HUD's FY 1998 Budget Request

This testimony addresses the Department of Housing and Urban Development's (HUD) fiscal year 1998 budget request. GAO's primary focus is on HUD's request for more than $9 billion to renew rental assistance contracts as well as on some of the assumptions that underlie HUD's estimates. GAO discusses (1) the estimates that HUD used to develop its budget request for renewing Section 8 assisted housing contracts, (2) HUD's justification for 50,000 additional Section 8 certificates, (3) HUD's success in reducing the level of uncommitted public housing modernization funds held by housing authorities, and (4) HUD's request for $100 million to fund the second round of the Empowerment Zone/Enterprise Community Program.

GAO noted that: (1) HUD's FY 1998 budget request for $9.2 billion in budget authority to renew expiring Section 8 contracts for assisted housing includes amounts that may not be required or could be offset; (2) first, HUD's request contains allowances for contingencies, costs that may or may not accrue or that cannot be precisely estimated, with an estimated value of $531 million; (3) however, because HUD also allows housing agencies that administer the tenant-based program to retain a large portion of their unspent reserves for contingencies, HUD may not need funding for the contingencies noted above; (4) second, in developing this budget request, HUD may be able to offset (reduce) some of its current renewal needs after it has identified all unspent budget authority accumulated over prior years, an effort it plans to complete by March 31, 1997; (5) finally, since its budget was released, HUD has found that two housing programs that provide project-based assistance do not need to be renewed in FY 1998, and therefore the programs do not require the $90 million that HUD budgeted for them; (6) HUD also has requested $305 million in budget authority for FY 1998 to fund 50,000 new Section 8 certificates; (7) according to HUD, the certificates will accommodate family relocations caused by the Department's Welfare-to-Work initiative, but it is unclear how HUD estimated the number of units or justified their need; (8) for example, HUD has neither given a basis for choosing 50,000 as its request nor provided a plan for distributing these certificates to states or urban centers according to their need; (9) in addition, HUD plans to request an additional 50,000 units over the next 4 years, adding approximately $2.4 billion in renewal costs through FY 2002 for the additional 100,000 certificates; (10) over the past 3 years, public housing authorities have decreased the amount of uncommitted public housing modernization funding that they have available for major modernization projects by approximately 30 percent; (11) despite this progress, approximately $925 million remains uncommitted; (12) in addition, several large troubled housing authorities have larger uncommitted balances than they did 3 years ago; (13) despite the pressure on HUD's budget because of the increasing need to renew Section 8 contracts, these housing authorities will continue to be granted additional funding in accordance with HUD's formula for awarding modernization grants; and (14) HUD's request for $100 million to fully fund a second round of the EZ/EC program appears premature as it is unlikely that HUD can commit this amount during FY 1998.