Transportation, Housing and Urban Development, and Related Agencies (THUD): FY2015 Appropriations
Released: 2014-06-16T00:00:00

Introduction to Transportation, HUD, and Related Agencies (THUD) Appropriations

The Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations subcommittees are charged with drafting bills to provide annual appropriations for the Department of Transportation (DOT), the Department of Housing and Urban Development (HUD), and six small related agencies. Typically, these bills are reported out by the appropriations committees and presented to the House and Senate for consideration. If a bill is passed in each house, final legislation is produced in a conference agreement.

Title I of the annual THUD appropriations bill funds DOT. The department is primarily a grant-making and regulatory organization. Its programs are organized roughly by mode of transportation, providing grants to state and local government agencies to support the construction of highways, transit, and intercity passenger rail infrastructure, while providing regulatory oversight to promote safety for the rail, transit, commercial trucking and intercity bus, and maritime industries, as well as noncommercial drivers. The Federal Aviation Administration (FAA) is exceptional among DOT's largest offices, in that while it administers grants for airport development and regulates the safety of aviation operations, the largest portion of its budget and workforce is dedicated to operating the U.S. air traffic control system.

Title II of the annual THUD appropriations bill funds HUD. The department's programs are primarily designed to address housing problems faced by households with very low incomes or other special housing needs. These include several programs of rental assistance for persons who are poor, elderly, and/or have disabilities. Three rental assistance programs—Public Housing, Section 8 Vouchers, and Section 8 project-based rental assistance—account for the majority of the department's nonemergency funding. Two flexible block grant programs—the HOME Investment Partnership Program and Community Development Block Grants (CDBG)—help communities finance a variety of housing and community development activities designed to serve low-income families. Other, more specialized grant programs help communities meet the needs of homeless persons, including those with AIDS. HUD's Federal Housing Administration (FHA) insures mortgages made by lenders to home buyers with low down payments and to developers of multifamily rental buildings containing relatively affordable units.

Title III of the THUD appropriations bill funds a collection of transportation-related agencies and housing and community development-related agencies. They include the Access Board, the Federal Maritime Commission, the National Transportation Safety Board, the Amtrak Office of Inspector General (IG), the Neighborhood Reinvestment Corporation (often referred to as NeighborWorks), the United States Interagency Council on Homelessness, and the costs associated with the government conservatorship of the housing-related government-sponsored enterprises, Fannie Mae and Freddie Mac.

Status of the FY2015 THUD Appropriations Bill

Table 1 provides a timeline of legislative action on the FY2015 THUD appropriations bill.

FY2015 THUD Discretionary Funding Allocation

The discretionary funding allocation to the Senate THUD subcommittee is $2.4 billion more than that provided to the House subcommittee. This difference creates an additional difficulty in reaching agreement on a final FY2015 THUD appropriation level. Table 2 shows the discretionary funding provided for THUD in FY2014, the Administration request for FY2015, and the amount allocated by the House and Senate Appropriations Committees to the THUD subcommittees. Table 3 lists the total funding provided for each of the titles in the bill for FY2014 and the amount requested for that title for FY2015.

As is discussed later, much of the funding for this bill is in the form of contract authority, a type of mandatory budget authority. Thus, the discretionary funding provided in the bill (often referred to as the 302(b) allocation) is only about half of the total funding provided by this bill.

FY2015 THUD Funding and Sequestration

The President's FY2015 budget included a request for $126.7 billion for THUD, $22 billion more than appropriated for THUD in FY2014. Most of this increase was for highway, transit, and rail funding under the Administration's surface transportation reauthorization proposal. The request for HUD is $4 billion more than provided in FY2014, but $3 billion of that increase reflects a decline in offsetting receipts; the decline in offsetting receipts means that HUD's appropriation would have to increase by $3 billion in order to provide the same amount of funding as HUD received in FY2014.

