Community Development Block Grants:
Funding Issues in the 112th Congress and
Recent Funding History
Eugene Boyd
Analyst in Federalism and Economic Development Policy
May 4, 2011
Congressional Research Service
7-5700
www.crs.gov
R41754
CRS Report for Congress
P
repared for Members and Committees of Congress

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Community Development Block Grants: Funding Issues in the 112th Congress

Summary
In the coming weeks and months Congress will consider legislation appropriating funds for
FY2012. The budget debate will establish national priorities and takes place within the context of
growing concerns about the need to address federal budget deficits, the national debt, and a
sluggish economic recovery following the longest and deepest recession since the Great
Depression. The Obama Administration and the 112th Congress may consider and debate a
number of approaches to spur economic activity and job growth, including federal public works
and community and economic development programs. In addition, the Administration and
Congress must arrive at a consensus on how to address long term deficit reduction, including
spending cuts. The Department of Housing and Urban Development’s (HUD) Community
Development Fund (CDF), which includes the Community Development Block Grants (CDBG),
are among the accounts that Congress may consider candidates for funding reduction or
elimination.
On April 15, 2011, the President signed into law P.L. 112-10, the Department of Defense and
Full-Year Continuing Appropriations Act for FY2011. The measure, which passed the House and
Senate on April 14, 2011, after months of intense budget negotiations, appropriated $3.508 billion
for activities in the CDF account, including $3.343 billion for CDBG formula funds. P.L. 112-10
included two provisions reducing the account’s overall appropriations. P.L. 112-10 also included a
0.2% mandatory across the board rescission of all appropriated funds and a 1% discretionary
transfer from designated HUD funds, including CDF activities to HUD’s Transformation
Initiative. The mandatory across the board rescission reduces the CDF account by $7 million to
$3.501 billion, while the 1% discretionary transfer would move $35 million from the CDF
account and its components to the Department’s Transformation Initiative. This 1% discretionary
transfer reduces the amount available for CDBG formula grants to states, entitlement
communities, and insular areas to approximately $3.303 billion. This is approximately 16% less
than appropriated in FY2010. The act also appropriated $64 million for Indian tribes’ CDBG
activities and $98 million for the Department’s Sustainable Communities Initiative, which
supports regional coordination of land use planning, housing, environmental, and transportation
activities and policies. The formula-based Community Development Block Grant program was
one of several programs targeted for significant budget reductions in an earlier version of a
consolidated appropriations bill, H.R. 1, that passed the House, but not the Senate. H.R. 1 would
have reduced funding for CDBG activities to $1.500 billon, or 62.5% below the amount
appropriated for FY2010.
Having completed action on the FY2011 appropriations, Congress will now consider the Obama
Administration’s FY2012 budget proposals, including the proposals for the CDF account. The
President’s proposed budget recommends $3.804 billion for the CDF account. This is 8.6% higher
than the account’s FY2011 funding level. The Administration has proposed a restructuring of the
CDF account by minimizing, through transfer or termination, activities not directly related to the
CDBG program by authorizing statute. The Administration’s FY2012 budget proposes to: (1)
increase funding for CDBG formula grants by 10.5% from $3.303 billion appropriated in FY2010
to $3.691 billion; (2) eliminate funding for the Neighborhood Initiative and Economic
Development Initiative programs; (3) eliminate funding for Section 107 activities; (4) transfer its
Sustainable Communities Initiative to a new stand alone account; and (5) convert Section 108
loan guarantees to a fee-based program.
This report will be updated as events warrant.
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Community Development Block Grants: Funding Issues in the 112th Congress

Contents
Recent Developments.................................................................................................................. 1
Fiscal Year 2011 Funding (P.L. 112-10 and H.R. 1) ..................................................................... 1
Passage of H.R. 1473, Full-Year Continuing Appropriations, P.L. 112-10 ........................ 2
H.R. 1 ............................................................................................................................. 3
Senate Appropriations Committee Amendment to H.R. 1, S.Amdt. 149 ........................... 5
Impact and Implications of Reduction in Funding.................................................................. 5
FY2012 Appropriations............................................................................................................... 6
The President’s FY2012 Budget Request............................................................................... 6
Sustainable Communities Initiatives (SCI) ...................................................................... 8
Section 108 Loan Guarantees .......................................................................................... 9
Estimated Distribution of CDBG Formula Funds................................................................... 9
Recent Funding History ............................................................................................................ 12
Formula Grants ................................................................................................................... 14
Impact of Inflation on CDBG-Formula Allocations ....................................................... 16
CDBG-Linked Set-Asides and Earmarks............................................................................. 16
Earmarks Dominate Set-Aside Activities ....................................................................... 18
Special Appropriations ........................................................................................................ 19
Proposed Rescission of Neighborhood Stabilization Program Funds .............................. 20

Figures
Figure 1. CDF Appropriations: FY2000 to FY2011 ................................................................... 13
Figure 2. CDBG Funding in Current and Constant Dollars: FY2000-FY2011 ............................ 16
Figure 3. CDF Set Asides in Current and Constant Dollars: FY2000 to FY2010 ........................ 17
Figure 4. CDF Earmarks and Set-Asides: FY2000 to FY2011.................................................... 18

Tables
Table 1. CDBG and Related Appropriations: FY2010 Actual and FY2011Request and
Recommended Appropriations ................................................................................................. 3
Table 2. Average CDBG Allocation Actual 2010 and Projected FY2011 (P.L. 112-10) ................. 6
Table 3. CDBG and Related Appropriations: FY2010 Actual and FY2012 Proposed.................... 7
Table 4. Actual Allocation of FY2010 CDBG Formula Grants to States and Entitlement
Communities, HUD’s Estimated Allocation for FY2011 Under P.L. 112-10, and the
President’s FY2012 Proposed CDBG Formula Funding.......................................................... 10
Table 5. CDF Appropriations: FY2000 to FY2010..................................................................... 14
Table 6. Number of CDBG Grantees and Average Allocation: FY2000 to FY2010..................... 15
Table A-1. CDF Set-Asides from FY2000 to FY2010 ................................................................ 21

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Appendixes
Appendix. CDF Set-Asides: FY2000 to FY2010 ....................................................................... 21

Contacts
Author Contact Information ...................................................................................................... 23
Acknowledgments .................................................................................................................... 23

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Community Development Block Grants: Funding Issues in the 112th Congress

