state and local governments, the private sector, non-profit
organizations, and research institutions and is slated to be in existence for two years.
Several national organizations representing state and local governments and
community development organizations who opposed the SACI did not submit
nominations for the SACAC in protest of the Administration’s proposal.
The SACAC submitted an initial report to the Secretary in July 2005, after
conducting several field hearings and undertaking a review of current federal
policies. Though the SACAC offered no specific legislative proposal, its report
chronicled the evolution of federal economic development policy, challenged the
existing paradigms that buttress federal economic and community development
programs, and outlined guiding principles and recommendations to be considered by
the Secretary of Commerce in developing a detailed legislative proposal for the
SACI.
Among the recommendations included in the report,16 are the following:
! establish regional competitiveness as the overriding goal of federal
economic and community development policies;
! coordinate and consolidate workforce development programs with
economic development initiatives;
! direct federal economic and community development assistance to
encourage communities to form regional alliances based on
economic relationships rather than political boundaries;
! target federal economic and community development resources to
communities and regions with the greatest need;
! develop a new challenge grant program to provide additional
assistance to distressed communities and regions that undertake
efforts to encourage private investment and business expansion;
! provide capacity-building assistance to communities that lack the
resources to compete for grant assistance;
! establish a 10-year goal of shifting the majority of federal
community and economic assistance to results-oriented competitive
grants;
! consolidate federal community and economic development programs
to reduce or eliminate overlap, duplication, and fragmented
implementation;
15 U.S. Dept. of Commerce,”Strengthening America’s Communities Advisory Committee,”
Federal Register, vol. 70, no. 39, March 1, 2005, pp. 9916-9918.
16 U.S. Dept. of Commerce, Report of the Strengthening America’s Communities Advisory
Committee, July 2005 available at [http://www.commerce.gov/SACI/
SACAC_Report_Final_d.pdf], visited January 25, 2006.

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CRS-9
! encourage the leveraging of non-federal funds when awarding
federal assistance, but allow waivers or reductions in certain
instances for distressed communities; and
! develop analytical tools and metrics to assist regions and
communities to identify their competitive advantages, develop
strategies, track progress, and quantify performance outcomes.
Current Distribution of Funds Proposed for Consolidation
When the Administration first introduced its SACI as part of its FY2006 budget
request, the FY2005 aggregate budget authority for programs included in the
Administration’s consolidation proposal was $5.615 billion. Congress rejected the
Administration’s consolidation proposal, but it did reduce the overall funding for the
programs that would have been consolidated to $5.338 billion for FY2006. Most of
these funds, 80%, are administered by the Department of Housing and Urban
Development (HUD) (See Figure 1). If approved by Congress, the Administration’s
proposed cuts, coupled with proposed increases in other programs within HUD,
would have reduced the agency’s total budget by 10.9%, from $31.9 billion to $28.5
billion. Instead Congress elected to fund the18 programs in FY2006. Though CDBG
formula grants for FY2006 were reduced by $400 million to $3.7 billion, overall
funding for the programs proposed for consolidation was reduced by only $300. This
was due in large part to an increase in funding for CDBG set-asides and earmarks.
In addition, total funding for HUD increased by $2 billion fueled by an increase in
Section 8 assisted housing and a decrease in offsetting FHA receipts.
Critics of the SACI maintained that the program, if enacted, would reduce the
agency’s role in encouraging solutions to the nation’s housing and community
development problems, one of the key components of the agency’s mission (42
U.S.C. 3531). Critics note that the Administration fails to recognize the link between
housing policy and community and economic development policies.

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CRS-10
Figure 1. Percent Distribution of FY2006 Appropriations for
Community and Economic Development Programs Included in
the Administration’s SACI Proposal, by Administering Agency
80.2%
5.3%
1.0%
1.5%
11.9%
CDBG Formula Grants. When first introduced in 2005, the SACI proposal
recommended consolidating the activities of the 18 programs and reducing funding
from $5.615 billion to $3.7 billion. The program most affected by the proposal
would be the formula portion of the CDBG program. Of the programs proposed for
consolidation, CDBG formula grants account for 74% of the $5.615 million in
aggregated FY2005 appropriations, and 70% of the $5.3 billion in aggregate FY2006
funding (See Table 3). Opponents of the change maintain that because CDBG is the
largest source of federal assistance for community and economic development and
neighborhood revitalization activities, changing or eliminating the program would
affect not only the 1,168 state and local governments that receive direct allocations,
but it would also affect the thousands of nonprofit subrecipients of CDBG funds,
including community development corporations, community action agencies, and
faith-based organizations. The Administration has noted that it is committed to
ensuring that the new program will continue to provide local governments with a
high degree of flexibility, but it will also require that communities demonstrate
measurable results.