The House bill would provide a total of $105.5 billion for FY2015. While this is $1 billion over the amount provided in FY2014, in effect it is a reduction of $2 billion in total spending authority from FY2014, due to the $3 billion decline in offsetting receipts. The committee recommended that the reduction be divided roughly evenly between DOT and HUD, with cuts in DOT's TIGER grant program (-$500 million), New Starts transit grant program (-$252 million), Amtrak (-$200 million), and rescissions of other DOT funding (-$354 million). HUD's funding would increase by $1 billion less than the reduction in offsetting collections.

The Senate Committee on Appropriations recommended a total of $108.1 billion. This is $3.7 billion over the amount provided in FY2014, but only $700 million more than the FY2014 level once the $3 billion reduction in offsetting receipts in FY2015 is taken into account.

The Office of Management and Budget reported that, as a result of the discretionary spending limits set in the Bipartisan Budget Act of 2013 ( P.L. 113-67 , Division A), no sequester reductions are required for FY2015.

THUD Funding Trends

Table 4 shows funding trends for DOT and HUD over the period FY2009-FY2014, omitting emergency funding and other supplemental funding, and the amounts requested for FY2015. The purpose of Table 4 is to indicate trends in the funding for these agencies, thus emergency supplemental appropriations are not included in the figures.

Components of the THUD Funding Bill

The funding numbers cited in discussions of the THUD appropriations bill can be confusing. Different totals, all of which may be correct, may be published by the committees in their tables and press releases, reported in the press or by advocates, and even presented in this report. This is possible because the THUD appropriations bills include different types of funding mechanisms and savings mechanisms, which can result in different figures being reported for the same programs, depending on how the numbers are presented. The following section of this report explains the different types of funding often included in the THUD appropriations bill.

Budget Concepts Relevant to THUD Appropriations

Most of the programs and activities in the THUD bill are funded through regular annual appropriations , also referred to as discretionary appropriations. This is the amount of new funding allocated each year by the appropriations committees. Appropriations are drawn from the general fund of the Treasury. For some accounts, the appropriations committees provide advance appropriations , or regular appropriations that are not available until the next fiscal year.

In some years, Congress will also provide emergency appropriations , usually in response to disasters. These funds are sometimes provided outside of the regular appropriations acts—often in emergency supplemental spending bills—generally in addition to regular annual appropriations. Although emergency appropriations typically come from the general fund, they may not be included in the discretionary appropriation total reported for an agency.

Most of the Department of Transportation's budget is in the form of contract authority . Contract authority is a form of budget authority based on federal trust fund resources, in contrast to "regular" (or discretionary) budget authority, which is based on resources in the general fund. Contract authority controls spending from the highway trust fund and the airport and airways trust fund.

Congressional appropriators are generally subject to limits on the amount of new non-emergency discretionary funding they can provide in a year. One way to stay within these limits is to appropriate no more than the allocated amount of discretionary funding in the regular annual appropriations act. Another way is to find ways to offset a higher level of discretionary funding. A portion of the cost of regular annual appropriations for the THUD bill is generally offset in two ways. The first is through rescissions , or cancellations of unobligated or recaptured balances from previous years' funding. The second is through offsetting receipts and collections , generally derived from fees collected by federal agencies.

When the Appropriations Committee subcommittees are given their "302(b) allocations"—that is, when the total amount that the Appropriations Committee has to spend for a fiscal year is divided among the subcommittees—that figure includes only net discretionary budget authority (non-emergency appropriations, less any offsets and rescissions); contract authority from trust funds is not included. That omission can lead to confusion, as the annual discretionary budget authority allocations for THUD are typically around half of the total funding provided in the bill, with the remainder made up of contract authority.

Allocation across Agencies by the Subcommittees

Once the THUD subcommittees receive their 302(b) allocations, they must decide how to allocate the funds across the different agencies within their jurisdictions. As shown in Figure 1 , for net discretionary budget authority (appropriations, less any offsets), the majority of funding allocated by the appropriations subcommittees generally goes to HUD (about two-thirds in FY2013). However, when contract authority—which, as noted earlier, is not allocated by the appropriations committees—is included, the total resources available to DOT are greater than the resources available to HUD.