Recent Developments
On April 15, 2011, the President signed into law P.L. 112-10, the Department of Defense and
Full-Year Continuing Appropriations Act for FY2011. The measure, which passed the House and
Senate on April 14, 2011, after months of intense budget negotiations, included a provision
appropriating $3.508 billion for the Community Development Fund (CDF). The act includes a
mandatory across-the-board rescission of 0.2% and a 1% discretionary transfer to the
Department’s Transformation Initiative, which reduces the CDF accounts total appropriation to
$3.501 billion. This is approximately 16% below the amount appropriated for FY2010. The CDF,
which includes the formula-based Community Development Block Grant program, was one of
several accounts targeted for significant budget reductions in an earlier version of a consolidated
appropriations bill, H.R. 1, that passed the House, but not the Senate. H.R. 1 would have reduced
funding for CDBG activities by 62.5% below the amount appropriated for FY2010. On February
14, 2011, the Obama Administration released its proposed budget for FY2012. The President’s
proposed budget recommends $3.804 billion for the CDF account. This is 8.6% more than the
$3.501 billion appropriated for FY2011. In the coming weeks, as the 112th Congress attempts to
reach consensus regarding funding levels for FY2012 it will do so amid heighten concerns about
federal spending, deficit reduction, and national priorities.
Fiscal Year 2011 Funding (P.L. 112-10 and H.R. 1)
The Community Development Block Grant (CDBG) program, administered by the Department of
Housing and Urban Development (HUD), is the federal government’s largest and most widely
available source of financial assistance supporting state and local government-directed
neighborhood revitalization, housing rehabilitation, and economic development activities. These
formula-based grants are allocated to more than 1,100 entitlement communities (metropolitan
cities with populations of 50,000, principle cities of metropolitan areas, and urban counties), the
50 states, Puerto Rico, and the insular areas of American Samoa, Guam, the Virgin Islands, and
the Northern Mariana Islands. Grants are used to implement plans intended to address housing,
community development and economic development needs, as determined by local officials.
Funding for HUD’s Community Development Fund, which includes the CDBG program, are
among the programs that were initially targeted for reduction as part of congressional efforts to
reduce the federal budget deficit. On February 19, 2011, the House-passed H.R. 1, a bill
providing continuing annual appropriations for FY2011.1 The House passed version of H.R. 1
would have reduced total funding for discretionary programs by $61 billion below the amount
requested by the Obama Administration. Included among the programs and accounts targeted for
cuts by the House-passed version of the H.R. 1 was the CDF account, which includes the
formula-based CDBG program. The bill, as passed by the House, failed to win Senate approval.
An alternative measure, S.Amdt. 149, introduced in the Senate, also failed to win Senate

1 Under Sec. 109 of P.L. 111-242, Continuing Appropriations Act for FY2011, a program whose complete distribution
of its FY2011 appropriations would have occurred at the beginning of the fiscal year is prohibited from allocating funds
or awarding grants. According to Sec. 109, the basis for this prohibition is that the complete distribution of program
funds would impinge on final funding prerogatives of Congress. Given this directive, in the absence of a full-year
appropriation and based on past practices, HUD may not allocate CDBG funds for the current fiscal year until Congress
has passed a final appropriations measure for FY2011.
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approval. This led to renewed negotiations between the Obama Administration, and House and
Senate leadership to resolve the FY2011 budget impasse.
Passage of H.R. 1473, Full-Year Continuing Appropriations, P.L. 112-10
After weeks of negotiations, on April 15, 2011, President Obama signed into law P.L. 112-10,
formerly H.R. 1473, the Department of Defense and Full-Year Continuing Appropriations Act for
FY2011. The measure was passed by both the House and the Senate on the eve of the expiration
of P.L. 112-8, a week-long temporary spending measure that was signed by the President on April
9, 2011, to allow House and Senate leaders time to negotiate a final FY2011 appropriations
agreement that would avoid a government-wide shutdown.2
P.L. 112-10 appropriated $3.508 billion for activities in the CDF account, including $3.343 billion
for CDBG formula funds. The act also includes a 0.2% mandatory across the board rescission of
all appropriated funds3 and a 1% discretionary transfer from designated HUD funds, including
CDF activities to HUD’s Transformation Initiative.4 The mandatory across the board cut reduces
the CDF account by $7 million to $3.501, while the 1% discretionary transfer would move $35
million from the CDF account and its components to the Department’s Transformation Initiative.
Table 1 includes the adjusted appropriations for CDF activities taking into account both the 0.2%
rescission and the 1% transfer. Table 1 also includes the actual distribution of funds appropriated
for activities included in the CDF account for FY2010, as well as the Administration’s budget
request for FY2011 and the projected estimated distribution of funds in the account based on the
language included in H.R. 1 and a Senate Committee’s amended version of H.R. 1 (S.Amdt.
149).5
P.L. 112-10 appropriation of $3.501 billion for the CDF account is 21.3% less than the $4.450
billion appropriated for FY2010 CDF activities and 20.1% less than requested by the
Administration for FY2011. Conversely, the FY2011 appropriation is 133% higher than
recommended by H.R. 1, a measure passed by the House earlier during the 1st session of the 112th
Congress. Included in the CDF account is the CDBG program, which includes the formula-based
grants awarded to Puerto Rico, the 50 states, and eligible metropolitan area-based cities and
counties (entitlement communities); insular areas (Guam, the Virgin Islands, the Northern
Mariana Islands; and American Samoa), and Indian tribes. P.L. 112-10 reduced funding for
CDBG formula grants by 16.4%. Also included in the account are funds for the Sustainable
Communities Initiative (SCI), a competitively awarded grant program intended to support a
coordinated approach to regional land use, housing, environmental, and transportation planning
activities. P.L. 112-10 reduced funding for SCI activities by 33%.

2 Included in P.L. 112-8, which funded the federal government through April 15, 2011,was a provision, Sec. 303,
appropriating $4.230 billion for the CDF for FY2011. That provision was voided with the passage of P.L. 112-10.
3 P.L. 112-10, Division B, Sec. 1119.
4 P.L. 112-10, Division B, Sec. 2259.
5 Given the minimal instructions included in the House-passed version of H.R. 1, figures included in Table 1 assume
that funds will be allocated among the CDBG components based on the same percentage distribution of funds allocated
for FY2010, except where noted.
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H.R. 1
On February 19, 2011, the House passed H.R. 1, Full Year Continuing Appropriations Act for
FY2011. As passed the House, H.R. 1 would have reduced the CDF account by 66.3% below the
account’s FY2010 funding level of $4.450 billion, and would have prohibited funds from being
used for earmarks6 and the Administration’s Sustainable Communities Initiative (SCI). It did not
include instructions on how funds were to be allocated among the components of the CDBG
program: states and entitlement communities, insular areas, and Indian tribes. The program’s
governing statute7 and previous appropriations acts required that 70% of funds be allocated to so-
called entitlement communities8 and 30% to states and Puerto Rico for distribution to
nonentitlement communities after specific amounts were set aside for insular areas, Indian tribes,
and other programs included in the account. Given the minimal instructions included in the
House-passed version of H.R. 1, figures included in Table 1 assume that funds would have been
allocated among the CDBG components based on the same percentage distribution of funds
allocated for FY2010, except where noted.
Table 1. CDBG and Related Appropriations: FY2010 Actual and FY2011Request and
Recommended Appropriations
(in millions of dollars)
FY2011
FY2010
Administration
H.R. 1 Senate
Program
Enacted
Request
H.R. 1 House
Committee P.L.
112-10g
CDF, Total
4,450.0
4,380.1
1,500.0 4,230.0
3,501.0
CDBG-formula
3,943.2
3,943.3
1,478.0
3,943.2
3,296.0
Entitlement
2,760.2 2,760.3
1,034.6 2,760.2
2,307.2
Communities
States 1,183.0
1,183.0
443.4
1,183.0
988.8
Insular Areas
6.9 6.9
7.0a 7.0a 6.9a
CDBG Indian Tribes
64.3
64.3
15.0b 40.0
64.2
CDBG Subtotal
4,014.4
4,014.4
1,500.0
3,990.0
3,367.1
Sustainable
148.5 148.5 0.0 148.5
98.8
Communities
Regional Integration
99.0 99.0 0.0 0.0
69.2
Planning Grants
Community
39.6 39.6 0.0 0.0
29.6
Challenge Grants

