The devil ... and angels in the details of Obama’s FY10 Budget

President Barack Obama submitted his detailed budget to Congress earlier this month. NACo legislative staff provides a synopsis of the details below. 

Agriculture and Rural Affairs

President Obama’s FY10 budget includes $25.7 billion for discretionary programs at the U.S. Department of Agriculture (USDA).  This is $1.6 billion above FY09 for programs such as rural development, food safety, conservation and research.  USDA Rural Development programs are funded through the department’s discretionary funds and are bolstered by Recovery Act funding that is clearing the backlog of projects.  The budget specifies that more than  $20 billion in grants and loans will be available for rural development programs, an increase of $300 million from FY09.

The newly authorized Rural Collaborative Investment Program supported by NACo is not mentioned in the budget, but NACo will continue to work with appropriators to advocate for full funding for this innovative rural development program. 

A summary of priority programs follows.

• Key County Rural Development Programs Maintain Funding Levels

Rural Water and Waste Disposal Program:  The budget provides $546 million in budget authority to support more than $1 billion in direct loans, $75 million in guaranteed loans and $469 million in grants for Water and Waste Disposal projects for a total program level of $1.6 billion.  This represents an $8 million increase in budget authority from FY09.  The 2008 Farm Bill changed the way interest rates are calculated, which reduced the cost of borrowing for most applicants, but cost the federal government more.  The increased costs for the federal government are more than offset by the historically low cost of borrowing for the Treasury.

Rural Community Facilities:  Provides $295 million in direct loans, $206 million in loan guarantees and $44 million for grants.  This represents a $3 million increase in grants and the same loan levels as FY09.  The budget authority for the program decreased by $12 million as the administration chose to use savings from the decreased cost of borrowing to fund other programs.

Rural Business Programs: Several key rural business programs remain relatively unchanged.  The Rural Business Enterprise Grants remain funded at $39 million and the Rural Business Opportunity Grants remain funded at $5 million.  The Intermediary Relending program continues to be supported at a program level of $34 million.

Rural Housing: Unlike the previous administration’s budgets, this proposal does not suggest eliminating some key rural housing programs. Most USDA Rural Development housing programs would operate at FY09 levels.  This program level of $8.8 billion includes funding for single-family housing, multi-family housing, rental assistance, farm labor housing and low-income housing repairs.

• Large Increases for New Rural Business Programs, Renewable Energy and Rural Broadband

Rural Business: The Rural Cooperative Development Grant Program received an $11 million boost to $17 million and the administration continued to support the Value Added Producer Grant Program with $22 million in total funding, a large commitment due to the expenditure of all mandatory funding for the program in FY08 and FY09.  The Rural Microenterprise Investment Program received $26 million, a $22 million boost for loans and grants to provide more low- and moderate-income individuals the opportunity to establish new small businesses in rural areas.

Renewable Energy:  The budget increases capacity for rural renewable energy development with $770 million in additional investments.  The Rural Energy for America Program receives $128 million, a boost of $88 million to help rural businesses, farmers, ranchers and schools purchase renewable energy systems and make energy efficiency improvements.  The Bio-refinery Assistance Program is funded at $262 million, which is estimated to lead to $515 million more in loans to expand the nation’s bio-refinery capacity.

Rural Broadband:  The administration requests $52 million in subsidy for the Rural Utility Service’s ongoing Broadband Program, an increase of $23 million over the regular appropriation for 2009.  This funding will support $532 million in direct loans and $13 million in grants.  The budget also requests $30 million for the Distance Learning and Telemedicine Grant Program, a cut of $5 million.

• Administration Eliminates Several Rural Programs

TheHigh Energy Costs Grants Program funded at $18 million in FY09 is eliminated.  This program is critical to remote rural communities with average home energy costs exceeding 2.75 times the national average. Grant funds are used for on-grid and off-grid renewable energy projects, and energy-efficiency and energy-conservation projects serving eligible communities. The administration believes the program is duplicative and serves only a few isolated areas that can be served less expensively through existing loan programs.

TheRural Empowerment Zones and Enterprise Communities Grants, funded at $8 million in FY09 are eliminated.  The program, funded at $8 million in FY09, is designed to afford severely distressed rural communities real opportunities for growth and revitalization. The administration believes the program duplicates the larger USDA Rural Development programs and that congressional set-asides of $27.6 million for these communities are sufficient.