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CRS-11
Policy Questions
Among the questions the Administration’s initiative poses are the following:
! why has the Administration chosen to undertake a new program
rather than strengthen existing programs such as CDBG and CSBG;
! how will eligibility for the new grants be determined and how will
it differ from existing programs that may have divergent recipients,
such as CDBG (which allocates funds to states and local
governments) and the Community Development Financial
Institutions Fund (which competitively awards funds to financial
institutions involved in community development lending in
underserved areas);
! how will the new program differ in its approach from the CDBG
program, which is the largest component of the programs that would
be consolidated;
! what formula factors will be used to distribute funds, and how will
they differ from the targeting requirements of the CDBG formula;
! how will the new bonus program work; and
! what performance measures will be used to evaluate program
effectiveness?

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CRS-12
Table 3. Distribution of Funds Proposed for Consolidation
FY2005
FY2006
Percent of
Program
Appropriations
Appropriation
FY2005 Total
(in millions of $)
(in millions of $)
Community Development Block
$4,150.0
74.0
$3,748.4
Grant (formula)
Community Development Block
302.0
5.4
471.6c
Grant Set-Asides
Community Development Block
Grants Section 108 Loan
6.0
0.1
3.0
Guarantees
Brownfields Economic
25.0
0.43
10.0
Development Initiative
Urban Empowerment Zones
10.0
0.18
0.0
Rural Housing and Economic
25.0
0.43
17.0
Development
National Community Development
30.0
0.5
30.0
Initiative
Economic Development
257.4
4.6
284.1
Administration
Community Development Financial
55.0
1.0
55.0
Institutions Fund
Bank Enterprise Awards
(10.0)
Program
Rural Business Enterprise Grants
40.0
0.71
40.0
Rural Business Opportunity Grants
3.0
0.05
3.0
Economic Impact Initiative Grants
23.0
0.4
18.0
Rural Empowerment Zones
12.0
0.2
21.4
Community Services Block Grants
and Related Programs (CSBG)a
676.7
12.1
637.0
Community Services Block
(636.8)
(11.3)
(596.9)
Grants
Community Economic
(32.7)
(0.6)
(32.7)
Development
Job Opportunities for
Low-Income
(5.4)
(5.4)
Individuals (JOLI)
Rural Community Facilities
(7.2)
(0.1)
(7.4)
Total
$5,615.1
100.0b
$5,338.5

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CRS-13
Note: A program in italics is a component of the program preceding it in roman type.
a. Although they are considered CSBG-related programs, the Community Food and Nutrition
Program and the National Youth Sports Program are not included in the calculations for the
President’s Initiative. The Administration stated that activities funded by these programs
duplicate existing programs of the Department of Agriculture’s Food and Nutrition Service, and
the Social Service Block Grant, respectively.
b. Funding does not add up to 100% due to rounding.
c. An additional $31 million previously funded under the CDBG program was transferred to a new
Self-Help and Assisted Homeownership program Housing account. For details see Table 14 of
CRS Report RL32869, The Department of Housing ad Urban Development (HUD): FY2006
Budget, by Maggie McCarthy, Libby Perl, Bruce Foote and Eugene Boyd. In addition, $20.6
million in federal assistance for minority institutions of higher education were transferred to the
Office of Policy Development and Research.
Profile of Programs Proposed for Consolidation
The following table includes brief profiles of programs proposed for
consolidation under the Administration’s Strengthening America’s Communities
Initiative proposal. The table lists for each program included in the consolidation
proposal: (1) its FY2005 and FY2006 funding level; (2) the type of recipients eligible
for program funds; (3) the type of assistance provided by the program (formula
grants, project grants, loans, loan guarantees); and (4) the method used to award or
allocate assistance. As a general observation, the majority of program funds
proposed for consolidation are currently allocated to local governments, particularly
those within metropolitan areas, through two block grants — CDBG and Community
Services Block Grants (CSBG). In addition, a number of programs provide direct
assistance to nonprofit organizations, particularly community development
corporations, which may also receive or administer funds as subrecipients.