6 In previous years, the CDF account included two earmarked subaccounts: the Economic Development Initiative (EDI)
and the Neighborhood Initiative (NI). H.R. 1 explicitly prohibits funds being used for earmarks. See Section 1102 of
H.R. 1.
7 42 U.S.C. 5301, et seq.
8 Entitlement communities include principle cities of metropolitan areas, cities in metropolitan areas whose population
exceeds 49,999 persons, and statutorily defined urban counties. In general, these are metropolitan-based counties whose
population meets or exceeds 200,000 persons, excluding the population of entitlement cities within its boundaries.
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FY2011
FY2010
Administration
H.R. 1 Senate
Program
Enacted
Request
H.R. 1 House
Committee
P.L. 112-10g
Capacity Building
— —
0.0
0.0
0.0
Clearinghouse
HUD-DOT
9.9 9.9
0.0 0.0
0.0
Integration
Research
Catalytic Competition
— 148.5 0.0 0.0
0.0
Grants
Rural Innovation Fundc 24.8
—
0.0
24.8
0.0
University Community
24.8 24.8 0.0 24.8
0.0
Fundc
Neighborhood
21.9 —
0.0 0.0
0.0
Initiative
Economic
171.1 —
0.0 0.0
0.0
Development Initiative
Transfer to the
44.5 43.8 0.0 42.3
35.0
Transformation
Initiativee
Non-CDBG Set-
435.6 365.6 0.0 240.0
133.8
asides and earmarks
Source: Prepared by CRS based on Administration’s FY2012 budget submission and H.R. 1.
Notes: Totals and subtotals may not correspond to actual amounts due to rounding. Italics indicates entry’s
amount is a component of the item immediately above it.
a. 42 U.S.C. 5306(a)(2) requires HUD to set aside $7 million, as specified by 42 U.S.C. 5307(1)(a), for insular
areas before al ocating funds to states and entitlement communities.
b. 42 U.S.C. 5306(a)(1) requires HUD to set aside 1% of the annual amount appropriated for al ocation to
Indian tribes. Congress has modified this requirement in annual appropriations acts setting aside a specific
amount. H.R. 1 does not include a specific amount for Indian tribes. H.R. 1473 assumes an allocation of
$65.0 million for Indian tribes.
c. Before FY2010, the program was funded under a separate account, Rural Housing and Economic
Development.
d. Prior to FY2007, CDBG-linked university activities were included in this account as authorized under 42
U.S.C. 5307. For FY2009, program funds of $23 million were appropriated under a separate HUD account,
Research and Technology.
e. Subtotal for the Transformation Initiative assumes transfer of 1% of amounts appropriated from programs
included in the CDF account.
f.
The bill targets $17.5 million of this amount to metropolitan areas with populations not exceeding 500,000
persons.
g. Table reflects an across-the-board rescission of 0.2% included under Sec. 1119, of Title I, Division B of P.L.
112-10. It also reflects the transfer of 1% of the amounts appropriated to each program under the CDF
account to HUD’s Transformation Initiative. Please note the original appropriation for the CDF account
was $3.508 billion, including $3.343 billion for CDBG formula funds and insular areas, $65 million for Indian
tribes, and $100 million for the Sustainable Communities Initiative.
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Senate Appropriations Committee Amendment to H.R. 1, S.Amdt. 149
On March 9, 2011, Senator Inouye, Chairman of the Senate Appropriations Committee, submitted
S.Amdt. 149, an amendment to H.R. 1, in the nature of a substitute, for Senate consideration.
S.Amdt. 149, which was defeated by a vote of 42 to 58, included a provision that would have
appropriated $4.230 billion for CDF activities. This included $3.990 billion for the CDBG
program. The amendment would have frozen CDBG formula grant funds allocated to states and
entitlement communities at the FY2010 appropriation level of $3.943 billion, while insular areas
would have received $7 million and Indian tribes $40 million (1% of the amount appropriated as
required by statute).9 The Senate bill would have also funded the Rural Innovation Fund,
University Community Fund, and SCI programs at their FY2010 funding levels.
Impact and Implications of Reduction in Funding
Under P.L. 112-10 appropriations for the formula-based components of the CDBG program
(entitlement communities and states, and excluding insular areas) totals $3.296 billion, which is
approximately 16.4% ($647 million) less than the $3.943 billion appropriated for FY2010.10 The
$647 million reduction in funding for formula grant activities could result in the average grant
amount for entitlement communities declining from $2.4 million to $2 million. This is a 16.7%
reduction in the average grant amount awarded to entitlement communities. The decline in
average funding is both a result of lower appropriations and an increase in the number of
communities qualifying for entitlement status (Table 2). The average state allocation may decline
by 16.4%, from $23.2 million in FY2010 to $19.4 million for FY2011. In addition, the
competitively awarded SCI is facing a funding reduction of 33% from its FY2010 appropriations
level.
Although the reductions in CDBG funding represent a decline in resources available to support
local community and economic development activities, they are well below the 62.5% reduction
proposed in H.R. 1. According to the U.S. Conference of Mayors and other organizations
representing state and local governments, the proposed reduction in funding included in H.R. 1
would have significantly impact the long-term community and economic development plans of
the states and local governments forcing them to postpone or terminate activities that support
private sector economic development and job creation efforts, public facilities, and public
services.11 The proposed funding reduction included in H.R. 1 also would have undercut the
resources of non-profit organizations serving as CDBG sub-grantees. These entities are involved
in managing a range of CDBG-funded public services, facilities, and activities, including
homeless shelters, public safety activities, and job counseling.
Supporters of the CDBG program contend that the reduction in funding will disproportionately
affect low and moderate income households given the statutory requirement that communities

9 42 U.S.C. § 5306.
10 The FY2011 amount assumes an across-the-board rescission of 0.2% and a 1% transfer of funds to the Department’s
Transformation Initiative. See Sec. 1119 and Sec. 2259 of P.L. 112-10.
11 See Housing and Development.Com, “Mayors Lobbying Senate to Restore CDBG Funding,” Community
Development Digest, February 25, 2010, p. 1; and U.S. Conference of Mayors, “Community Development Block
Grants Work for America,” February 2011, http://www.usmayors.org/cdbg/. National League of Cities, “NLC
ACTION ALERT: Community Development Block Grant Recess Strategy,” press release, February 2011,
http://www.nlc.org/advocating_for_ cities/legaction center.aspx.
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allocated at least 70% of the program’s funds to activities principally benefitting low and
moderate income persons.12 The FY2011 appropriations for the formula component of the CDBG
program is the lowest amount appropriated in more than a decade. (See Table 5.) The 16.7%
reduction in funding for entitlement communities will result in entitlement communities delaying
some projects and reducing support for others, including activities undertaken by community-
based organizations acting as sub-grantees.
Table 2. Average CDBG Allocation Actual 2010 and Projected FY2011 (P.L. 112-10)
(dollars in millions)
FY2011
Projected
Number of
Number of
average
Percentage
eligible
FY2010
eligible
allocation
change from
entities
average
entities
under P.L.
FY2010 to

FY2010
allocation
FY2011
112-10
FY2011
Entitlement
1,165 $2.4
1,167
$1.9 -16.7
communities
States 51
23.2
51
19.4
-16.4
Insular areas
4
1.7
4
1.7
0.0
Source: HUD allocations at data at http://www.hud.gov/offices/cpd/about/budget/budget10/index.cfm and CRS,
based on information included in Table 1.
FY2012 Appropriations
In the coming months Congress will consider and debate the Administration’s budget
recommendations for fiscal year 2012. It will undertake these efforts with an eye on reducing
federal spending in an effort to address the federal deficit. It may balance this concern with a
focus on funding federal activities that support private sector job creation in an effort to combat a
national unemployment rate that remains high and a U.S. economy that continues to be mired in a
so-called “jobless recovery” following the recession that began in December 2007. Supporters of
the program have vowed to continue defending the program against cuts in funding.13
The President’s FY2012 Budget Request
On February 14, 2011, the Obama Administration submitted its FY2012 budget recommendations
for congressional consideration. The Administration has proposed restructuring the CDF account
by minimizing, through transfer or termination, activities not directly related by authorizing
statute to the CDBG program. The Administration’s budget proposes to:
• reduce funding for CDBG formula grants;

