HUD's FY 1998 Budget Request:

Some Requests for Funding May Be Unnecessary

T-RCED-97-108: Published: Mar 18, 1997. Publicly Released: Mar 18, 1997.

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GAO discussed the Department of Housing and Urban Development's (HUD) fiscal year (FY) 1998 budget request, focusing on: (1) the estimates HUD used to develop its budget request for renewing Section 8 assisted housing contracts; (2) HUD's justification for 50,000 additional Section 8 certificates; (3) HUD's success in reducing the level of uncommitted public housing modernization funds held by housing authorities; and (4) HUD's request for $100 million to fund the second round of the Empowerment Zone/Enterprise Community (EZ/EC) program.

GAO noted that: (1) HUD's FY 1998 budget request for $9.2 billion in budget authority to renew expiring Section 8 contracts for assisted housing includes amounts that may not be required or could be offset; (2) HUD's request contains allowances for contingencies, costs that may or may not accrue or that cannot be precisely estimated, with an estimated value of $531 million; (3) however, because HUD also allows housing agencies that administer the tenant-based program to retain a large portion of their unspent reserves for contingencies, HUD may not need funding for the contingencies noted above; (4) in developing this budget request, HUD may be able to offset (reduce) some of its current renewal needs after it has identified all unspent budget authority accumulated over prior years, an effort it plans to complete by March 31, 1997; (5) since its budget was released, HUD has found that two housing programs that provide project-based assistance do not need to be renewed in FY 1998, and therefore the programs do not require the $90 million that HUD budgeted for them; (6) HUD also has requested $305 million in budget authority for FY 1998 to fund 50,000 new Section 8 certificates; (7) according to HUD, the certificates will accommodate family relocation caused by HUD's Welfare-to-Work initiative, but it is unclear how HUD estimated the number of units or justified their need; (8) for example, HUD has neither given a basis for choosing 50,000 as its request nor provided a plan for distributing these certificates to states or urban centers according to their need; (9) in addition, HUD plans to request an additional 50,000 units over the next 4 years, adding approximately $2.4 billion in renewal costs through FY 2002 for the additional 100,000 certificates; (10) over the past 3 years, public housing authorities have decreased the amount of uncommitted public housing modernization funding that they have available for major modernization projects by approximately 30 percent; (11) despite this progress, approximately $925 million remains uncommitted; (12) in addition, several large troubled housing authorities have larger uncommitted balances than they did 3 years ago; (13) despite the pressure on HUD's budget because of the increasing need to renew Section 8 contracts, these housing authorities will continue to be granted additional funding in accordance with HUD's formula for awarding modernization grants; and (14) HUD's request for $100 million to fully fund a second round of the EZ/EC program appears premature as it is unlikely that HUD can commit this amount during FY 1998.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: Instead of not funding one or more line items or allowances in HUD's fiscal year 1998 budget proposal for Section 8 assisted housing contract renewals, the House Appropriations Committee stated that it is recommending to fully fund the Section 8 program because of the Balanced Budget Agreement. However, in the fiscal year 1997 Emergency Supplemental Appropriations Act, the Congress took an alternative but similar action to what GAO suggested regarding the 1998 budget submission. In that act, the Congress required HUD to recapture $5.8 billion of Section 8 excess budget authority from prior-year appropriations so that the Congress could rescind $3.65 billion and assign the remaining $2.15 billion to a "Reserve Preservation Fund." This action by the Congress more than addressed the matter for consideration and went far toward improving the accuracy of HUD's future budget submissions.

    Matter: The Congress may wish to consider not funding the various contingency allowances that HUD has proposed in its FY 1998 budget request for tenant-based Section 8 contract renewals until HUD provides the Congress a more complete justification of the need for each contingency allowance, including HUD's policy that allows housing authorities to retain large excess contract reserves. As part of that justification, HUD should advise the Congress to what extent, if any, each of the allowances or reserves duplicates other allowances or reserves.

  2. Status: Closed - Not Implemented

    Comments: The House Appropriations Committee stated that it fully funded HUD's Section 8 contract renewal request because of the Balanced Budget Agreement. Although neither the House nor the Senate chose to deny HUD's request for funding for these project-based Section 8 contract renewals, as GAO suggested in the matter for consideration, the Congress did rescind $3.65 billion from prior-year Section 8 tenant-based reserves in the fiscal year 1997 Emergency Supplemental Appropriation (Public Law 105-18) because of the extra funding built into the fiscal year 1998 request.

    Matter: Because HUD has determined that $90 million in project-based contract renewals is not needed in FY 1998, the Congress should consider not appropriating this amount for such contract renewals.

  3. Status: Closed - Implemented

    Comments: The House version of the appropriations bill deleted the entire $100 million requested for the EZ/EC program, the Senate version reinstated $25 million for the program, and the conference bill, which was signed into Public Law 105-65 on October 27, 1997, included $5 million for the program. Therefore, GAO's analysis resulted in a $95-million reduction in HUD's budget authority for fiscal year 1998.

    Matter: Congress may wish to review HUD's need for budget authority in FY 1998 of $100 million for the second round of the EZ/EC program and to seek assurances from HUD that the program will be ready to commit funds.


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