TheResource Conservation and Development (RC&D) Program is targeted for elimination.  The administration believes that the program’s councils are self-sustaining at the state and local level.  President George W. Bush also tried to eliminate RC&D funding, but congressional appropriators continued the program, which first began in 1962 and was funded at $51 million in FY09.

TheWatershed and Flood Prevention Program, a Natural Resources and Conservation Service program, funded at $24 million in FY09, is targeted for elimination because nearly all funded projects are selected through the earmark process.

• Other Terminations and Reductions

The budget also limits farm commodity payments to $250,000 per person for direct payments and phases direct payments out over three years for farmers with sales revenue of more than $500,000 annually.  It also eliminates the $52 million in payments to cotton producers for storage payments and reduces crop insurance subsidies to farmers and insurance companies. All of these provisions are very unpopular in Congress and are likely to be ignored.

Community and Economic Development

• Housing and Urban Development Fares Well

The Obama administration’s FY10 budget request of $43.7 billion is a 7.4 percent increase over the 2009 budget.  The request fully funds the Community Development Block Grant Program at $4.1 billion in formula funds and totals $4.5 billion overall.  The budget proposes changing the CDBG formula and also CDBG program performance measures. 

Within CDBG, the budget provides $150 million in new funding for a Sustainable Communities Initiative to be overseen by HUD Deputy Secretary Ron Sims who recently was confirmed by the Senate. Sims was the King County, Wash. executive before his appointment at HUD.

Also, $25 million is added for a Rural Innovation fund for states to award grants through a competitive process promoting innovative approaches to improving housing in rural communities. 

The HOME Investment Partnerships program would be funded at $1.825 billion, up from current $1.7 billion level.

The budget renews the federal government’s commitment to housing and community development with a focus on meeting low-income family housing needs by providing $17.8 billion for rental assistance programs to fund public housing vouchers through end of 2009.  $8.1 billion is included for Section 8 housing vouchers to preserve 1.3 million affordable rental units.  One billion dollars is also provided for an Affordable Housing Trust Fund created last year as part of the Housing and Economic Recovery Act legislation. 

The budget expands the Federal Housing Administration loan-making capabilities and also provides $100 million for Housing Counseling, a $35 million increase from the current level.  Also, $250 million is added for a New Choice Neighborhood Initiative to transform neighborhoods with extreme poverty areas. 

Also included is $100 million for energy-efficiency construction grants and $10 million for HUD to coordinate with the Transportation Department in developing strategies for public housing and transportation accessibility.

While housing and most community development get a boost, the Obama budget does not request funding for the Brownfields Economic Development Initiative, or Empowerment Zone (EZ) or Renewable Community (RC) initiatives but proposes to extend the EZ and RC tax incentives through December 2010. 

• Economic Development Administration

The Obama administration budget includes $284 million for Economic Development Administration an $11.2 million increase.  The budget would increase funding for the Economic Adjustment program to $125 million.  This $90 million increase would fund two initiatives — creation of regional innovation clusters and support for networks of business incubators. 

The budget in turn reduces $60 million in funding for the public works agency for $73 million in FY10.

Environment, Energy and Land Use

• Army Corps of Engineers Takes a Hit

The administration budget proposal for the U.S. Army Corps of Engineers for FY10 reduces overall funding from $5.4 billion in FY09 to $5.1 billion. The Corps received $4.6 billion through the Recovery Act, which was signed into law in February.

Most notably in the Corps budget, the administration proposes not to fund water and wastewater projects through Corps money.  In FY09, $180 million was available.  The administration believes this is outside of the agency’s three mission areas of commercial navigation, flood and storm damage reduction, and aquatic ecosystem restoration.  Additionally, the budget documents suggest the program duplicates other programs funded through other agencies.  The money will be reallocated for other Corps-type projects.

• Environmental Protection Agency Boosted

Under the Obama proposal, EPA would receive $10.5 billion, nearly $3 billion above its FY09 enacted budget.

Water Infrastructure funding is slated to get $3.9 billion under the FY10 budget. It gives $2.4 billion for the Clean Water Act State Revolving Loan Fund (SRF) projects and $1.5 billion for Safe Drinking Water Act SRF loans.