12 The program’s authorizing statue and regulations define low and moderate income persons as those persons whose
income do not exceed 80% of the median income of the jurisdiction.
13 Zach Patton, “The CDBG Mobilization,” Governing, 2011, pp. 11-12.
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• eliminate funding for the Neighborhood Initiative (NI) and Economic
Development Initiative (EDI) programs;
• eliminate funding for Section 107 activities;
• transfer its Sustainable Communities Initiative (SCI) to a new stand-alone
account; and
• convert Section 108 loan guarantees to a fee-based program.
The Administration’s FY2012 budget recommends a total funding level of $3.804 billion for
programs funded under the CDF account. The proposed funding level represents a 14.5%
reduction below the account’s FY2010 enacted appropriations level, but a 8.6% increase above
the $3.501 appropriated for FY2011.
The Administration proposes to increase funding for the CDBG formula component of the CDF
account by 11.5%, from $3.296 billion appropriated in FY2011 to $3.684 billion (see Table 3). It
also proposes to fund CDBG grants to insular areas and Indian tribes at $7 million and $65
million, respectively, as required the CDBG program’s authorizing statute.
In addition, the Administration is requesting $25 million for Rural Innovation Grants and $23
million for Guam beyond the amount it would receive as an insular area. Rural Innovation Funds
would be awarded competitively and targeted to rural areas whose populations do not exceed
20,000 persons to support innovative housing and economic development efforts, while
assistance to Guam is intended to address community development needs arising from the
relocation of military facilities and personnel to the island.
As in previous years, the Administration’s budget does not include funding for Economic
Development Initiatives and Neighborhood Initiatives grants, two programs subject to
congressional earmarks. The Administration states that it opposes earmarking NI and EDI funds
and supports the regular CDBG formula program.
Table 3. CDBG and Related Appropriations: FY2010 Actual and FY2012 Proposed
(in millions of dollars)
FY2012
FY2010
FY2011
Administration
Program
Enacted
Enacted
Request
House
Senate
CDF, Total
4,450.0
3,501.0 3,804.3


CDBG-formula
3,950.1
3,302.9
3,691.4


Entitlement Communities
2,760.2
2,702.2
2,579.1


States 1,183.0
988.8
1,105.3


CDBG Insular areas
6.9
6..9
7.0


CDBG Indian Tribes
64.3
64.2
65.0


Section 107 (technical assistance)
0.0
0.0
0.0


CDBG Subtotal
4,014.4
3,367.1
3,756.4


Grant to Guama 0.0
0.0
22.9


Rural Innovation Fundb 24.8
0.0
25.0


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FY2012
FY2010
FY2011
Administration
Program
Enacted
Enacted
Request
House
Senate
Catalytic Competition Grants
—
0.0
0.0


University Community Fundc 24.8
0.0
0.0


Sustainable Communitiesd 148.5
98.8
0.0


Regional Integration Planning
99.0
69.2
0.0
Grants
Community Challenge Grants
39.6
29.6
0.0
Capacity Building Clearinghouse
—
0.0
0.0
HUD-DOT Integration Research
9.9
0.0
0.0
Neighborhood Initiative
21.9
0.0
0.0


Economic Development Initiative
171.1
0.0
0.0


Transfer to the Transformation
44.5 35.0
0.0


Initiativee
CDBG-related set-asides and
435.6 133.8
47.9


earmarks
Disaster relief supplementalf
100.0 0.0
0.0


Source: Prepared by CRS based on Administration’s FY2012 budget submission and H.R. 1.
a. Funds would be transferred from the Defense Department and administered under the CDBG program and
would be used to address community development needs resulting from the relocation of various military
installations and personnel to Guam.
b. Before FY2010, the program was funded under a separate account, Rural Housing and Economic
Development.
c. Prior to FY2007, CDBG-linked university activities were included in this account. For FY2009, program
funds of $23 million were appropriated under a separate HUD account, Research and Technology.
d. The Administration is proposing to fund the programs at $150 million under a separate stand-alone
account.
e. Subtotal for Transformation initiative assumes transfer of 1% of amounts appropriated to programs included
in the CDF account.
f.
P.L. 111-212 included $100 million for disaster recovery activities.
Sustainable Communities Initiatives (SCI)
The Administration’s FY2012 budget recommends transferring the SCI programs to a new stand-
alone account. The SCI is a set of planning-oriented grants first proposed by the Obama
Administration in its FY2010 budget and funded at $150 million. For FY2012 the Administration
is requesting an appropriation of $150 million. Funds would be used to support SCI’s three
components:
• Regional Integrated Planning Grants. $100 million would be
competitively awarded to regional organizations in metropolitan areas to
support efforts to develop effective models that would integrate the
planning requirements of various disciplines critical to the development of
sustainable communities. This would be done in collaboration with the
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Department of Transportation, the Environmental Protection Agency, and
other federal agencies. Grant awards would focus on metropolitan-wide
housing, transportation, energy, and land use planning.
• Community Challenge Grants. $40 million would be competitively
awarded to communities to reform existing building codes, land use and
zoning ordinances with the goal of promoting sustainable growth and
discouraging inefficient land use patterns.
• Housing-Transportation Integration Research. $10 million was set aside
for a joint HUD-Department of Transportation research initiative that
would seek to quantify and evaluate the benefits and trade-offs of various
efforts. A portion of these funds would be use to evaluate the long-term
benefits of Regional Integrated Planning Grants and Community
Challenge Grants.
Section 108 Loan Guarantees14
The CDBG Section 108 Loan Guarantee program (Section 108) allows states and entitlement
communities to collateralize their annual CDBG allocation in an effort to attract private capital to
support economic development activities, housing, public facilities, and infrastructure projects.
Communities may borrow up to five times their annual allocation for a term of 20 years through
the public issuance of bonds. The proceeds from the bonds must be used to finance activities that
support job creation and that meet one of the national goals of the CDBG program. The activity
must principally benefit low or moderate income persons, aid in preventing or eliminating slums
or blight, or address an urgent threat to residents. Each community’s current and future annual
CDBG allocation serves as security in case of default. Financing is pegged to yields on U.S.
Treasury obligations of similar maturity to the principal amount.
The Administration’s budget proposes doubling the program’s loan commitment ceiling from
$250 million in FY2010 to $500 million in FY2012. The Administration’s budget justifications
noted that, given the continued difficulties in the credit markets, the proposed increase in funding
will help local governments finance large-scale job creation activities. In addition to an increase
in the loan commitment ceiling, the Administration proposes revamping the program by charging
a fee-based assessment to borrowers accessing the program, which would eliminate the need for
an appropriated credit subsidy.15 This proposal was first made by the Administration in its
FY2010 budget, but it was rejected by Congress in favor of maintaining the status quo.
Estimated Distribution of CDBG Formula Funds
The Administration’s budget proposal for CDBG formula funds for FY2012 and the program’s
FY2011 appropriations (P.L. 112-10) are at odds. For FY2012, the Administration is seeking an

14 This program is authorized by 42 U.S.C. § 5308.
15 The Credit Reform Act of 1990 requires federal agencies administering credit programs to estimate a program’s
subsidy rate and to request an appropriation to cover that cost. A credit subsidy is intended to cover the estimated long-
term cost to the federal government of a direct loan or loan guarantee. For loan guarantees, the subsidy cost is the net
present value of estimated payments by the government to cover defaults and delinquencies, interest subsidies, or other
payments, offset by any payments to the government, including origination and other fees, penalties, and recoveries.