Impact of Offsets

Besides the level of the 302(b) allocation, one of the most important factors in determining how much in new appropriations the THUD subcommittees will provide each year is the amount of savings available from rescissions and offsets. Each dollar available to the subcommittees in rescissions and offsets serves to reduce the "cost" of providing another dollar in appropriations. As shown in Table 5 , in FY2014, without rescissions and offsets, it would have "cost" the THUD subcommittees an additional $12.8 billion to provide the same amount of appropriations.

The amount of these "budget savings" can vary from year to year, meaning that the "cost" of providing the same level of appropriations may vary as well. Due to a $3 billion reduction in offsetting collections in FY2015 compared to FY2014, it would cost the THUD subcommittees an additional $3 billion in discretionary funding in FY2015 to provide the same level of total funding as provided in FY2014. But with a 302(b) discretionary allocation that was only $1.1 billion higher than THUD's net FY2014 level, the House THUD subcommittee was not given sufficient funds to make up the shortfall.

Detailed Tables and Selected Key Issues

Title I: Department of Transportation

Table 6 presents a selected account-by-account summary of FY2015 appropriations for DOT, compared to FY2014.

Selected Budget Issues

Roughly three-fourths of DOT's budget is mandatory budget authority (contract authority) derived from the highway trust fund. The authorizations for that funding expire at the end of FY2014, but the highway trust fund is projected to reach insolvency before that date. Thus Congress is considering FY2015 DOT appropriations in the context of uncertainty about DOT's future program structure and funding.

Overall, the FY2015 budget request totals $90.9 billion in new budget resources for DOT. The requested funding is $20 billion more than that enacted for FY2014. The Administration request reflects its surface transportation reauthorization proposal, which envisions $302 billion over four years for highways, transit, and intercity passenger rail. This is an average of $78 billion each year; by contrast, the current authorization provided $105 billion over two years, an average of $52.5 billion annually. Highway, transit, and intercity passenger rail programs would all see significant funding increases under this proposal. Transportation authorization is outside the jurisdiction of the appropriations committees, but since most of DOT's appropriations come from the highway trust fund, the status of the fund is a key concern.

The House bill would provide $70.2 billion in net new budget authority, $1 billion (1%) less than provided in FY2014. The Senate Committee on Appropriations recommended $71.7 billion, $500 million (1%) more than provided in FY2014.

Highway Trust Fund Solvency

Virtually all federal highway funding, and most federal transit funding, comes from the highway trust fund, whose revenues come largely from the federal motor fuels excise tax ("gas tax"). For several years, expenditures from the fund have exceeded revenues; for example, in FY2014, revenues are projected to be approximately $39 billion, while authorized outlays are projected to be approximately $53 billion. Congress transferred more than $54 billion, mostly from the general fund of the Treasury, to the highway trust fund during the period FY2008-FY2014 to keep the trust fund solvent. In April 2014 the Congressional Budget Office (CBO) projected that the trust fund would become insolvent in FY2015, though the highway account may be unable to provide payments in a timely manner even before the end of FY2014.

One reason for the shortfall in the highway trust fund is that the federal gas tax has not been raised since 1993. The tax is a fixed amount assessed per gallon of fuel sold, not a percentage of the cost of the fuel sold: whether a gallon of gas costs $1 or $4, the highway trust fund receives 18.3 cents for each gallon of gasoline and 24.3 cents for each gallon of diesel. Meanwhile, the capacity of the federal gas tax to support transportation infrastructure has been diminished by inflation (which has reduced the purchasing power of the revenue raised by the tax) and increasing automobile fuel efficiency (as more efficient vehicles are able to travel farther on a gallon of fuel). CBO has forecast that gasoline consumption will be relatively flat through 2024, as continued increases in the fuel efficiency of the U.S. passenger fleet will offset increases in the number of miles driven. Consequently, CBO expects highway trust fund revenues of $37 billion to $38 billion annually from FY2014 to FY2024, well short of the current $53 billion annual level of authorized expenditures from the fund.