These amounts represent a substantial increase in funding over the FY09 enacted levels. In 2009, the Clean Water SRF received $689 million and the Safe Drinking Water SRF received $829 million.  This funding will help communities meet the challenges of upgrading their aging water infrastructure systems.

One of the reasons for the significant jump in water infrastructure funding centers around the administration’s proposal to eliminate $145 million in earmarked water infrastructure funds.  In FY09, these earmarks amounted to 301 water or wastewater projects in specified communities.  The administration states that earmarks bypass a state’s priority-setting process and should be eliminated from the budget process. 

Also in the water realm, the Homeland Security Grants for Drinking Water and Wastewater Systems program would be eliminated. These grants — $5 million in FY09 — were used for water infrastructure vulnerability assessments, operator training and education on water utility preparedness, and for coordination on security measures. 

The administration contends the program is no longer needed since water systems were required to complete vulnerability assessments in 2004.  Additionally, there is already a strong intergovernmental cooperation on water security issues; the administration feels this program is duplicative in nature.

In the air realm, the president proposes to fund the EPA Greenhouse Gas (GHG) emissions inventory at $17 million.  This will be used to design and develop guidance and training materials to guide the regulated entities under the proposed mandatory GHG reporting rule on emissions inventory.

However, the administration’s budget, at the same time, would cut Local Government Climate Change Grants. This program, first funded in 2009, was intended to help local governments reduce greenhouse gas emissions.  However, the administration believes program “lacks focus” and is duplicative of other programs.  That is why the administration proposes to cut $10 million from its budget and focus on other programs such as ENERGY STAR.

The president’s budget gives Superfund a boost from $1.28 billion to $1.3 billion.

• No Money for EECBG Program in Department of Energy Budget

The administration requested $26.4 billion for the DOE FY10 budget request.  This is in addition to the $38.7 billion DOE received in the Recovery Act.

The administration’s budget, however, does not include funding for the Energy Efficiency and Conservation Block Grant (EECBG) program.  EECBG was first funded in the Recovery Act at $3.2 billion.  EECBG is instrumental in providing funding to help local governments make energy-efficient changes at the local level.

The administration proposes to eliminate all funding for the Yucca Mountain nuclear waste storage project ($91 million in FY09).  However, the president acknowledges that nuclear power is an important source of electricity and that it is important to continue research into the best way to dispose of nuclear waste.  To that end, he has proposed nearly $197 million to be used for research on alternative ways to dispose of nuclear waste.

Finance and Intergovernmental Affairs

• Commerce Department’s Census Bureau Would Get $3 Billion Increase

The Census Bureau would receive $7.8 billion to ensure it has the resources necessary to complete the 2010 decennial census.  This is approximately $3 billion more than the bureau received in 2009.  The decennial census will employ an estimated one million temporary workers and will engage in extensive advertising and other activities to encourage a full and accurate count.   

• Treasury

The Treasury Department’s Office of Financial Stability will receive $228 million, some of which will be used to pay financial services firms for overseeing the Troubled Assets Relief Program (TARP).  Created by the Emergency Economic Stabilization Act of 2009, TARP funding is used to buy troubled assets from financial institutions.  NACo supports efforts to use some of these funds to reimburse losses local government entities incurred as a result of the Lehman Brothers bankruptcy. 

• Proposed Cuts

Following a line-by-line review of the 2010 budget proposal, the Obama administration announced its intention to reduce grant funding to states under the Help America Vote Act (HAVA).  These grants are used to purchase and upgrade voting machines, pay poll workers and support the implementation of voter registration databases.  The administration’s stated rationale for reducing grant funding from $106 million to $52 million is the assertion that more than $1.3 billion in funds previously distributed to states under HAVA have gone unspent. 

Health

The president’s more detailed budget request includes some adjustment to the proposal for a reserve fund of more than $600 billion to finance an overhaul of the nation’s health system.  The administration acknowledges that health reform will require additional savings and revenue-raising measures that “promote efficiency and accountability, align incentives toward quality and encourage shared responsibility.”

The president requests $584 million for pandemic influenza preparedness and response, in addition to the $1.5 billion supplemental request sent to Congress in April.  The request for the Centers for Disease Control and Prevention includes $102 million for the Preventive Health and Health Services Block Grant, which is the same level as FY09.