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CRS-14
Table 4. Profile of Community and Economic Development Programs Proposed for Consolidation
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Department of Housing and Urban Development
Community Development Block
FY05 — $4,150.0
50 states, Puerto Rico,
Formula-based block grants.
Grants
FY06 — $3,748.0
metropolitan-based
Funds are distributed to states and local governments based on the
Formula-based block grants
entitlement communities
higher yield from one of two needs-based formulas.
allocated to states and local
(metropolitan cities with
governments in support of
populations of 50,000 or
(1) 30% of funds are allocated to states for distribution to
neighborhood revitalization,
more and urban counties).
communities that do not receive a direct allocation. States receive
economic development, and
In FY2005, there were
funds based on one of two formulas:
housing activities. Communities
1,032 entitlement
— Formula A allocates funds based on each state’s share of
may use block grants to support 23
communities. $7 million is
population, poverty, and overcrowded housing;
categories of eligible activities.
set aside for insular areas
— Formula B allocates funds based on each state’s share of poverty,
70% of funds must be used on
including Guam, American
housing built before 1939, and population.
eligible activities and projects that
Samoa, and the Virgin
principally benefit low- or
Islands.
(2) 70% of funds are allocated to entitlement communities based on
moderate-income persons.
one of two formulas:
— Formula A allocates funds based on each entitlement
community’s share of population, poverty, and housing built before
1939 (age of housing);
— Formula B allocates funds based on each entitlement
community’s share of poverty, overcrowded housing, and the lag in
population growth.

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CRS-15
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
CDBG set-asides
FY05 — $302.0a
Project grants.
FY06 — $467.0e
Neighborhood Initiative
FY05 — ($41.0)
Congressionally selected
Congressionally earmarked funds allocated to a diverse group of
GY06 — ($50.0)
community development
recipients. Program was originally targeted to community
corporations.
development corporations involved in neighborhood revitalization.
Economic Dev. Initiative
FY05 — ($261.0)
No specific criteria
Congressionally earmarked grant funds allocated to diverse groups of
FY06 — ($310.0)
establishing eligibility for
recipients including universities, community colleges, nonprofit
funding.
entities, local governments. Funds are used in support of a variety of
activities including recreation, literacy, historic preservation, job
training, feasibility studies, public services. No specific list of eligible
activities.

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CRS-16
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
National Community
FY05 — $30.0
Local Initiative Support
Project grants.
Development Initiative (Living
FY06 — $30.0
Corporation and the
Federal funds are used in coordination with investments from
Cities) Program supports local
Enterprise Foundation
foundations and corporations in support of redevelopment efforts in
community development
(national nonprofit
distressed urban neighborhoods. Working through two national
corporations involved in
intermediaries). The two
intermediaries, the Local Initiative Support Corporation and the
neighborhood revitalization.
nonprofit intermediaries
Enterprise Foundation, local community development corporations
support neighborhood
receive technical and financial assistance in support of their
revitalization efforts of
revitalization efforts. More than $250 million in private sector funds
local community
from 14 participating corporate and foundation entities have been
development corporations.
used in the program since its inception in 1991.
More than 300 community
development corporations
in 23 selected cities have
been involved in the
program.b
Brownfields Econ. Dev. Initiative
FY05 — $25.0
State and local
Project grants.
(BEDI) Funds are use to reclaim
FY06 — $10.0
governments are direct
BEDI funds must be used in coordination with CDBG Sec. 108 loan
contaminated sites for adaptive
recipients of funds.
guarantees. These grants and the accompanying Sec. 108 loan
reuse.
Subgrantees or
guarantees must be consistent with a community’s CDBG plan and
beneficiaries may include
must meet the same income targeting requirements as the CDBG
businesses or nonprofits
program. In 2004, HUD selected 17 communities to received $24.6
involved in job creation
million in BEDI grants and $119 million in loan guarantees.
activities.

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CRS-17
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Rural Housing and Econ. Dev.
FY05 — $25.0
Local rural nonprofits,
Project grants.
Grants
FY06 — $17.0
community development
Applications are evaluated and rated based on five rating factors:
Grants are awarded for two
corporations, state housing
(1) Capacity of the applicant and relevant organizational experience
categories of activities:
finance agencies, state
(25 points);
(1) capacity building; and (2)
community and economic
(2) Need and extent of the problem (25 points);
support for innovative housing and
agencies, and federally
(3) Soundness of approach (25 points);
economic development activities.
recognized Indian tribes.
(4) Leveraging resources (10 points); and
Grants are limited to $150,000
(5) Achieving program results and evaluation (15 points).
under the first category, and
Grants are awarded to applicants securing the highest scores.
$400,000 under the second
category.
Urban Empowerment Zones
FY05 — $10.0
15 urban empowerment
Project grants.
Round II Grants Awarded to the
FY06 — 0.0
zones designated as a result
For FY2005, each zone received $666,666 for use in conjunction with
15 designated communities for use
of a competition.c
economic development activities consistent with the communities’
in conjunction with economic
strategic plans.
development activities consistent
with the strategic plan of each
empowerment zone.

