Eliminating the Community Development Block Grant Program Would Hurt the Illinois Economy

Eliminating the Community Development Block Grant (CDBG) program would directly impact more than 464,000 people in Illinois; state and local governments would lose access to $116 million in federal funding.

Tax reform and budget proposals currently being discussed in Congress will directly impact the lives of working and middle-class families, with the Community Development Block Grant (CDBG) program being one of the most harmed. In a recent survey, 63 percent of U.S. mayors responded that the elimination of the CDBG program would have a negative impact on their cities. Recent tax reform proposals result in $1.5 trillion less revenue for the federal government, which can only lead to spending cuts of existing programs. Tax reform alone is expected to benefit the wealthy more than the middle-class, but the impacts are even more striking when considering specific program cuts.

The Trump Administration’s fiscal year 2018 budget proposal included the complete elimination of the CDBG program as part of $6.2 billion in cuts to the U.S. Department of Housing and Urban Development (HUD). 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 critical public services to help low-to-moderate income people.

A new Illinois Economic Policy Insitute (ILEPI) and University of Illinois Project for Middle Class Renewal (PMCR) report, The Elimination of the Community Development Block Grant (CDBG) Program: Impacts on Illinois, finds that eliminating the CDBG program would directly impact more than 464,000 people in Illinois, and state and local governments would lose access to $116 million dollars in federal funding.

In Illinois, the loss of funding for this program would have negative economic and social consequences for needy residents. Statewide, the cuts to the CDBG program will:

  • Result in more than 460,000 low-to-moderate income people losing direct assistance;
  • Eliminate over 1,800 full-time jobs paying an average income of over $62,000, including 1,000 jobs in the Chicago area and nearly 800 jobs outside of the Chicago area;
  • Reduce economic output by nearly $170 million; and
  • Reduce state and local tax revenues by nearly $5 million dollars.

Nationwide, the projected losses from cutting the CDBG program would be significant. The Trump administration’s proposal will:

  • Result in nearly 24 million low-to-moderate income people losing direct assistance, including 4.5 million special needs persons, 4 million elderly Americans, and about 150,000 veterans;
  • Eliminate about 60,000 jobs and negatively impact over 32,000 businesses and federal contractors; and
  • Result in more than 11,000 city and county public projects shutting down.

The Administration has justified its proposal to cut the CDBG program by arguing that the program is not effective, that it poorly targets those in need, that state and local governments are better positioned to address local community development needs, and that many aspects of the program have become outdated. Yet the economic consequences of eliminating the program reveal that CDBG funds have demonstrable results, with cuts severely impacting low-income and middle-class families. Additionally, state and local governments– especially in Illinois– are not in a position to fill the funding gap left from a $3 billion cut in CDBG investments.

In lieu of a complete cut, Congress and the Trump Administration should consider the five following reforms to improve the CDBG program.

  1. Redefine or rename “entitlement” and “non-entitlement” areas;
  2. Use a formula in rural areas to reduce administrative costs and make funding equitable;
  3. Standardize HUD accounting rules;
  4. Further incentivize cities to geographically target CDBG funds to the poorest neighborhoods; and
  5. Require cities to report the location of CDBG dollars and increase staff capability to assess impacts.

The Community Development Block Grant program assists disadvantaged citizens and improves the economy by investing in low-to-moderate income communities. A complete elimination of the program, as proposed by the Trump Administration, would leave millions of poor, homeless, veteran, special needs, and elderly people without vital care, services, and assistance that they need.

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Read the full report here.

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