Recovering from the Year of Sequestration

written by Steve Berg
July 10, 2013

After a string of federal fiscal fiascos, people working on budget issues in Washington, DC have had a few months of “regular order.” It’s unlikely to last, but we wanted to take the opportunity to run through the current state of the big budget and how it’s impacting decision-making on homelessness programs. We’ll also speculate on where we could go between now and the end of the year. This information will be useful to people who are communicating with their congressional offices about the federal government’s role as a partner in ending homelessness.

We are well into fiscal year (FY) 2013, the “Year of Sequestration,” but also a year that followed two previous years of harsh cuts to HUD. Homelessness providers have now been hit with the 25 percent cut in Emergency Solutions Grants (ESG), applied in most cases to state and local fiscal years that began on July 1, a few days ago. Later in the year, communities will have to grapple with Continuum of Care applications based on allocations that will be around 7 or 8 percent short of what’s necessary to renew all grants at current levels. While the homelessness programs got better treatment than most other HUD programs, they were swept up in the big movement to cut federal discretionary spending. Now we’re working on getting that capacity back.

For FY 2014, the budget process began with both House and Senate passing measures known as Budget Resolutions, setting overall spending levels; and then with the Appropriations Committees in both House and Senate announcing how much money each subcommittee would have to work with. Both House and Senate proposed changes to the Budget Control Act, the law from 2009 that imposed sequestration and that set spending limits for discretionary spending in the defense and non-defense categories for ten years. The Senate measures do away with the sequestration-level cuts for FY 2014 and beyond, increasing both defense and nondefense spending above the 2013 level. The House essentially does away with sequestration-level cuts for the defense department for 2014 and beyond, but makes up for it with even more cuts to nondefense programs.

In June, both the House and the Senate appropriations committees rolled out proposed bills for HUD funding. The funding levels for HUD’s homelessness programs illustrate the impact of the larger budget issues. In both bills, HUD’s Homeless Assistance account is treated as among the highest priorities – people around the country have been effective at letting decision-makers know that these programs serve the hardest-hit Americans, they are  impactful and cost-effective, and they have bipartisan support. That level of priority in the Senate translated into $2.261 billion, enough to renew Continuum of Care programs at the 2012 level of impact, to return ESG to its 2012 level of $286 million, and to add $50 million in new ESG funding for rapid re-housing programs.

In the House bill, homelessness programs received $2.088 billion. On paper, this would be the highest level ever. Because of the well-known accounting problems associated with expiring multiyear grants, however, it would not be enough to return the Continuum of Care program to its 2012 level of impact, but would leave it barely above the post-sequestration 2013 level discussed above. ESG would be left at the 2013 level. This is substantially better than the fate of most HUD programs in the House bill, but that would only mean more people with nowhere but the homelessness programs to turn.

So what’s next? A high school civics textbook would tell you that once the bills pass their respective chambers, a conference committee of House and Senate members would meet to reach an agreement on a final version. That won’t work this time – because the differences in the House and Senate T-HUD bills reflect higher-level disagreements over the total amount of domestic spending, an agreement would require a deal on these bigger budget issues. Such an agreement would need to involve the top leadership of both parties in both chambers, as well as the President.

On funding bills, there will probably be some agreement. Without one, we get a government shutdown, as happened last when Newt Gingrich and Bill Clinton squared off over spending in 1995. That happens very seldom, because the consequences can be very severe; and because there’s an easy default position – a “full-year CR,” or Continuing Resolution, keeping funding for nearly all programs at the previous year’s level, with the exception of a small number of “anomalies” that receive extra funding. That would mean a repeat of FY 2013 post-sequestration funding levels. Homeless Assistance has consistently been treated as an anomaly in full-year CRs because of the expiring renewal issue, but even so, in those circumstances funding along the lines of the Senate bill or the President’s budget would be difficult to obtain.

Another possibility is a bigger budget deal that would undo the sequestration-level cuts in domestic (as well as defense) discretionary spending and make up for it with other deficit reduction measures, in taxes and in entitlement programs. Because the sequestration cuts applied to defense as well as nondefense spending, they were supposed to provide incentive for members of Congress from a broad spectrum of ideologies to agree on something different, and that may still happen. There have been a number of proposals along those lines, although little negotiation. But later this year the federal government will run up against the debt ceiling once again, and that could be the occasion for a harder look at long-term federal deficits and short-term needs. In that context, any kind of conclusion is possible.

In any deal on the big budget, there are two key questions for homeless people and their allies: Will the way be opened for funding to be improved for the programs at HUD, VA, HHS, and elsewhere that help the lowest-income Americans have a place to live? And, will the specific entitlements that are most important to those Americans (Medicaid, SSI, TANF, for example) be protected? It will be essential for everyone to pay close attention to what federal decision-makers are doing, in order to ensure the answers to these questions are “yes.”