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CRS-18
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
CDBG Sec. 108 Loan
FY05 — $6.0
C D B G e n t i t l e m e n t
Loan guarantees.
Guarantees
in credit
communities and states on
Open application process. Applications are reviewed by HUD to
Allow states and CDBG
subsidies in
behalf of nonentitlement
determine compliance with national objectives of the CDBG program
entitlement communities to borrow
support of
communities are direct
and feasibility of the project. Among the factors used to assess loan
up to five times their annual
$282.0
r e c i p i e n t s o f f u n d s .
risk are the following:
CDBG allocations to finance
in loan
Subgrantees or beneficiaries
(1) the length of the proposed repayment period;
eligible large-scale economic
guarantee
may include nonprofits and
(2) the ratio of expected annual debt service requirements to expected
development projects.
commitments
for-profit entities involved
annual grant amount awarded to the state or entitlement community;
in job creation activities.
(3) the likelihood that the public entity or state will continue to
FY06 — $3.0 in
receive CDBG assistance during the proposed repayment period;
credit in
(4) the public entity’s ability to furnish adequate security; and
subsidies in
(5) the amount of program income the proposed activities are
support of
reasonably expected to contribute to repayment of the guaranteed
$137.5 in loan
loan.
guarantee
commitments

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CRS-19
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Department of Commerce
Economic Development
FY05 — $257.4
Economic Development
Competitive grants.
Administration (EDA) Agency
FY06 — $284.0
Districts (EDD) (multi-
Generally, EDA administers a number of competitive project grants.
administers several economic
county organizations
Grants may not exceed 50% of the cost of the project. Projects
development programs, including
established to promote
meeting certain specified criteria and for areas characterized as
public works grants for upgrading
economic development and
severely depressed may be eligible for additional funding not to
infrastructure, planning, and trade
job creation). EDA
exceed 30% of the cost of the project. Projects must be located in
adjustment assistance. Eligible
provides assistance to 327
economically distressed areas including those experiencing high
projects must:(1) improve the
EDDs. The areas
unemployment or low incomes. Priority is given to projects:
opportunities for business creation
designated as EDDs must
(1) in areas with persistently high rates of poverty;
or expansion; (2) assist in the
meet one of three criteria:
(2) involving previously unserved distressed areas and applicants;
creation of additional permanent
(1) low per capita income;
(3) involving innovative partnerships and private investment
private-sector jobs; or (3) benefit
(2) unemployment higher
leveraging;
low-income persons including
than national average;
(4) that support sub-state regional networks and collaborations; and
those who are unemployed or
(3) sudden economic
(5) in areas undergoing significant economic downturns and
underemployed.
dislocation or persistent
dislocations.
and long-term economic

distress. Funds may also
be awarded to states, cities,
and other political
subdivisions and other
organizations.

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CRS-20
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Department of Agriculture
Rural Business Enterprise
FY05 — $40.0
Grants to small and
Competitive grants.
Grants
FY06 — $40.0
emerging businesses;
Preference given to:
expansion of rural distance
(1) projects located in communities with a high percentage of the
learning networks; job
population with low incomes;
training related to potential
(2) projects that will save existing jobs;
employment for adult
(3) projects that will create jobs; and
students; nonprofit
(4) projects located in areas with a high unemployment rate.
organizations for provision
of technical assistance to
rural communities for
improving transportation
services. A rural area is
defined as a city, town, or
unincorporated area that
has a population of 50,000
or less and is not an
urbanized area
immediately adjacent to a
city, town, or
unincorporated area that
has a population in excess
of 50,000 persons.

