Reconnecting America People * Places * Possibility

Summary and Analysis of the President’s Fiscal Year 2013 Budget Request (Feb. 16, 2013)

The President’s budget request for fiscal year 2013 totals more than $3.8 trillion and continues to emphasize themes of economic growth, infrastructure investment, and innovation. Agencies with programs that support transportation, housing, and sustainable communities are pushing forward with robust funding requests, despite setbacks in Congress last year for programs in the U.S. Department of Transportation (DOT) and the U.S. Department of Housing and Urban Development (HUD). Congressional efforts to curb spending and reduce the deficit led to a challenging year for the FY2012 budget request and appropriations process, and this year will likely feature more of the same.

As the President laid out in the State of the Union address, his priorities for this year focus on giving every individual a fair shot, putting people back to work, increasing education and skill levels for workers, creating competitive local economies, jumpstarting innovative industries, and rebuilding America’s infrastructure as a means for job creation. Consistent with these goals, the budget maintains support for programs like the Sustainable Communities Partnership, high-speed rail, and livability initiatives in DOT.

Highlights:

  • A six-year, $476 billion surface transportation reauthorization proposal, which more than doubles transit funding and includes funding for high-speed and intercity passenger rail. Partly paid for through “peace dividends,” savings from the reduction in overseas military operations.
  • Restoration of $100 million for the Sustainable Communities grants at HUD.
  • Immediate transportation investments of $50 billion in 2012 to spur job growth, which was first proposed last year.
  • Rewards for communities making reforms and creating innovative solutions in transportation policy through the Transportation Leadership Awards program ($700 million requested).

Programs to Support Complete Communities

While this analysis focuses primarily on programs related to transportation and housing, it is important to note that building a complete community – one where people from all walks of life can afford to live, work, and visit -- requires investment in more than just those two elements. In addition to affordable homes and transportation options, complete communities have characteristics such as access to jobs, healthy food, quality schools, and safe places to play.

Programs across the federal budget can help to create complete communities. In addition to programs at DOT and HUD, the following are examples of programs at other federal agencies that address elements of complete communities:

  • The Healthy Food Financing Initiative at the US Department of Treasury helps to create greater access to fresh foods in low-income communities.
  • The Promise Neighborhood Initiative at the Department of Education aims to support disadvantaged communities in implementing comprehensive reforms with a focus on high-quality schools.
  • The CDFI program at the Department of Treasury promotes community development through capital, credit, and financial services to low-income communities.

Although the President’s budget recognizes the importance of these investments, the current political and fiscal environment suggests that achieving full funding for programs that support complete communities will be challenging in the upcoming appropriations process.

US Department of Transportation (DOT)

The President’s budget requests $74 billion for FY2013, a 2 percent increase from FY2012, to invest in national infrastructure, strengthen safety and oversight, and modernize the transportation system across the country. The budget requests funding for the first year of a six-year reauthorization plan that balances the needs of transit, highways, airports, inter-city rail and other investments. However, the Administration’s proposed program structure and funding levels differ in many ways from the reauthorization proposals currently making their way through the House and Senate.

The reauthorization proposal would be paid for using revenues from the federal gasoline tax and savings from the scaling down of troops in oversees operations, as shown in Table 1. The funding proposal recommends that the Highway Trust Fund be converted into a Transportation Trust Fund, which would include both Highway and Transit accounts and also a new Multimodal account for passenger rail and other infrastructure investments.

Table 1: Proposed funding of DOT bill. Source: DOT Budget Highlights

DOT maintains its commitment to livability by requesting $4 billion in FY13 for the Livable Communities Program in the Federal Highway Administration (FHWA). In addition to other eligible activities, the program would support place-based planning to help communities increase mobility choices. The Livability Programs at the Federal Transit Administration (FTA) have been reorganized in a larger Transit Expansion and Livable Communities program. Within this account, funds would be provided in FY13 to Capital Investment Grants (formerly New Starts - $2.2 billion), Planning Programs ($140 million), and Livability Demonstration Grants ($30 million).