When the authorization provided by MAP-21 expires at the end of FY2014, Congress will again face policy choices concerning surface transportation. Among the options are to reduce the scope of federal highway and transit programs to match current trust fund revenues, to increase federal taxes on motor fuels to support the programs at current or increased funding levels, or to obtain funding from other sources, such as the general fund. Over the longer term, increases in vehicle fuel efficiency resulting from previously enacted legislation and greater use of electric vehicles are likely to constrain motor fuel consumption, leaving in question the viability of motor fuel taxes as the principal source of surface transportation funding.

National Infrastructure Investment (TIGER Grants)

The Transportation Investments Generating Economic Recovery (TIGER) grant program originated in the American Recovery and Reinvestment Act ( P.L. 111-5 ), where it was referred to as "national infrastructure investment" (as it has been in subsequent appropriations acts). It is a discretionary grant program intended to address two criticisms of the current structure of federal transportation funding:

that virtually all of the funding is distributed to state and local governments which select projects based on their individual priorities, making it difficult to fund projects that have national or regional impacts but whose costs fall largely on one or two states; and that federal transportation funding is divided according to mode of transportation, making it difficult for major projects in different modes to compete on the basis of comparative benefit.

The TIGER program provides grants to projects of national, regional, or metropolitan area significance in various modes on a competitive basis, with recipients selected by U.S. DOT.

Congress has continued to support the TIGER program through annual DOT appropriations. There have been five rounds of TIGER grants (from ARRA funding, and from FY2010-FY2013 annual appropriations), with the sixth round (FY2014) in process. After the restructuring of DOT programs in the MAP-21 reauthorization, the TIGER program is virtually the only remaining discretionary grant program for surface transportation (other than the FTA's Capital Investment Grant program, popularly referred to as New Starts, discussed below). It is heavily oversubscribed; for example, DOT has announced that it received a total of $9.5 billion in applications for the $600 million available for FY2014 grants.

The U.S. Government Accountability Office (GAO) has reported that, while DOT has selection criteria for the TIGER grant program, it has sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects, without explaining why it did so, raising questions about the integrity of the selection process. DOT has responded that its project rankings are based on transportation-related criteria (e.g., safety, economic competitiveness), but that it must sometimes select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards.

The Administration requested $1.25 billion for the TIGER program for FY2015, roughly double the $600 million Congress provided in FY2014. The FY2015 House bill would provide $100 million for the program, far less than the amount requested and $500 million (83%) less than provided in FY2014, while retaining the provisions requiring an equitable distribution of funds geographically and between urban and rural areas, and with a maximum grant size of $15 million. The Senate Committee on Appropriations recommended $550 million, far less than the amount requested and $50 million (8%) less than provided in FY2014.

Essential Air Service (EAS)16

The EAS program seeks to preserve commercial air service to small communities by subsidizing the cost of service that would otherwise be unprofitable. The costs of the program doubled between FY2008 and FY2012, in part because route reductions by airlines resulted in new communities being added. Congress made changes to the program in 2012, including allowing no new entrants, capping the per passenger subsidy for a community at $1,000, limiting communities less than 210 miles from a hub airport to a maximum average subsidy per passenger of $200, and allowing smaller, less expensive planes to be used for communities with few daily passengers.

Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, anticipating that airlines would reduce or eliminate service to many communities that were too small to make such service economically viable. Supporters also contend that subsidizing air service to smaller communities promotes economic development in rural areas. Critics of the program note that the subsidy cost per passenger is relatively high, that many of the airports in the program have very few passengers, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports.

As Table 8 shows, the Administration requested $155 million for the EAS program in FY2015, in addition to $106 million in mandatory funding. This is $8.6 million (3%) less than the FY2014 funding ($149 million appropriation plus $121 million in mandatory funding).

The House bill would provide $149 million in discretionary funding, the same amount as in FY2014, but with an estimated reduction in the overflight fee revenues, the total available funding would be $6 million (2%) less than requested. It would also lower the maximum rate of subsidy per passenger from $1,000 to $500, except for communities willing to pay part of the subsidy cost. The Senate Committee on Appropriations recommended $155 million, the amount requested.