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CRS-21
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Rural Business Opportunity
FY05 — $3.0
Grants to public bodies,
Competitive grants. Grant selection criteria include the extent to
Grants
FY06 — $3.0
nonprofit organizations,
which:
Indian tribes, and
(1) economic activity generated by the project is sustainable;
cooperatives for training
(2) the project leverages funds from other sources;
and assistance to rural
(3) the project will induce additional economic benefits;
businesses, economic
(4) the targeted community has experienced long-term population or
planning for rural areas,
job loss;
and training for rural
(5) the proposed project will serve a community that may be
entrepreneurs. A rural area
experiencing economic trauma due to natural disaster, base closure,
is defined as a city, town,
or exodus or downsizing by a major employer;
or unincorporated area that
(6) the project would be located in a community that may be
has a population of 50,000
characterized as chronically poor.
or less and is not an
urbanized area
immediately adjacent to a
city, town, or
unincorporated area that
has a population in excess
of 50,000 persons.

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CRS-22
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Economic Impact Initiative
FY05 — $21.0
Essential community
Competitive grants.
Grants
FY06 — $18.0
facilities in economically
Funding through directed spending of appropriations to the
depressed rural
Community Facilities account of the Rural Community Advancement
communities with high
Program.
unemployment and/or
significant out-migration.
Rural Empowerment
FY05 — $12.0
Communities with high
Loans and grants.
Zones/Enterprise Communities
FY06 — $21.4
unemployment and poverty
Discretionary appropriations to the EZ/EC program account for
Program (EZ/EC)
that have been designated
designated EZ/EC communities. Additional funding may also be
as Empowerment Zones
provided through directed spending of appropriations to the Rural
and Enterprise
Community Advancement Program ($22.2 million in FY2005,
Communities through a
including funding for the Rural Economic Area Partnership areas).
competitive process.
Directed spending of appropriations to other USDA Rural
Development programs may also affect the EZ/EC programs.

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CRS-23
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Department of the Treasury
Community Development
FY05 — $55.0
Organizations that qualify
Competitive grants.
Financial Institutions Fund
FY06 — $55.0
as a CDFI must meet
Financial and technical assistance is provided in the form of grants,
(CDFI)d
specific eligibility criteria.
loans, equity investments, and deposits. Applicants participate in a
The Fund has several components
Entities must submit
merit-based qualitative application and selection process. Funding
proposed for consolidation. They
applications for
decisions are based on pre-established evaluation criteria. Assistance
are listed below and include the
certification to the Fund.
agreements can include performance goals, matching funds
CDFI program, the BEA program,
In FY2004, 68 financial
requirements, and reporting requirements.
and the Native Initiative. The
assistance awards, totaling
purpose of the Fund is to provide
$46.7 million, and 80
credit and investment capital to
technical assistance
community-based organizations in
awards, totaling $3.6
distressed urban and rural areas.
million, were made to
The Fund’s programs also
CDFIs.
encourage banks and thrifts to
expand their activities in distressed
communities. The programs
provide training and technical
assistance to qualifying financial
institutions.

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CRS-24
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Bank Enterprise Award
FY05 — ($10.0)
Insured depository
Competitive grants.
Program (included in CDFI
FY06 — ($10.0)
institutions; in FY2004, 49
Applicants participate in the BEA Program through a competitive
Fund)
FDIC-insured institutions
process which evaluates applications based on the value of their
received $17 million in
increases in certain qualified activities. Participants receive award
BEA Program awards.
proceeds only after successful completion of the specified qualified
activities.
Native Initiatives (included in
FY05 — ($4.0)
Existing and emerging
Same as for the CDFI Program.
CDFI Fund)
FY06 — ($4.0)
CDFIs serving Native
American, Alaska Native,
and Native Hawaiian
communities; in FY2004,
41Native Initiative awards
were made, totaling $8.5
million.

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CRS-25
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Department of Health and Human Services
Community Services Block
FY05 — $636.8
50 states, Puerto Rico,
Formula block grants.
Grants
FY06 — $637.0
Indian tribes, and the
HHS is required under the CSBG Act to reserve 1.5% of appropriated
territories of Guam,
funds for training and technical assistance and other administrative
American Samoa, the
activities, of which half of this set-aside must be provided to state or
Virgin Islands, and the
local entities. Also, half of 1% of funding is reserved for outlying
Northern Mariana Islands.
territories (Guam, American Samoa, the Virgin Islands, and the
Northern Mariana Islands). Block grants are allotted to states and
Puerto Rico based on the relative amount received in each state, in
FY1981, under a section of the former Economic Opportunity Act.
HHS may allow Indian tribes to receive their allotments directly,
rather than through the state.
States are required to pass through at least 90% of their federal block
grant allotments to “eligible entities.” There are more than 1,000
eligible entities around the country, of which approximately 80% are
private nonprofit organizations and about 20% are public agencies.