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11.7% increase in funding for CDBG formula grants on the heels of an all-out-effort by local
officials to save the program from the 62.5% reduction in funding proposed in H.R. 1. Congress
may be reluctant to fund such an increase given the call for reduced spending and following the
passage of P.L. 112-10, which resulted in a 16.4% reduction in funding below the program’s
FY2010 funding level.
Table 4 identifies the FY2010 actual distribution, HUD’s preliminary estimated distribution for
FY2011, and FY2012 projected distribution of CDBG formula funds awarded to states and
entitlement communities. The table presents information at the state level, but each state total
includes actual, estimated, or projected amounts that may be allocated to the state and entitlement
communities within each state. The number of entitlement communities in each state are
identified in the last two columns of the table by fiscal year. Calculations for 2011 are preliminary
estimates generated by HUD. Calculations for FY2012 are based on the President’s budget
recommendation and assumes the same percent distribution of funds as FY2011, minus the
statutory requirements that funds be set aside for Indian Tribes and the insular areas of Guam, the
Virgin Islands, American Samoa, and the Northern Mariana Islands. In addition, the estimates for
FY2012 do not include any new grantees that may be added as a result of meeting the minimum
population threshold for entitlement status.
In short, P.L. 112-10 reduces formula allocations to states and entitlement communities by 16.4%
below FY2010 allocation while the President’s budget recommendation for FY2012 would result
in an increase of 11.7% more than the FY2011 funding level.
Table 4. Actual Allocation of FY2010 CDBG Formula Grants to States and
Entitlement Communities, HUD’s Estimated Allocation for FY2011 Under P.L. 112-
10, and the President’s FY2012 Proposed CDBG Formula Funding
HUD’s
FY2010 Actual
Estimated
Number
Number
State and
FY2011 state
Administration
of
of
Entitlement
and
FY2012
Formula
Formula
Community
Entitlement
Budget
Recipients Recipients
Allocations:
Allocations:
Request:
in State
in State
State
$3,942,610,534
$3,297,896,926
$3,684,368,000
FY2010
FY2011
Alabama 53,316,977
44,560,841
49,824,694
17
17
Alaska
5,165,029
4,340,630
4,826,718 2
2
Arizona 58,918,034

49,312,939
55,058,880
17
17
Arkansas 29,830,047
25,019,234
27,876,167
15
15
California 498,630,012

416,396,550
465,969,551
181
181
Colorado 40,776,639

34,036,269
38,105,753
22
22
Connecticut 45,226,742

37,854,384
42,264,373
23
23
Delaware 7,754,022
6,489,539
7,246,131
4
4
District of Columbia
19,636,404
16,328,333
18,350,212
1
1
Florida 172,387,975
43,244,834
161,096,495
78 77
Georgia 88,719,365
74,354,659
82,908,212
25
25
Hawai 16,331,868
13,652,376
15,262,124
4
4
Idaho 13,306,473
11,171,526
12,434,894
8
8
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HUD’s
FY2010 Actual
Estimated
Number
Number
State and
FY2011 state
Administration
of
of
Entitlement
and
FY2012
Formula
Formula
Community
Entitlement
Budget
Recipients Recipients
Allocations:
Allocations:
Request:
in State
in State
State
$3,942,610,534
$3,297,896,926
$3,684,368,000
FY2010
FY2011
Illinois
186,636,960 61,260,048 174,412,166 51
51
Indiana 75,280,553
62,938,007
70,349,647
25
25
Iowa 44,391,171
37,134,289
41,483,532
12
12
Kansas 30,264,453
25,325,380
28,282,119
10
10
Kentucky 49,407,821
41,382,755
46,171,589
10
10
Louisiana 68,563,722
57,130,439
64,072,771
15
15
Maine 21363472
18,888,787
19,964,156
7
7
Maryland 59,055,404
48,388,599
55,187,252
15
15
Massachusetts 117,649,272
98,168,950
109,943,199
38
38
Michigan 141,260,510
118,343,989
132,007,891
46
46
Minnesota 62,071,555
51,887,824
58,005,844
21
21
Mississippi 38,270,634
32,080,845
35,763,892
7
7
Missouri 71,768,251
60,243,209
67,067,402
17
17
Montana 9,933,211
8,325,022
9,282,582
4
4
Nebraska 20,683,366
17,196,288
19,328,597
3
4
Nevada 21,933,014
18,357,248
20,496,393
8
8
New Hampshire
14,303,671
11,979,072
13,366,775
6
6
New Jersey
109,303,706
91,444,435
102,144,270
57
58
New Mexico
22,830,540
19,146,342
21,335,131
6
6
New York
374,236,685
313,075,654
349,724,036
49
49
North Carolina
77,770,615
65,280,479
72,676,609
27
27
North Dakota
6,851,614
5,739,131
6,402,831
4
4
Ohio 174,218,540
145,721,537
162,807,157
45
45
Oklahoma 32,629,101
27,347,592
30,491,882
11
11
Oregon 39,408,379
32,930,765
36,827,115
15
15
Pennsylvania 236,902,677
197,935,354
221,385,459
48
48
Rhode Island
18,671,084
15,629,723
17,448,121
7
7
South Carolina
41,999,569
35,217,231
39,248,581
17
17
South Dakota
8,671,615
7,268,482
8,103,621
3
3
Tennessee 54,075,918
45,351,248
50,533,924
17
17
Texas 276,687,113
231,944,344
258,563,999
78
78
Utah 22,522,762
18,657,562
21,047,512
14
16
Vermont 9,014,623
7,555,202
8,424,162
2
2
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HUD’s
FY2010 Actual
Estimated
Number
Number
State and
FY2011 state
Administration
of
of
Entitlement
and
FY2012
Formula
Formula
Community
Entitlement
Budget
Recipients Recipients
Allocations:
Allocations:
Request:
in State
in State
State
$3,942,610,534
$3,297,896,926
$3,684,368,000
FY2010
FY2011
Virginia 65,725,958
54,943,345

61,420,882
30
30
Washington 66,000,003
55,093,486
61,676,977
31
31
West Virginia
27,027452
22,624,306
25,257,143
9
9
Wisconsin 71,488,467
59,756,603
66,805,944
23
23
Wyoming 4,561,267
3,826,721
4,262,502
3
3
Puerto Rico
119,176,219
99,664,515
111,370,130
28
28
Formula Subtotal
3,942,610,534
3,297,896,926
3,684,368,000
1,216
1,218
American Samoa
1,121,951
1,144,882
1,134,000
1
1
Guam 3,050,365
3,117,008
3,081,000
1
1
Northern Marianas
880,151
832,690
889,000
1
1
Virgin Islands
1,877,526
1,891,420
1,896,000
1
1
Insular Area
Subtotala
6,929,993 6,986,000 7,000,000
4 4
Guamb

