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A budget that is hard to like
Contributed by Robert A. Rapoza, Rapoza
and Associates
Recently,
the Obama Administration released its Fiscal Year 2014 Budget. The submission
to Congress was 10 weeks late, due to the delay in Congress’ action on ‘fiscal
cliff’ legislation. For supporters of federal rural development programs and
rural housing programs in particular, the budget was yet one more example of
how little interest the Administration and its Department of Agriculture (USDA)
have in rural development.
The top
line number for the rural development section of USDA is $2.289 billion, which
is a reduction of more than $200 million from the fiscal year 2013 enacted
level. This marks the fourth straight budget proposing reductions in rural
development. In addition to those program reductions, USDA proposed changes in
policy – essentially arguing that loans for water, waste and community
facilities saved the government money – that yield $300 million in savings.
Since
2010, USDA overall discretionary spending has fallen by $4 billion. Rural
Development, which makes up about 10 percent of the budget, has been reduced by
at least $750 million or 19 percent. The largest share of those reductions is
in housing, which is down by $399 million.
At this
time, there are very tight spending caps imposed by the Budget Control Act that
was passed last year in the debt limit debate. These caps freeze domestic
spending for 10 years. Still, it seems that rural housing has been singled out
for particularly poor treatment. The budget proposes to reduce Section 502
loans to $360 million, which constitutes a 60 percent reduction. As a result,
rather than financing approximately 8,000 loans, USDA will finance about 3,000.
Not only
does Section 502 provide the opportunity of homeownership for people with limited
means, the fiscal year 2014 projected cost to the government per loan is about
$3,000. That’s not per year, that’s total cost.
The
budget also calls for a two-thirds reduction in self-help housing grants – so
much for families working nights and weekends to build equity and gain a decent
place to live. Rural water and wastewater grants are also reduced by $100
million. Secretary Vilsack testified before the House Appropriations Committee
that he is working with Wall Street to come up with ways to finance rural
communities’ facilities. It’s hard to believe that communities with 500 people
who need clean water are going to be of much interest to USDA.
During the
next several months Congress will deliberate on the Administration’s
recommendations. Given the commitment of the House to balance the budget over
10 years it could be a rough ride. However, the many House Republicans are from
rural communities and USDA’s rural development team did not get a warm
reception at a hearing last week. Stay tuned…