FEDERAL BUDGET CUTS THREATEN LOW- AND MIDDLE-INCOME FAMILIES IN ILLINOIS

Trump Administration’s proposal to eliminate Community Development Block Grants and Public Service Loan Forgiveness program would hurt economy and adversely impact 500,000 state residents each year.

La Grange: The Trump Administration’s proposal to eliminate HUD’s Community Development Block Grant (CDBG) program and the Public Service Loan Forgiveness (PSLF) program would negatively impact nearly 500,000 Illinois residents, tens of thousands of businesses, and reduce the state’s economy by nearly $300 million per year, according to a pair of newly released studies from the Illinois Economic Policy Institute (ILEPI) and the University of Illinois Urbana-Champaign’s Project for Middle Class Renewal (PMCR).

Read a Summary of the Studies Here.

Read the Full CDBG Impact Report Here, and the Full PSLF Impact Report Here.

“In seeking ways to pay for $1.5 trillion in mostly corporate tax cuts, as well as substantial increases in defense and border-related spending, White House and Congressional leaders have proposed a range of significant budget cuts that would dramatically affect Illinois and our economy,” said ILEPI Policy Director and study co-author Frank Manzo IV.  “The proposals we’ve examined would produce less than 5 percent of the savings needed to pay for these tax cuts, but would shrink our economy, eliminate thousands of jobs, and disproportionately hurt low- to middle-income residents– including students, the elderly, veterans, and people with special needs.”

The CDBG program is a federal block grant that gives state and local governments access to flexible funding for infrastructure projects, economic development initiatives, housing rehabilitation programs, and to meet urgent community needs ranging from crime prevention to child care and health services.  The program costs less than $3 billion per year.

Analyzing HUD performance data and analysis from the National Association of Housing and Redevelopment Organizations (NAHRO), the study found that CDBG aids over 24 million low- and middle-income individuals across America– more than a third of whom have special needs, are elderly, or are veterans.  It also supports 32,000 businesses working on nearly 11,000 city and county projects.

Using industry-standard IMPLAN modeling, the researchers found that, at a cost of just $2 a month per federal taxpayer in Illinois, CDBG delivers $3 in economic benefits to the state– providing direct assistance to 460,000 low- to moderate-income residents, creating 1,800 jobs, and adding almost $170 million to the economy each year.  These benefits are spread across the state, but 63 percent of the impact is felt in the seven-county Chicago region alone.

“The elimination of CDBG would adversely affect millions of Americans and the economy as a whole,” added study co-author and University of Illinois Project for Middle Class Renewal Director, Dr. Robert Bruno.  “While exploring ways to make programs like CDBG more efficient and responsive to the needs of target populations is a worthy goal, its elimination is not only unjustified– it actively undermines the goal of strengthening America’s middle class.”

Similarly, the Public Service Loan Forgiveness Program is also at risk.  Created in 2007 by President George W. Bush, it is designed to prevent labor shortages in vital public service occupations that pay lower wages by subsidizing federal student loan repayments for workers employed in certain teaching, social work, psychological, public safety, health service, and religious, and charitable professions.  Generally, PSLF caps student loan payments at 10 percent of a worker’s income.  Once continuous payments have been made for ten years while employed full-time in eligible occupations, workers can earn access to loan forgiveness.  Nationally, the program will cost less than $3 billion per year over the next decade, according to CNBC.

In Illinois, there are currently 21,000 young PSLF borrowers earning an average of $50,000 per year, but facing an average student loan debt burden of $80,000.  According to the study, PSLF provides these borrowers an average annual benefit of more than $7,000 per year. The effect of these savings helps to boost the Illinois economy by $118 million per year, saves or creates 1,300 jobs, and enables another 1,500 young workers to rent their own homes instead of living with their parents.

“The elimination of the Public Service Loan Forgiveness program amounts to a $600 per month tax increase on young workers engaged in careers of service to their communities and our country,” said study co-author Jill Manzo.  “Worse, instead of making college more affordable for working families currently struggling with skyrocketing student debt, a repeal of the PSLF program would have precisely the opposite effect.”

“Nonpartisan analysts have already concluded that the tax plans currently before Congress– which disproportionately benefit the wealthy and large corporations– will be paid for with more debt, higher taxes, and higher health insurance premiums on millions of working families,” concluded Frank Manzo IV.  “But our research suggests that these proposals will also be subsidized by a federal budget that aims to slash programs on which both our economy and hundreds of thousands of Illinois’ most vulnerable citizens rely.”

The Illinois Economic Policy Institute (ILEPI) is a nonprofit organization which uses advanced statistics, reliable surveying techniques and the latest forecasting models to develop timely and dynamic analysis of policy issues affecting the economies of the Midwest.

The Project for Middle Class Renewal (PMCR) at the University of Illinois investigates the working conditions of workers in today’s economy and elevate public discourse on issues affecting workers with research, analysis and education in order to develop and propose public policies that will reduce poverty, provide forms of representation to all workers, prevent gender, race, and LGBTQ+ discrimination, create more stable forms of employment, and promote middle-class jobs.