Why “More is Less” for Homeless Assistance: How Flat Funding Would Cut Program Capacity

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Federal Policy Brief | October 10, 2013

Files: Why “More is Less” for Homeless Assistance (PDF | 278 KB | 1 page)

Why “More is Less” for Homeless Assistance:
How Flat Funding Would Cut Program Capacity

Overview
Because of accounting issues involving expiring multiyear contracts, communities’ homeless programs are preparing for a 7-8 percent cut in the Continuum of Care (CoC), the largest federal program for homeless people, when FY 2013 funding is distributed, exacerbating a nearly 25 percent cut in the Emergency Solutions Grants, HUD’s other homelessness program, that they have already had to absorb.  These cutbacks are despite the fact that on paper, after sequestration, the FY 2013 appropriated budget authority for HUD’s homelessness assistance is $30 million higher than in FY 2012.

For FY 2014, “flat funding” HUD’s Homeless Assistance account at the FY 2013 (budget authority) level would mean even less money (outlays) for local programs to use. The Alliance estimates that Continuum of Care program capacity would be reduced by $115 million below the post-sequestration FY 2013 level, and $254 million below the FY 2012 level.  This means 32,000 people homeless instead of housed compared with FY 2013, and 143,000 people homeless instead of housed compared with FY 2012 (including the impact of cuts to ESG).

The reason is that some of HUD’s CoC grants operate under multiyear contracts. By law, all the funding for a multiyear contract comes from the appropriation in the first year of the contract.  HUD then releases money to the service provider over several years. After these initial funds are spent and the contract expires, Congress must replenish budget authority in HUD’s appropriation so that spending under the CoC grants may continue at the same level as in the previous year.  In other words, these multiyear contracts are not fully incorporated into the appropriations baseline until they shift to annual renewals at the end of their initial multiyear term.  It makes no difference whether the renewal grant is made to the same grantee or to some other grantee – this effect impacts the amount of money available for homeless services, whichever program receives the money.

Example
HUD awarded $350,000 to a provider in its FY 2009 Continuum of Care competition, for rent subsidies for homeless people. Under the law in effect at that time, the award would cover five years’ worth of rent subsidies. Under congressional accounting rules, the entire $350,000 would be set aside from the FY 2009 appropriation. In the first year, HUD would write $70,000 worth of checks to landlords for rent subsidies, and $280,000 would remain. In each of the remaining four years of the contract, HUD would provide another $70,000 to the landlords out of the remaining funds, but Congress would not need to appropriate any additional funds for the project.

For FY 2014, Congress will need to appropriate an additional $70,000 for HUD to continue to provide the rent subsidies. Thus, HUD will spend the same amount of money in FY 2014 as in FY 2013 ($70,000), but the amount appropriated by Congress will be greater than in FY 2013. All subsequent renewals are done through one-year contracts, so the amount appropriated by Congress and the amount spent by HUD would be the same in FY 2014 and all future years. The following chart summarizes how funding would be made available for this one project:

FY 2009 FY 2010 FY 2011 FY 2012 FY 2013 FY 2014
Amount Congress appropriates (“budget authority”) $350,000 $0 (HUD still has 2009 funds) $0 $0 $0 $70,000 (an increase compared to 2013)
Amount HUD spends (“outlays”) $70,000 $70,000 $70,000 $70,000 $70,000 $70,000 (same as 2013)
Amount HUD has left at the end of the year $280,000 $210,000 $140,000 $70,000 $0 $0

Impact
Multiplied by the expiration of hundreds of initial multiyear contracts – many begun under the Bush Administration’s chronic homelessness initiative – the overall result is that level funding for Homeless Assistance in the FY 2014 T-HUD bill would be insufficient to maintain the current level of assistance provided to people experiencing homelessness.