The request for health centers is $2.208 billion, the same level as was appropriated in FY09.

The request includes more than $1 billion for programs to strengthen and support the health workforce, especially in underserved areas, and $73 million for programs to improve rural health care, including Rural Health Care Services Outreach, Network and Quality Improvement grants, state offices of rural health and Telehealth grants.

The budget requests $2.3 billion for the Ryan White HIV/AIDS program, an increase of $54 million over this year’s level.

The president requests $48 million for programs supporting children with autism spectrum disorders and their families, an increase of $6 million.

The Substance Abuse and Mental Health Services Administration (SAMHSA) request includes $59 million to increase the capacity of drug courts (an increase of $35 million), including $5 million to support families affected by methamphetamine abuse.  It also asks for level funding for the Substance Abuse Prevention and Treatment (SAPT) Block Grant Program at $1.8 billion and Community Mental Health Services Block Grants at $421 million.

The budget proposes eliminating 927 earmarks approved by Congress in 2009 for local health projects worth $356 million.  These include Health Care Facilities and Construction ($310 million), the Denali Commission ($20 million) and the Delta Health Initiative ($26 million).

The Health Care Facilities and Construction program funds construction, renovation and equipment acquisition for public and private sector facilities. The Denali Commission supports construction of health facilities in Alaska. The Delta Health Initiative funds construction of health care facilities, training of health professionals, and the purchase of equipment in Mississippi. 

The administration argues that the projects are not subject to competitive or merit-based processes and support private institutions that should not be federally subsidized.

Human Services and Education

The president’s budget proposes major expansions of early childhood development programs.  The early childhood initiative includes a legislative proposal with several new programs:

• a mandatory program for states for home-visitation programs, which would start at $124 million in FY10 and increase to $1.8 billion in FY19
• $500 million for formula grants under a new Early Childhood Grants for state and local education agencies, and
• $300 million for competitive grants to develop and improve pre-K and other early childhood education programs.

Head Start funding for 2010 would be $7.2 billion, an increase of $122 million over the 2009 appropriation level.  However, it should be noted that the American Recovery and Investment Act provided an additional $2.1 billion for Head Start and $1.1 billion for Early Head Start, half of which would still be available in FY10.

The administration’s budget includes a legislative proposal for a funding trigger under the Low Income Home Energy Assistance Program (LIHEAP) that would allow for an automatic program increase when gas prices increase by at least 15 percent or electricity costs by at least 10 percent.  The overall funding for LIHEAP would be $3.2 billion. 

This amount is more than the traditional $2.5 billion that is usually provided to LIHEAP, but less than the 2009 amount because the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act of 2009 doubled the program to $5.2 billion as a result of the energy crisis.

In general, most other human services received level funding including $1.7 billion for the Social Services Block Grant.  One exception is the refugee program, which would receive $741 million, an increase of $107 million. 

On the other hand, the Community Services Block Grant, which received a boost of $1 billion under the Recovery Act, would receive $765 million, $10 million less than the regular appropriation.  Programs for the elderly also received the same funding as in 2009: $810 million for nutrition programs, $361 million for home and community services, and $154 million for the Family Caregiver Support Program.

On the nutrition side, the Women, Infants and Children (WIC) program would receive a significant increase of $917 million, for a total of $7.8 billion.  Child nutrition programs, including WIC, school lunch, and school breakfast are up for reauthorization in this Congress. 

On the education side, the Title I Grants to Local Educational Agencies would receive just under $13 billion.  This is about $500 million less than the FY09 budget, but the Recovery Act provided $10 billion for Title I, $5 billion of which would be available for the 2010 school year, bringing the total up to almost $18 billion.  The grants to states under the Individuals with Disabilities Education Act (IDEA) received level funding, $11.5 billion.  IDEA also has much of the $11 billion it received under  the Recovery Act for the next school year.

Justice and Public Safety

The Obama budget request for FY10 marks Byrne JAG at $517 million; the same as last year, and $100 million for the Second Chance Act, an increase of $75 million.  The COPS program increased $210 million from $551 million in FY09 to $761 million in FY10.  Of the $761 million for COPS, $298 million was set aside for COPS hiring. 