22,930,000


Total 3,949,540,527
3,304,882,926
3,756,368,000


Indian Tribes
Subtotalc
64,350,000 64,200,000 65,000,000


Source: CRS Analysis based on HUD FY2010 and FY2011 allocation data available at http://www.hud.gov/
offices/cpd/communitydevelopment/budget/.
a. 42 U.S.C. 5306(a)(2) requires HUD to set aside $7 million, as specified 42 U.S.C. 5307(1)(a), for insular
areas before al ocating funds to states and entitlement communities. H.R. 1 does not include a specific
amount for Indian tribes, thus Table 3 assumes that the requirement specified in the authorizing statute
would apply.
b. Funds would be transferred from the Defense Department and administered under the CDBG to be used
to address community development needs resulting from the relocation of various military installations and
personnel to Guam.
c. 42 U.S.C. 5306(a)(1) requires HUD to set aside 1% of annual amount appropriated for al ocation to Indian
tribes. From time to time Congress has modified this requirement in annual appropriations acts to set aside
a specific amount. H.R. 1 does not include a specific amount for Indian tribes, thus Table 3 assumes that
the 1% requirement specified in the authorizing statute would apply.
Recent Funding History
This section of the report is a review of the CDF accounts funding history since FY2000. It
includes a discussion of the three primary components of the CDF account:
• CDBG formula grants;
• CDBG-related set-asides and earmarks; and
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• CDBG-linked supplemental or special appropriations.
Figure 1 is a graphic representation of the distribution of the primary components of CDF
account since FY2000.
Figure 1. CDF Appropriations: FY2000 to FY2011
(in billions of $)
2011
2010
2009
2008
2007
2006
Year
2005
scal
Fi 2004
2003
2002
2001
2000
0
2
4
6
8
10
12
14
16
18
20
22
24
Billions of $
Formula Grants
Set-asides
Disaster Recovery
NSP
ARRA

Source: CRS analysis based on Table 5 and HUD Budget Justifications.

From FY2000 to 2010, total appropriations for the CDF account—excluding special and
supplemental appropriations for disasters, mortgage foreclosures, and economic recovery—
fluctuated between a high of $5.112 billion for FY2001 and a low of $3.772 billion for FY2007
(see Table 5). The FY2011 appropriation for CDF activities are the lowest appropriated in more
than a decade.
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Table 5. CDF Appropriations: FY2000 to FY2010
(in billions of dollars)
Year
2000 2001 2002 2003 2004 2005
2006
2007
2008
2009 2010 2011
CDBG Formula
Grants
4.235 4.399 4.341 4.340 4.331 4.117 3.711 3.711 3.593 3.642 3.948 3.303
Set-asides
0.545 0.713 0.659 0.565 0.603 0.585 0.467 0.061 0.274 0.258 0.502 0.198
EDI & NI
earmarks
0.263a 0.401 0.336 0.301 0.334 0.300 0.356 0.0 0.206 0.185 0.195 0.0
CDF Total
4.780 5.112 5.000 4.905 4.934 4.702 4.178 3.772 3.867 3.900 4.450 3.501
Disaster
Recovery
0.000 0.000 3.480 0.000 0.000 0.150 16.673 0.000 9.800 0.00 0.100 0.000
NSP
— — — — — — — —
3.900 2.000 1.000 0.000
ARRA
— — — — — — — — —
1.000 —
0.000
Supplemental/
Special Funds
0.000 0.000 3.480 0.000 0.000 0.150 16.673 0.000 13.700 3.000 1.100 0.000
Subtotal
Total
4.780 5.046 8.480 4.905 4.934 4.852 20.851 3.772 17.566 6.900 5.550 3.501
Source: CRS appropriations reports, HUD Budget Justifications.
a. Total appropriations were $256.2 million for EDI, including $232 million for earmarked projects and $30
million for NI, including $23 million for earmarked projects. EDI original appropriation of $275 million was
subject to a rescission of $18.8 million.
Formula Grants
During recent appropriations cycles the funding level for the CDBG-formula component of the
CDF account has been the focus of debate. Supporters of the program have pressed for increased
funding, contending that the program’s appropriations have declined in both current and constant
dollars. Supporters noted that this decline or near stagnation in funding has been compounded by
the increased number of communities gaining entitlement status and thus eligibility for a direct
allocation of a share the 70% of funds dispersed to so-called “entitlement communities.”
Entitlement communities have been forced share an ever-shrinking or stagnant slice of the CDBG
formula pie with an ever-increasing number of eligible grant recipients. Critics of the program
have argued that increased funding has not been justified based on the program’s PART score16
and more recently, the need to reduce domestic discretionary spending as part of a larger effort to
reduce federal budget deficit and the national debt.
As noted in Table 6, during the period from FY2000 to FY2010, the average grant amount
allocated to CDBG entitlement communities declined by 26.7% from a high of $3 million in

16 Performance Assessment Rating Tool (PART) “is a questionnaire designed to help assess the management and
performance of programs. It is used to evaluate a program’s purpose, design, planning, management, results, and
accountability to determine its overall effectiveness.” The latest undertaken for the CDBG program was FY2003. For
additional information on PART see http://www.whitehouse.gov/omb/expectmore/part.html. For a link to the CDBG
entitlement program’s FY2003 PART review see http://www.whitehouse.gov/omb/expectmore/summary/
10001161.2003.html.
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FY2002 to a low of $2.1 million in FY2008. The total amount appropriated declined annually
from FY2001 to FY2008 and has been increasing from FY2009 to FY2010, but the average
allocation had been steadily declining. However, since FY2008, the average allocation had
increased by 9%, from $2.2 to $2.4 million in FY2010. However, the FY2011 estimated average
allocation of $1.9 million is a reversal of that recent trend. For FY2011, the average allocation is
34.5% less than the amount appropriated in FY2000. The decline in the average grant amount is
both a function of fewer dollars appropriated and an increase in the number of entitlement
communities as more cities and counties achieve the population threshold necessary to be
designated an entitlement community. From FY2000 to FY2011, the number of jurisdictions
receiving a direct allocation as CDBG entitlement communities increased by 155, from 1,012 to
1,167 (see Table 6).
Table 6. Number of CDBG Grantees and Average Allocation: FY2000 to FY2010
Fiscal Year Allocations

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011a
Total al ocated
$2.964 $3.079 $3.039 $3.038 $3.032 $2.882 $2.593 $2.598 $2.510 $2.549 $2,760 $2,325
to entitlement
communities (in
billions of $)
Number of
1,012 1,018 1.023 1041 1,111 1,117 1.135 1,140 1.151 1,159 1.165 1,167
entitlement
communities
Average
$2.9 $3.0 $3.0 $2.9 $2.7 $2.6 $2.3 $2.3 $2.2 $2.2 $2.4 1.9
entitlement
allocation (in
millions of $)
Total al ocated
$1.271 $1.320 $1.302 $1.302 $1.299 $1.235 $1.111 $1.113 $1.076 $1.093 $1.183
$973
to states (in
billions of $)
Number of
51 51 51 51 51 51 51 51 51 51 51 51
states + Puerto
Rico
Average state
$24.9 $25.9 $25.5 $25.5 $25.5 $24.2 $21.8 $21.8 $21.1 $21.4 $23.2 $19.1
allocation (in
millions of $)
Source: CRS analysis based on data from HUD.
a. Figures for FY2011 are based on preliminary estimates generated by HUD.

The fluctuations in the average annual grant amount awarded to states was less pronounced. In
FY2010, $1.183 billion was allocated among the 50 states and Puerto Rico for distribution to
nonentitlement communities. This was 7.4% ($88 million) less than the $1.271 billion made
available to states in FY2000, but 7.6% ($90 million) more than allocated to states for FY2009.
During this period the average state allocation declined from a high of $25.5 million in FY2002
to $21.1 million in FY2008 before rebounding to $23.2 in FY2010. However, the FY2011
average state allocation of $19.1 million reverses that upward trend. The FY2011 estimated
average allocation is 23.3% less than the FY2000 amount and 17.7% less than the FY2010
average state allocation.
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Impact of Inflation on CDBG-Formula Allocations
When measured in inflation-adjusted constant dollars, program funding declined by 40% during
this period, from $4.235 billion in FY2000 to $2.545 billion in FY2011. As Figure 2 illustrates,
appropriations for CDBG formula grants have fluctuated between $3.5 billion and $4.3 billion in
current (non-inflation adjusted) dollars during the last decade.
Figure 2. CDBG Funding in Current and Constant Dollars: FY2000-FY2011
Base Year 2000
5
4.5
4
3.5
3
f $
o
ns 2.5
io
ll
Bi
2
1.5
1
0.5
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Fiscal Year
formula grants current $
formula grants constant $

Source: CRS analysis.
CDBG-Linked Set-Asides and Earmarks17
In addition to the CDBG formula program, the CDF is also populated by a number of other
programs with smaller appropriation levels, narrower objectives, and fewer direct recipients.
Some set-asides included in the account are intended to complement the activities of the larger
formula grant program. Others are intended to meet other agency objectives and still others are
earmarked for specific activities or projects. Some observers have contended that a number of
these programs have been funded at the expense of the larger CDBG formula grant program,
particularly those projects funded as earmarks.

