CDBG-CV Formula Allocation Methods

CDBG-CV Formula Allocation Methods

INSIGHTi

CDBG-CV Formula Allocation Methods
October 16, 2020
The Community Development Block Grant (CDBG) program is a primary source of flexible federal
funding for state and local governments to use for economic and community development. It has also
become a primary tool for the federal government to direct long-term recovery funding to states and
localities in response to disasters and emergencies, including, most recently, the COVID-19 public health
emergency. On March 27, 2020, Congress passed, and the President signed, the Coronavirus Aid, Relief,
and Economic Security (CARES) Act (P.L. 116-136), which included $5 billion for CDBG. This funding
was intended “to prevent, prepare for, and respond to coronavirus.” The law directed HUD to allocate the
supplemental CDBG funds (CDBG-CV) in three tranches, each with a different formula allocation
method, at separate stages in the national response to the COVID-19 pandemic.
For more information on CDBG supplemental appropriations in the CARES Act, see CRS Insight
IN11315, Community Development Block Grants and the CARES Act, by Joseph V. Jaroscak.
CDBG-CV Allocations
First Tranche
Of the $5 billion appropriated for CDBG-CV, the CARES Act required an initial allocation of $2 billion
consistent with the existing statutory distribution formula (42 U.S.C. §5306). It directed
HUD to allocate these supplemental funds to CDBG grantees—including eligible local
governments, states, and insular areas—proportional to their conventional FY2020 CDBG allocation.
HUD published allocation amounts (CDBG-CV1) for the first tranche of CDBG-CV funds in April 2020.
Second Tranche
The act directed HUD to allocate $1 billion of the total appropriation to states and insular areas outside of
the standard formula, to target need within their areas of jurisdiction. HUD announced allocation
amounts and published the methodology for this second tranche of funds on May 11, 2020. The allocation
for the second tranche of CDBG-CV funds considered the following factors:
 count of low-income elderly (50% weight);
 count of children in poverty (10% weight); and
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 aggregate count of unemployment insurance claims during a six-week period ending on
April 25, 2020 (40% weight).
Allocation amounts (CDBG-CV-2) were adjusted based on per capita coronavirus confirmed case rate as
of May 3, 2020. Due to a lack of available data for insular areas, HUD exercised its discretion to allocate
0.2% (i.e., $2 million) of the funds, an amount proportional to the first tranche for these communities.
These funds were divided among American Samoa, Guam, the Northern Mariana Islands, and the U.S.
Virgin Islands in a manner consistent with CDBG allocations under past annual appropriations.
Third Tranche
The law directed the third tranche of approximately $2 billion be distributed to states and units of local
government on a rolling basis. It provided the HUD Secretary discretion to design a formula and allocate
these funds to eligible CDBG grantees based on the best available data, with a primary focus on (1) risk
of coronavirus transmission, (2) rate of coronavirus cases, and (3) economic and housing market
disruptions related to the pandemic. Up to $10 million of the funds in this tranche were eligible to
supplement existing awards or to provide additional technical assistance to current CDBG grantees. On
September 11, 2020, HUD published allocation amounts (CDBG-CV3 Part A) and a summary of the
formula methodology for $1.988 billion in CDBG-CV funds under the third tranche. This allocation
formula targeted 40% of the funds based on the following household characteristic factors:
 overcrowded households, defined as having “1.01 or more persons per room” (20%
weight); and
 very low-income renters (20% weight).
These factors were adjusted by per capita coronavirus case counts as compared to the national average,
using the greatest result of three case count methods as of September 2, 2020.
The other 60% of funds in this tranche were allocated based on state share of unemployment as of July
2020, to account for “economic and housing market disruptions.” Allocation amounts for grantees within
each state were determined based on the Bureau of Labor Statistics’ seasonally adjusted Local Area
Unemployment Statistics in the following industries impacted by the pandemic:
 mining, quarrying, and oil and gas extraction;
 arts, entertainment, and recreation; and
 accommodation and food services.
This portion of the allocation was further subdivided to target communities in which industry workers live
(70%) and communities in which they work (30%). Additionally, HUD adjusted allocations for some
grantees in this tranche to correct calculation errors in the first tranche. Similar to the second tranche,
insular areas received 0.2% (i.e., $3.9 million) of the allocated funds, due to data availability issues.
District of Columbia
Generally, under the CDBG program, the District of Columbia (DC) is treated as an entitlement
community rather than a state. Because of this treatment, DC was not technically eligible for funds in the
second tranche. HUD revised its second tranche allocation announcement to account for this issue on May
15, 2020. In the revised version, HUD adjusted allocation amounts and granted $2.4 million to DC, with
funds from the third tranche of CDBG-CV funds. This amount was separate from DC’s allocation under
the third tranche formula.

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Targeting of Formula Funds
Given the evolving nature of the pandemic, formula-based models might present challenges for allocating
funds based on need. Although the CARES act funds were allocated in different phases, based on
emerging data, the efficacy of some formula factors in targeting need may be unclear. For instance, time
lags and other potential data limitations for formula factors may generate amounts inconsistent with
grantee need at the time of allocation. In the case of the CDBG-CV formula allocations, it is unclear to
what extent other data sources and formula factors could have been considered or employed during the
design processes. Data limitations are likely inherent in allocation formulas intended to target a wide
range of economic and public health needs. On the other hand, formula models—like those used to
allocate supplemental appropriations of CDBG funds—allow for timely distribution of funds in a way
that approximates need based on the best available data.

Author Information

Joseph V. Jaroscak

Analyst in Economic Development Policy

Disclaimer
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