High Speed and Intercity Passenger Rail

Reflecting the Administration's surface transportation reauthorization proposal, the budget proposed a total of $4.8 billion for a new National High Performance Rail System program within the Federal Railroad Administration, consisting of two grant programs: $2.5 billion for a Current Passenger Rail Service grant program (which would primarily fund maintenance and improvement of existing intercity passenger rail service, i.e., Amtrak) and $2.3 billion for a Rail Service Improvement grant program (which would fund new intercity passenger rail projects as well as some improvements to freight rail). The funding would come from a transportation trust fund rather than discretionary funding. The Administration made a similar proposal in FY2014.

Neither the House nor the Senate would provide funding for these new programs.

The 111 th Congress (2009-2010) provided $10.5 billion for DOT's high speed and intercity passenger rail grant program, beginning with $8 billion in the American Recovery and Reinvestment Act of 2009. Since then, Congress has provided no additional funding and in FY2011 rescinded $400 million of the unobligated portion of the $10.5 billion already appropriated.

This program has provided funding mainly to develop intercity passenger rail service with top speeds of 90 or 110 miles per hour. Only one state, California, is actively pursuing development of a high speed rail line that would provide dedicated tracks for passenger trains traveling at speeds greater than 150 miles per hour. California has received $3.6 billion in federal funding for this project, but the total cost of constructing the line is estimated at more than $70 billion, and the prospects for financing the full project are uncertain.

Amtrak

The Administration proposed in its FY2015 budget to place Amtrak's funding into a new Federal Railroad Administration account—Current Passenger Rail Service—and requested $2.45 billion for the account. It would fund publicly owned passenger rail asset development and maintenance, primarily Amtrak. Congress provided $1.39 billion in capital, operating, and debt service grants for Amtrak in FY2014.

Amtrak also submits a grant request to Congress each year, separate from the Administration's budget request. The agency requested $1.62 billion for FY2015. This is almost $1 billion less than its request in FY2014; compared to FY2014, the FY2015 request asks for less money for capital improvements and for debt service, and omits funding for station improvements to comply with requirements of the Americans With Disabilities Act (ADA), for new equipment purchases and equipment lease buybacks, and for the NEC Gateway expansion project. Amtrak's request was $600 million less than the Administration request for Amtrak. Although Amtrak's request used different categories than the Administration request for Amtrak, some of the differences are evident: the Administration requested $550 million for the NEC and $350 million for the ADA-required station improvements, while Amtrak requested $445 million for the NEC and nothing for the ADA-required station improvements.

The House would provide $1.19 billion for Amtrak for FY2015, $200 million (14%) below its FY2014 funding. The Senate Committee on Appropriations recommended $1.39 billion, the same amount provided in FY2014, and much less than requested by Amtrak and the Administration.

Table 9 shows the amount of funding appropriated for Amtrak grants in FY2013 and FY2014, requested by the Administration for FY2015, and proposed by the House and Senate.

Federal Transit Administration New Starts and Small Starts (Capital Investment Grants)

The majority of FTA's $10 billion funding is funneled to state and local transit agencies through several formula programs. The largest discretionary grant program is the Capital Investment Grants program (commonly referred to as the New Starts program). It funds new fixed-guideway transit lines and extensions to existing lines. Before 2012, the program had two components, New Starts and Small Starts, based on project cost. The New Starts component funds capital projects with total costs over $250 million and which are seeking more than $75 million in federal funding; and the Small Starts component funds capital projects with total costs under $250 million and which are seeking less than $75 million in federal funding.

In the transit program reauthorization enacted in 2012, Congress added a third component, Core Capacity. This component funds expansions to existing fixed-guideway systems that are at or near capacity.

The Capital Investment Grants program provides funding to large projects over a period of years. Much of the funding for this program each year is committed to existing New Starts projects with multi-year grant funding agreements. FTA reports that its existing grant agreements will require $1.41 billion in New Starts funding in FY2015.