The only major disappointment in the budget request was a call to eliminate the State Criminal Alien Assistance Program (SCAAP) funded at $405 million in FY09.  Attorney General Eric Holder has agreed to review the SCAAP decision.  SCAAP reimburses counties for illegal immigrants who are detained in county jails. 

Byrne Discretionary Grants, which had received $225 million in the Recovery Act, received an added request of $30 million in the administration’s FY10 budget.  Byrne JAG received $2 billion in the Recovery Act and COPS received $1 billion.  Under Juvenile Justice, Title V (the prevention title) received $62 million while the Juvenile Accountability Block Grant received $55 million in the FY10 budget.

Homeland Security

President Obama’s first budget request to Congress proposes $42.7 billion for the Department of Homeland Security (DHS), an increase of $2.718 billion compared to last year.  Funding would support five major priorities — counterterrorism; border security; enforcement of immigration laws; disaster preparedness, response and recovery; and department unification.

Key state and local first responder assistance programs would receive a total of $3.8 billion, an increase over FY09’s $3.1 billion level.

Specifically, the FY10 budget request includes the following amounts for key state and local first responder assistance programs:

• $713 million for DHS’ State Homeland Security Grant Program ($713 million enacted in FY09), of which $60 million is slated for grants to Southwest border applicants
• $666 million for DHS’ Urban Area Security Initiative Program ($629 million enacted in FY09)
• $460 million for Law Enforcement Prevention ($447 million enacted in FY09);
• $590 million for FIRE Grants ($775 million enacted in FY09), of which $420 million is proposed for grants for the Staffing for Adequate Fire and Emergency Response (SAFER) Program ($220 million enacted in FY09), and $170 million is proposed for the Assistance to Firefighters Grant (AFG) program ($565 million enacted in 2009 with an additional $210 million provided in the Recovery Act)
• $315 million for the Emergency Management Performance Grant Program ($315 million enacted in FY09), and
• $114 million for State and Local Training Programs ($196 million enacted in FY09).

• Eliminations Proposed for Justice and DHS programs

While the president’s FY10 budget request supports many programs important to counties, there are several major programs recommended for elimination.   In addition to eliminating SCAAP, the request recommends terminating DHS’ Emergency Operation Grant Program, Trucking Security Program and Intercity Bus Security Grant Program.  

The budget request also proposes to terminate the Environmental Protection Agency’s Homeland Security Grant Program to States.  

Labor and Employment

The president’s budget for the Department of Labor (DOL) includes $76.7 billion in budget authority for the department’s mandatory programs. In addition, the budget requests $13.3 billion in discretionary budget authority for DOL, which includes $3.83 billion in funding for Workforce Investment Act (WIA) programs — a $200 million increase over FY09 funding levels. WIA Adult, Dislocated Worker and Youth  formula funding streams remain essentially level-funded from FY09.

Highlights of the budget include:

• $861.5 million for Adult Training
• $1.413 billion for Dislocated Workers Employment and Training Activities
• $924 million for WIA Youth Activities (no increase over FY09)
• $114 million for YouthBuild ($44 million increase over FY09)
• $115 million for ex-offender activities, of which $88.5 million shall be for youthful offender activities ($7 million increase over FY09)
• $135 million for a Career Pathways Innovation fund (new in FY10), and
• $15 million for a Workforce Data Quality Initiative (new in FY10)

The budget also creates three new initiatives:

• The Green Jobs Innovation Fund would provide $50 million to support competitive grant opportunities to help workers receive job training in green industry sectors and occupations and access green career pathways. This initiative was designed to complement and extend the competitive grant awards made through the funding available for training in high-growth and emerging industry sectors under the Recovery Act.
• The Workforce Data Quality Initiative would provide $15 million in competitive grants to support the development of data systems that integrate education and workforce data to provide timely and accessible information to consumers, policymakers and others. 
• Career Pathways Innovation Fund would provide $135 million in competitive grants to community college-led partnerships that are developing or expanding career pathway programs in partnership with education and training providers, employers and the workforce investment system.

Public Lands

• USDA Forest Service Boosted in Obama Budget

The president’s FY10 budget request for the Forest Service totals $5.227 billion, an 8.9 percent increase over FY09 levels. The budget reflects new presidential initiatives to:

• address critical deferred maintenance and operational components of the Forest Service infrastructure
• address regional issues that affect the Great Lakes, such as invasive species, non-point source pollution and contaminated sediment, and
• address climate change.