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CRS-26
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Community Economic
FY05 — $32.7
Nonprofit community
Competitive discretionary grants.
Development
FY06 — $32.7
development corporations
Funds awarded at the Secretary’s discretion. This program is one of
including charitable, faith-
the related activities authorized by the CSBG Act. The program
based, Indian, and Alaskan
supports local community development corporations’ National Youth
Native organizations.
Sports Program, and efforts to generate employment and business
development opportunities for low-income residents. Projects must:
(1) directly benefit persons living at or below the poverty level and
(2) be capable of being completed within 12 to 60 months of the date
the grant was awarded. Preference is given to projects that document
public/private partnership including the leveraging of cash and in-
kind contributions; and to projects located in areas characterized by
poverty and other indicators of socioeconomic distress, such as a
Temporary Assistance to Needy Families (TANF) assistance rate of at
least 20%, designation as an Empowerment Zone or Enterprise
Community (EZ/EC), high levels of unemployment, high levels of
incidences of violence, gang activity, crime, drug use, and low-
income noncustodial parents of children receiving TANF.

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CRS-27
Program Name and Description
FY2005/FY2006
Eligible Entities
Formula or Distribution Method
Appropriation
($ in millions)
Job Opportunities for Low-
FY05 — ($5.4)
Nonprofit, tax-exempt
Competitive discretionary grants.
Income Individuals (JOLI)
FY06 — ($5.4)
organizations including
This program is a set-aside within the Community Economic
faith-based and community
Development Program. The program provides grants to community
development corporations
based, nonprofit organizations to demonstrate and evaluate ways of
and charitable
creating new employment opportunities with private employers for
organizations.
individuals receiving TANF and other low-income individuals whose
family income level does not exceed 100% of the poverty guidelines.
Projects to help with this effort include self-employment and micro-
enterprises, new businesses, expansion of existing businesses, or
creating new jobs or employment opportunities.
Rural Community Facilities
FY05 — $7.2
Tax-exempt nonprofit
Competitive discretionary grant.
FY06 — $7.4
organizations, states, and
This program is one of the related activities under the community
local governments.
economic development component of the CSBG. Grants are provided
to nonprofit organizations that train and offer technical assistance on
water and waste water facilities management and home repair to low-
income families, and that develop low-income rental housing units in
rural communities. Approximately 8 water and wastewater projects
are funded annually.
Note: A program identified in italics is a component of the program preceding it in roman type.
a. When calculating the amount of funds included in activities that would be consolidated under its proposal, the Bush Administration includes funding only for the Neighborhood
Initiative Grants and Economic Development Initiative Grants, both of which are congressional earmarks. The Administration does not include funding for all remaining set-asides
or earmarks that would not be consolidated under the new proposal. These include Housing Assistance Council ($3.3 million), National American Indian Housing Council ($2.4
million), National Housing Development Council ($4.8 million), National Council of LaRaza ($4.8 million), Technical Assistance ($1.4 million), and Working Capital Fund ($3.5
million).

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CRS-28
b. Selected cities include Atlanta, GA; Baltimore, MD; Boston, MA; Chicago, IL; Cleveland, OH; Columbus, OH; Dallas, TX; Denver, CO; Detroit, MI; Indianapolis, IN; Kansas
City, MO; Los Angeles, CA; Miami, FL; Minneapolis-St. Paul, MN; Newark, NJ; New York, NY; Philadelphia, PA; Phoenix, AZ; Portland, OR; San Antonio, TX; San Francisco Bay
Area, CA; Seattle, WA; Washington, D.C.
c. Round II EZ cities include Santa Ana, CA; New Haven, CT; Miami-Dade County, FL; Boston, MA; Gary-Hammond-East Chicago, IN; Minneapolis, MN; St. Louis — East St.
Louis, MO-IL; Cumberland County, NJ; Cincinnati, OH; Columbus, OH; Columbia-Sumter, SC; Knoxville, TN; El Paso, TX; Norfolk-Portsmouth, VA; Huntington,-Ironton,WV-OH.
d. In addition, the Fund administers the New Markets Tax Credit (NMTC) program. This program permits taxpayers to receive a tax credit for making qualified investments in
designated Community Development Entities (CDEs). The NMTC will continue to be administered by the Department of the Treasury.
e. The FY2006 appropriations includes funding CDBG funds to Indian tribes ($60 million) and the YouthBuild program ($50 million), and Working Capital fund ($1.6 million). These
Administration’s FY06 budget proposal recommended transferring these programs to other accounts.

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