17 Set-asides are funds in a larger appropriations measure that is designated to fund a specific program or activity.
Under House and Senate rules, “an earmark is a provision in legislation or report language that is included primarily at
the request of a Member, and provides, authorizes, or recommends a specific amount to an entity or to a specific state,
locality, or congressional district.” For a discussion of disclosure procedures CRS Report R40976, Earmarks Disclosed
by Congress: FY2008-FY2010 Regular Appropriations Bills, by Carol Hardy Vincent and Jim Monke.
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Figure 3. CDF Set Asides in Current and Constant Dollars: FY2000 to FY2010
(in millions of $)
700
600
500
f $ 400
o
s
n
io 300
ill
M
200
100
0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Fiscal Year
CDF set asides Current $
CDF set asides in constant $

Source: CRS analysis.

From FY2000 to FY2011, the number and appropriations for set aside programs included in the
CDF account has fluctuated significantly. In FY2001 Congress appropriated $647 million for
CDF set-asides, but only $61 million in FY2007. In FY2007, Congress eliminated all earmarks in
the CDF account. In FY2010, Congress appropriated $509 million in CDF set-aside activities,
with a significant portion of that amount targeted to the earmark accounts of Economic
Development Initiative (EDI) and Neighborhood Initiative (NI). Most recently, for FY2011
Congress eliminated funding for the EDI and NI earmarked accounts. The broad swing in the
amounts appropriated for CDF set-asides was a result of Congress’ decisions:
• to move several categorical grant programs into or out of the CDF account,
including deciding to no longer fund a program or to transfer selected
programs to another account;
• to reduce funding for specific programs; and
• to fund, and at what amount, two programs that have been the vehicles for
congressional earmarks, EDI and NI programs.
See Table A-1 in the Appendix for a detailed listing of programs included as set-asides in the
CDF account during the period from FY2000 to FY2011. From FY2000 to FY2008, CDBG-
related set-asides and earmarks declined by 59.4% when measured in constant FY2000 dollars,
but rebounded in FY2009 and FY2010 before declining significantly in FY2011. (See Figure 3.)
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Earmarks Dominate Set-Aside Activities
With the exception of FY2011 and FY2007 (when there were no earmarks), and FY2010 (when
the Obama Administration introduced its Sustainable Communities Initiative), congressional
earmarked projects funded by the EDI and NI programs were the dominant elements of CDBG-
related set aside appropriations. These two programs are used exclusively for congressionally
earmarked projects.
The issue of earmarks has been the source of debate during recent Congresses. During the
FY2007 appropriations cycle Congress removed all earmarks from the CDF account.
Subsequently both houses of Congress have instituted new rules governing disclosure of earmark
requests.18 Since FY2007, EDI and NI earmarks have been included in subsequent legislation
appropriating funds for CDF activities. In FY2008 and FY2009, EDI and NI earmarks were the
dominant components of CDBG-linked set asides programs. As Figure 4 illustrates, the
combined appropriations for EDI and NI in FY2008 and FY2009 were twice the amount
appropriated for other set-aside activities combined. For FY2011 Congress did not fund NI and
EDI earmarks.
Figure 4. CDF Earmarks and Set-Asides: FY2000 to FY2011
(in millions of $)
450
400
350
300
f $
o 250
ns
io 200
ill
M 150
100
50
0
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Fiscal Year
EDI & NI earmarks
Other set asides

Source: CRS analysis.

18 For a discussion of disclosure procedures see CRS Report RL34462, House and Senate Procedural Rules
Concerning Earmark Disclosure, by Sandy Streeter, and CRS Report R40976, Earmarks Disclosed by Congress:
FY2008-FY2010 Regular Appropriations Bills, by Carol Hardy Vincent and Jim Monke.
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Special Appropriations
When events have warranted, Congress has used the CDBG program’s administrative framework
and rules to provide supplemental or special appropriations (see Figure 1). These supplemental
funds have been used to:
• support local and state government disaster relief, recovery, and mitigation
activities following such events as the terrorist attacks of 9/11 and the Gulf
Coast hurricanes of 2005;19
• assist local and state governments in reducing the inventory of abandoned and
foreclosed properties (caused by the recent and ongoing mortgage foreclosure
crisis) by providing funds to states and selected communities to be used to
acquire, rehabilitate, and resell foreclosed properties under the Neighborhood
Stabilization Program (NSP);20 and
• assist local and state governments in supporting private sector job creation in
response to the economic recession that began in December 2007, as part of a
larger federal effort under the American Recovery and Reinvestment Act
(ARRA).21
With the exception of CDBG-ARRA funds, which were allocated to all eligible CDBG
entitlement communities, disaster relief and NSP funding were allocated only to states or
communities meeting specific criteria or eligibility thresholds.22 In the case of CDBG disaster
funding, only communities designated as disaster areas by a presidential declaration have
received funds, at the discretion of Congress. Each Congress decides if the magnitude of the
disaster warrants supplemental CDBG funds beyond funds typically made available by the
Federal Emergency Management Administration (FEMA).
In the case of the first and third rounds of the Neighborhood Stabilization Program, known as
NSP-1 and NSP-3, funds were allocated to states based on the relative number and percentages of
mortgage foreclosures, subprime loans, and mortgage delinquencies and defaults. Congress
established a minimum grant amount to be awarded to each state of 0.5% of the amount
appropriated. Of the amounts allocated to each state under NSP-1 and NSP-3, Congress required
each state to dispense a portion of these funds to local governments experiencing high rates of
mortgage foreclosures, subprime loans, and mortgage delinquencies and defaults allowing these
communities to directly administer these funds. It further limited the direct allocation of NSP to