For FY2015, the Administration requested $2.5 billion for the program, roughly $550 million (28%) more than the $1.94 billion appropriated in FY2014. The House bill would provide $1.69 billion, $250 million (13%) less than the FY2014 level. The Senate Committee on Appropriations recommended $2.161 billion, less than requested but more than provided in FY2014. According to the committee, that amount would fully fund all projects included in the Administration request that are currently under construction or expected to begin construction during FY2015.

New Starts Federal Funding Share

The federal share for New Starts projects, by statute, can be up to 80%. Since FY2002, DOT appropriations have included a provision directing FTA not to sign any full funding grant agreements that provide a federal share of more than 60%. The House bill would lower the maximum federal share to 50%.

Critics of this provision note that the federal share for highway projects is typically 80% and in some cases is higher. They contend that, by providing a lower share of federal funding (and thus requiring a higher share of local funding), this provision makes highway projects relatively more attractive for communities considering how to address transportation problems. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount available, so requiring a higher local match allows FTA to support more projects with the available funding. They also assert that requiring a higher local match likely encourages communities to estimate the costs and benefits of proposed transit projects more carefully, reducing the risk of subsequent cost overruns.

Selected Policy Issues

The House and Senate bills include several policy provisions. In the House bill, these include amendments that would prohibit the use of funds in the bill

for the California high-speed rail project; to subsidize Amtrak food and beverage service and to subsidize the Amtrak route with the highest per-passenger subsidy (the Sunset Limited); to approve the application by Air Norwegian International, an Ireland-based subsidiary of a Norwegian air carrier, to serve the United States; to administer NHTSA's Roadside Survey of Alcohol and Drugged Driving; and to let DOT work with states to promote motorcycle safety (such as by enacting helmet laws).

Commercial Driver Hours of Service and the 34-Hour Restart Requirement

The Senate bill was amended in committee to suspend portions of the commercial driver hours-of-service rules for roughly a year, pending a study of their cost and benefits. In June 2013, two new requirements took effect: drivers are required to take at least 34 hours off duty, covering two consecutive 1 a.m.-5 a.m. periods, after working for 60 hours in a seven-day period (or 70 hours in an eight-day period). And drivers are only allowed to take this 34-hour "restart" once in a 168-hour (seven-day) span. If drivers work for less than 60 hours in a week, they do not have to take the 34-hour restart; for example, if a driver worked 8 hours every day, for a total of 56 hours in a seven-day period, that driver could continue to work every day without taking a 34-hour rest period.

The purpose of the 2013 change in the hours-of-service rules was to promote highway safety by reducing the risk of driver fatigue. Under the previous rules, drivers had to take a 34-hour restart period after working for 60 hours in a seven-day period (or 70 hours in an eight-day period). But drivers could start this rest period at any time, and could take more than one such rest period per week. Thus a driver was able to work the maximum permitted time per day (14 hours) and take the 34-hour restart after five days, and then, after a rest period of as little as one night and two daytime periods, work 14 hours a day for another five consecutive days. FMCSA asserted that this schedule allowed a driver to work up to 82 hours over a seven-day period, which it judged to be insufficient to prevent the driver being fatigued while driving.

By limiting the use of the 34-hour restart to once in a seven-day (168-hour period), FMCSA sought to limit drivers to a maximum of 70 hours of work in a seven-day span. And by requiring that the 34-hour restart period cover two 1 a.m.-5 a.m. periods, the current rule allows drivers to get more sleep during the 1 a.m.-5 a.m. period, when studies indicate that sleep is most restorative (compared to sleeping during other times of the day).

The amendment would suspend that requirement for roughly a year, while returning the requirement to what it was prior to June 2013. The amendment would also require DOT to study the impact of the current (post-June 2013) requirements to see if the benefits of the changes outweigh the costs. FMCSA published a cost-benefit analysis in the final rule that implemented the change, but proponents of this amendment say that now that the rule has been in effect for many months, the impacts can be more accurately estimated, and that the impacts are greater than FMCSA previously estimated. This change was supported by commercial trucking groups and opposed by highway safety groups.