Additional program funding changes include:

• State and Private Forestry programs are proposed at $306 million, an increase of $40 million.
• National Forest System funding is proposed at approximately $1.5 billion, slightly less than FY09.
• FY10 Wildland Fire Activities would increase (excluding emergency funding) by $388 million to $2.5 billion, and
• Capital Improvement and Maintenance programs are proposed at $557 million, an increase of $62 million.

The Secure Rural Schools payment would decrease in FY10 since the legislation re-establishing the program called for a phase-out of payments after four years. The 2009 payment was $395 million and the 2010 payment would be $354 million.

• U.S. Department of the Interior

The president’s FY10 budget request for DOI totals $12 billion and provides additional investments in developing renewable energy and protecting endangered species. Most importantly, the budget request includes a funding level of $390 million for the Payment in Lieu of Taxes program.

Last year, Congress passed the Emergency Economic Stabilization Act of 2008, which converted the PILT program from a discretionary program (subject to annual appropriations) to a mandatory entitlement program. Full funding for the program was provided through FY12. 

Other budget priorities include:

• $75.4 million have been set aside for a new Energy Frontier initiative, which includes $50.1 million to promote a clean energy future with a focus on renewable energy sources on federal lands
• $133 million in additional funding to monitor, adaptively manage, and assess the impacts of climate change on the nation’s lands, waters, fish and wildlife
• $26 million in grants to promote conservation of western water by local communities through voluntary water banks, wastewater reclamation and reuse, and other market-based conservation measures
• a $95 million increase in the Land and Water Conservation Fund for land acquisition, and
• $370 million for wildfire suppression and $75 million in a new Wildland Fire Contingency Reserve Fund, which will minimize the need for the transfer of funds from non-fire programs.

Telecommunications   and Technology

The president’s budget provides for the establishment of the Broadband Technology Opportunities Program (BTOP) in the National Telecommunications and Information administration (NTIA) and also provides resources for broadband grants and loans through the Rural Utilities Service of the Department of Agriculture.

BTOP is intended to increase access to broadband service in unserved and underserved areas of the country, and ensure broadband access to strategic institutions that are likely to provide significant public benefits such as schools, libraries, health care providers and public safety agencies.

The BTOP initiatives will provide grant support to enable broadband access for consumers with limited or no broadband service as well as stimulate demand and facilitate greater use of broadband services, while contributing to economic growth and job creation.

Transportation

The administration’s FY10 budget provides $73.25 billion, up from the FY09 level of $71.4 billion.  Most programs received an increase to continue current services, although there were a few exceptions where programs got a major boost in spending, including high-speed rail and Essential Air Service.

• Highways

The federal highway program is increased from the FY09 level of $40.7 billion to the FY10 level of $41.1 billion.  Because of the potential revenue problems faced by the Highway Trust Fund, only $5 billion comes from the Trust Fund and $36 billion from the General Fund.  If the Trust Fund problem is fixed to address the potential negative balance, it is likely that the General Fund will not be needed to fund the highway program.

• Transit

The FY09 level of $10.23 billion is increased for FY10 to $10.33 billion.  This includes $8.34 billion for the formula and bus grant program, and $1.82 billion for the capital grant new start program. 

• Aviation

The Airport Improvement Program (AIP), which is used for capital projects at public airports, is level-funded at $3.51 billion, the same amount as the past four years.  That figure could change if Congress passes the reauthorization of the federal aviation and airport program this year. 

A big increase, however, is proposed for the Essential Air Service Program (EAS), which is funded at $175 million for FY10, up from the $127 million level in FY09.  EAS provides subsidized air service to about 150 rural communities. This increase in funding is part of the Obama administration’s “Standing with Rural America Initiative.”

• Rail

Amtrak is funded at $1.502 billion for FY10, up from $1.49 billion in FY09. High-speed rail/intercity passenger receives $1 billion, up from $90 million in the FY09 budget and continues the initiative in funding high-speed rail that began with $8 billion in the stimulus legislation.  The Rail Line Relocation Grant Program, a small program providing $25 million to communities for moving rail lines to mitigate the impact of rail traffic on motor vehicle traffic and improve safety, is terminated.