The budget proposes to use the Transportation Infrastructure Finance and Innovation Act (TIFIA) program to leverage federal funds, requesting $500 million in FY13 and $3 billion total over 6 years. Provisions in a restructured TIFIA program would allow for greater use of this federal credit assistance by transit agencies. The budget projects that the $3 billion TIFIA investment would produce up to $90 billion in transportation infrastructure projects.

DOT maintains the message that high-speed rail is important, requesting $2.5 billion in FY13 to improve and expand intercity passenger rail across the country. Within the 6-year reauthorization plan, the President includes rail investment of $47 billion, and proposes to initiate construction on 7 high-speed rail corridors.

Overall, the DOT budget proposal promotes regional planning by awarding funds to high-performing communities, continues to focus on a “fix-it-first” approach for highway and transit grants, and re-proposes much of the programmatic restructuring first laid out in last year’s budget. It is a blueprint that is consistent with the Administration’s goals of promoting multi-modal transportation options.

US Department of Housing and Urban Development (HUD)

The U.S. Department of Housing and Urban Development (HUD) requested $44.8 billion, an increase of $1.4 billion, or 3.2 percent, from the 2012 funding level. This increase was requested in order to revitalize distressed neighborhoods, protect the homeless and vulnerable families, and advance investments in sustainable development.

The budget requests $100 million for the Sustainable Communities Initiative, of which $46 million would be for Regional Integrated Planning and Implementation Grants (the budget estimates this would fund about 20 new grants), and $46 million would support the Community Challenge Planning Grants. The remaining $8 million would support research, evaluation, modeling tools, technical assistance, and best practices related to sustainable communities.

The budget requests $2.95 billion for the Community Development Block Grants (CDBG) and $1 billion for the HOME Investment Partnerships. CDBG funding allows state and local governments to invest in public infrastructure improvements and to rehabilitate affordable housing, among other uses. HOME funding is also provided to state and local governments in order to increase the supply of affordable housing for low-income families. The HUD budget also highlights Project Rebuild, which includes a series of policies to help connect Americans looking for work in distressed communities with the work needed to re-purpose residential and commercial properties. It is designed to achieve the dual goals of creating jobs and stabilizing neighborhoods.

The budget requests $1 billion in mandatory funding in FY2013 for the Housing Trust Fund, which was established to finance the development, rehabilitation and preservation of affordable housing for extremely low-income families. It also includes $150 million for the Choice Neighborhoods Initiative, focused on transformative investments in high-poverty neighborhoods.

The budget introduces reforms to HUD’s rental assistance programs through aligning policies across rental assistance programs and reducing costs by increasing the minimum rent to $75 per month for all HUD-assisted households. The budget also provides $640 million less for Project-based Rental Assistance than last year by reducing upfront funding on some contracts. According to the budget documents, these reforms to rental assistance programs would save more than $500 million in FY2013 without reducing the number of families served.

Highlights from other agencies

US Department of Agriculture (USDA) – The Community Facilities Program at USDA contains $2 billion for community facility direct loans, an increase of approximately $700 million over the FY12 enacted level. This level of funding would support loans to over 1,700 rural communities to develop essential facilities such as hospitals, schools, libraries, fire protection, child and adult day care, and other public buildings.

Environmental Protection Agency – The US Environmental Protection Agency requested $8.3 billion, a decrease of 1.2 percent, or $105 million, below the FY12 enacted level. The budget seeks $167 million for the EPA’s Brownfields programs to support communities’ efforts to clean up potentially contaminated sites. The agency will also continue participation in the Interagency Partnership for Sustainable Communities, and will focus this year on providing more direct technical assistance to communities, including rural areas and disadvantaged communities.

US Treasury Department – The President’s budget continues funding for Community Development Financial Institutions with a $221 million funding request, similar to last year’s level. The CDFI program promotes community development through capital, credit, and financial services to low-income communities. The Treasury Department will also continue the Healthy Foods Financing Initiative.

Conclusion

The budget is bold and ambitious, especially given the current political environment. The Administration continues to build on funding for programs that will promote sustainable communities and spur local economic development. While worthy goals, getting these programs funded in a Presidential election year with an already divided Congress will be a serious challenge.