19 For additional information on the use of CDBG funds for disaster relief and recovery see CRS Report RL33330,
Community Development Block Grant Funds in Disaster Relief and Recovery, by Eugene Boyd.
20 For additional information on the use of CDBG funds to address the mortgage foreclosure crisis see CRS Report
RS22919, Community Development Block Grants: Neighborhood Stabilization Program; Assistance to Communities
Affected by Foreclosures, by Eugene Boyd and Oscar R. Gonzales.
21 This was not the first time Congress used the CDBG program framework to create jobs in response to a recession.
The Emergency Jobs Appropriations Act of 1983, P.L. 98-8, allocated an additional $1 billion in CDBG funds to be
used for job creation activities in response to a national unemployment rate of 10.7% and what a General Accounting
Office (GAO) report characterized as the worst economic recession of the post-World War II era. The report noted that
the CDBG program was the most efficient job creation mechanism of the 77 federal programs that received funding
under the act. The report, Emergency Jobs Act of 1983: Funds Spent Slowly, Few Jobs Created, GAO/HRD 87-1, is
available at http://archive.gao.gov/f0102/132063.pdf.
22 Congress funded three rounds of NSP activities. These three rounds have been designated as NSP-1, NSP-2, and
NSP-3.
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communities whose allocation met a minimum threshold of $2 million for NSP-1 and $1 million
for NSP-3 funds. As a result 309 communities qualified for administration of NSP-1 funds while
268 communities met or exceeded the NSP-3 threshold. NSP-2 funds were awarded
competitively to states, local governments, and non-profit organizations. For-profit entities are
also allowed to participate as partners with any of the three primary grant recipients of NSP-2
funds.
Proposed Rescission of Neighborhood Stabilization Program Funds
On March 1, 2011, Representative Gary Miller introduced the Neighborhood Stabilization
Termination Act, H.R. 861, which would rescind the $1 billion in NSP-3 funds appropriated
under the Wall Street Reform Act. On March 2, 2011, the House Financial Services Committee’s
Subcommittee on Insurance, Housing, and Community Opportunity conducted a hearing on NSP
and three federal foreclosure mitigation programs. On March 9, 2011, the House Financial
Services Committee considered, marked up, and ordered reported H.R. 861. During the markup
the committee approved by voice vote an amendment requiring HUD to publish a notice of
termination of the NSP program on its website. The notice is to be posted within five days
following the bill’s enactment and is to include language directing citizens to contact their
congressional representatives and locally elected officials if they are concerned about the impact
of foreclosures on their communities.
During the March 2, 2011, subcommittee hearing and the March 9, 2011, markup session by the
House Financial Services Committee, Representative Miller, sponsor of H.R. 861, characterized
the program as ineffective and a waste of taxpayers’ dollars. He argued that, given the need to
address the larger issue of reducing the federal debt and deficit, funding for NSP-3 should be
rescinded. In addition, he argued that the program was a giveaway to banks and speculators.
Other Members countered that the program has been successful in assisting communities to
combat the negative impacts of the mortgage foreclosure crisis on neighborhoods, property
values, and local revenues generated by property taxes. During the March 2 hearing, HUD’s
Assistant Secretary for Community Planning and Development, Mercedes M. Márquez, offered
written testimony stating that HUD expects “NSP will impact 100,000 properties in the nation’s
hardest-hit markets,” with 36,000 units already under construction.23 In addition, the Assistant
Secretary’s testimony stated that “based on NSP1 activity budgets, the Department estimates that
NSP will support more than 93,000 jobs nationwide.”24 Members also argued that the program
helps reduce the supply of abandoned, blighted, and foreclosed housing stock. The measure
passed the House on March 16, 2011, by a vote of 242 to 182. A companion bill to H.R. 861 has
not been introduced in the Senate.


23 U.S. Congress, House Financial Services, Insurance, Housing, and Community Opportunity, “Legislative Proposals
to End Taxpayer Funding for Ineffective Foreclosure Mitigation Programs,” 112th Cong., 1st sess., March 2, 2011, p. 4-
5. http://financialservices.house.gov/media/pdf/030211marquez.pdf.
24 Ibid. p. 8.
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Appendix. CDF Set-Asides: FY2000 to FY2010
Table A-1. CDF Set-Asides from FY2000 to FY2010
(in millions of dollars)

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Indian
Tribes
67.0 71.0 70.0 70.5 71.6 68.4 59.4 59.4 62.0 65.0 64.3 64.2
Housing Assistance
3.0 2.9 3.3 3.3 3.3 3.3 —a — — — — —
Council
National American
2.2 2.6 2.6 2.4 2.5 2.4 — — —b
— — —
Indian Housing
Council
National Housing
— 10.0 5.0 5.0 5.0 4.8 —c — — — — —
Dev. Corp.
National Council
— — 5.0 5.0 5.0 4.8 —c — — — — —
of LaRaza
Sec.107 Grantsd 41.5
45.4
42.5
48.8
51.7
43.4
0.0
4.0
5.0
Hawaiian
— —- 9.6 — —a — — — — — — —
Homelands
University Comm.
—a
—a
—a
—a
—a
—a
—a
—e — — 24.8 —
Fund
Resident
55.0 55.0 55.0 —f
— — — — — — — —
Opportunity
Support Services
(ROSS)
Working Capital
— 15.0 13.8 3.4 4.9 3.4 1.6 1.6 1.5 3.2 — —
Fund Info. Tech.
transfer
Self-help
20.0 19.9 22.0 25.1 26.8 24.8 —c — — — — —
Homeownership
Opportunity
(SHOP)
Capacity Building
23.8
28.5
29.0
32.3
34.5
34.2
—c — — — —
YouthBuild
42.5 60.0 65.0 59.6 64.6 61.5 49.5 0.0g
— — — —
Sustainable
— — — — — — — — — —
148.5
98.8
Communities
Rural Innovation
— — — — — — — — — —
24.8h —
Fund
Alaskan Museumi
— — — — 9.9 — — — — — — —
Special
Olympics
4.0 — — — — 1.9 — — — — — —
Hudson
River
Park — — — — —
30.7 — — — — — —
Salt Lake City
— 2.0 — — — — — — — — — —
Olympic Games
Temp. Housing
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
Wel stone Center
— — — 8.9 — — — — — — — —
for Community
Building
NI 30.0j 43.9 42.0 41.8 43.7 41.4 49.5 — 25.9 19.5 22.1 —
EDI 256.2k 357.3l 294.2 259.3 279.3m 259.9 306.9
— 179.8 165.3 172.8
—
Transformation
— — — — — — — — — —
L44.5n 35.0
Initiative
Total CDF Set-
545.2 713.5 659.0 565.4 603.5 585.0 466.9 61.0 273.2 258.3 502.0 198.0
Asides

a. Funded under Sec. 107 activities.
b. Transferred to HUD’s Public and Indian Housing account.
c. Transferred to new Self Help and Assisted Housing account, created with the passage of P.L. 109-148.
d. Sec. 107 of the Housing and Community Development Act of 1974, as amended, authorizes the funding of a
number of activities including technical assistance; community development demonstration projects;
community development work study programs; grants to minority serving institutions of higher education,
including Historically Black Colleges and Universities, institutions serving Native Americans, Hispanic-serving
institutions, and university-community partnerships.
e. Prior to FY2007, CDBG-linked university activities were included in Sec. 107 subaccount. For FY2007,
program funds of $23 million were appropriated under a separate HUD account, Research and Technology.
f.
ROSS appropriations transferred to HUD’s Public Housing Capital Fund account.
g. Program authority transferred to the Department of Labor.
h. Before FY2010, the program was funded under a separate account, Rural Housing and Economic
Development.
i.
Added by P.L. 108-199, Sec. 165.
j.
FY2000 appropriation includes $23 million in congressional earmarks and $7 million in competitive grants.
Al funds after FY2000 earmarked for projects included in conference reports.
k. FY2000 appropriation includes $232 million in congressional earmarks and $24 million in competitive grants.
Al funds after FY2000 were earmarked for congressional y designated projects. Does not include $27.5
million in emergency supplemental appropriations.
l.
Includes amounts appropriated under P.L. 103-377 and P.L. 106-554. Al funds were earmarked for specific
projects.
m. Includes $2.990 million added by P.L. 108-199, Sec. 167.
n. Subtotal for Transformation Initiative assumes transfer of 1% of amounts appropriated to programs included
in the CDF account.

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Author Contact Information

Eugene Boyd

Analyst in Federalism and Economic Development
Policy
eboyd@crs.loc.gov, 7-8689


Acknowledgments
The author would like to acknowledge Julius Jefferson, Information Specialist, KSG-G&F for his
contributions to the development of this report.

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