Title II: Department of Housing and Urban Development

Table 10 presents an account-by-account summary of FY2015 appropriations proposals for HUD, compared to FY2014 enacted levels. For a more detailed discussion of proposed HUD funding in FY2015, see CRS Report R43548, Department of Housing and Urban Development: FY2015 Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

Selected Budget Issues

FHA Credit Subsidy and Offsetting Receipts

The Federal Housing Administration (FHA) insures private mortgage lenders against losses on certain mortgages made to eligible borrowers. If such a borrower defaults on the mortgage, FHA repays the lender the remaining amount that the borrower owes on it. The provision of FHA insurance is intended to make mortgage credit more widely available, and at a lower cost, than it might be in the absence of the insurance.

The Federal Credit Reform Act of 1990 (FCRA) specifies the way in which the costs of federal loan guarantees, including FHA-insured loans, are recorded in the federal budget. It requires that the cost of loans insured in a given fiscal year be recorded in the budget as the net present value of all of the expected future cash flows from the loans that will be insured in that year. This is referred to as credit subsidy (and the net present value of the cash flows expressed as a percentage of the volume of loans expected to be insured in that year is the credit subsidy rate ).

FHA's largest program insures mortgages on single-family homes, and that program is administered through the Mutual Mortgage Insurance Fund (MMI Fund). Historically, the mortgages insured under the MMI Fund each year have been expected to have a negative credit subsidy cost, meaning that the money that those loans will earn for the government (such as from fees paid by borrowers) is expected to exceed their costs (such as from claims paid to lenders for defaulted mortgages). A negative subsidy cost results in offsetting receipts , which, in the case of the MMI Fund, can offset other costs of the HUD budget.

For FY2015, the President's budget estimated that the MMI Fund would generate $12.2 billion in negative credit subsidy. Combined with an additional $876 million in negative credit subsidy from other FHA programs, the President's budget estimated that FHA would generate about $13.1 billion in negative credit subsidy in FY2015 that could be used as offsetting receipts.

The Congressional Budget Office (CBO) does its own estimates of FHA's credit subsidy rate and offsetting receipts, and the CBO estimates are used by congressional appropriators to determine budget authority. CBO's estimate for the amount of negative credit subsidy that will be generated by the loans insured under the MMI Fund in FY2015 is $4.2 billion lower than the estimate included in the President's budget. CBO estimates that loans insured under the MMI Fund in FY2015 will result in $8 billion in negative credit subsidy for the MMI Fund rather than the $12.2 billion estimated in the President's budget.

Because offsetting receipts are subtracted from gross budget authority to arrive at net budget authority, a lower amount of offsets reduces the amount of new appropriations that can be provided while remaining within agreed-upon limits on net budget authority.

Section 8 Project-Based Rental Assistance

The Section 8 project-based rental assistance (PBRA) account provides funding to administer and renew existing project-based Section 8 rental assistance contracts between HUD and private multifamily property owners. Under those contracts, HUD provides subsidies to the owners to make up the difference between what eligible low-income families pay to live in subsidized units (30% of their incomes) and a previously agreed-upon rent for the unit. No contracts for newly subsidized units have been entered into under this program since the early 1980s. When the program was active, Congress funded the contracts for 20- to 40-year periods, so the monthly payments for owners came from the original appropriations. However, once those contracts expire, they require new annual appropriations if they are renewed. Further, some old contracts do not have sufficient funding to finish their existing terms, so new funding is needed to complete the contract (referred to as amendment funding). As more contracts have shifted from long-term appropriations to new appropriations, this account has grown and become the second-largest account in HUD's budget.

The FY2015 President's budget proposed a decrease of almost $200 million in PBRA compared to FY2014 ($9.7 billion compared to $9.9 billion). The budget also proposed that all PBRA contracts be funded on a calendar year (CY) schedule, from January through December. Currently, PBRA funding is based on the month in which contracts were entered into. In recent years, due to funding levels for the program, HUD has sometimes "short-funded" contracts, providing owners with less than one year of funding. The President's budget proposed that FY2015 funding be used to fund all contracts through CY2015 (in some cases, this would mean less than one year of funding would be needed). Then, FY2016 funding would be used to fund all contracts for the full 2016 calendar year at an estimated cost of $10.8 billion. Calendar year funding would bring PBRA in line with Section 8 tenant-based rental assistance and Public Housing, where units are already funded on a calendar year basis.

Both the House-passed bill ( H.R. 4745 ) and Senate Appropriations Committee-passed bill ( S. 2438 ) follow the President's proposal for calendar year funding, and would provide $9.7 billion for PBRA. The Senate Appropriations Committee "reluctantly" agreed with the proposal to shift to calendar year funding, and stated that " due to the budget constraints for fiscal year 2015, the Committee accepts this approach as the best option for preserving HUD's housing assistance programs." (See S.Rept. 113-182 .) The House Appropriations Committee reported that it expected HUD to "plan for the sustainability of the new payment cycle beyond calendar year 2015, and ... to accurately reflect the twelve months of funding required to support the new approach in its annual budget request for fiscal year 2016." (See H.Rept. 113-464 .)

HOME Investment Partnerships Program

The HOME Investment Partnerships Program is a flexible block grant that provides formula funding to states and local jurisdictions to use for a wide range of affordable housing activities that benefit low-income households. The President's budget requested $950 million for the HOME program, a 5% decrease from the FY2014 enacted level of $1 billion. The request included up to $10 million as a set-aside for the Self-Help Homeownership Opportunity Program (SHOP), which is currently funded in its own account.

The House-passed bill ( H.R. 4745 ) would provide $700 million for HOME, which is $250 million less than the President's budget request and $300 million less than was provided in FY2014. Like the President's budget request, it would provide up to $10 million for SHOP within the HOME account, rather than funding SHOP within its own account.

The Senate Appropriations Committee-reported bill ( S. 2438 ) would fund the HOME account at $950 million, the same level as requested in the President's budget. The Senate Committee-reported bill would provide $10 million for SHOP, but would continue to provide this funding in its own account rather than as a set-aside within the HOME account.

The President's budget also included several legislative proposals related to HOME. One proposal involves the thresholds for local jurisdictions to become eligible to receive their own allocations of HOME funds (localities that receive their own allocations of HOME funds are referred to as participating jurisdictions). Currently, a local jurisdiction becomes eligible to receive a direct allocation of HOME funds if it is eligible for a formula allocation of at least $500,000 in a given year, or at least $335,000 in years when less than $1.5 billion is appropriated for the program. The President's budget proposes removing the lower threshold, so that localities would only become eligible to be participating jurisdictions if they were eligible for a formula allocation of $500,000, regardless of the total amount of appropriations in a given year.

The budget also proposes revising provisions regarding "grandfathering" of participating jurisdictions. Currently, a locality that has been participating in the program can continue to participate even if its formula allocation falls below the threshold. The proposal in the budget would eliminate this grandfathering, and instead would allow a locality to continue to qualify as a participating jurisdiction for a five-year period. The budget noted that, due to a higher number of participating localities and decreasing appropriations in recent years, many jurisdictions are receiving allocations that are too small to effectively administer affordable housing programs. Removing the lower threshold and ending grandfathering would result in fewer participating localities, but higher grant amounts for localities that continue to participate.

The House-passed bill contains language that has been included in recent appropriations laws that would disregard the lower threshold for localities to become participating jurisdictions during the fiscal year, meaning that localities would have to reach the higher $500,000 threshold in order to become participating jurisdictions even with a total program appropriation of less than $1.5 billion. The bill does not include the permanent changes that are included in the President's budget, such as permanently changing the threshold requirement or making changes to the grandfathering provision. The Senate Appropriations Committee-reported bill also contains the language that would disregard the lower threshold for localities to become participating jurisdictions in FY2015. The Senate Committee-reported bill also adopts some legislative changes included in the President's budget request, but like the House-passed bill, it does not permanently change the threshold requirements or make changes to the grandfathering provision.

Title III: Related Agencies

Table 11 presents appropriations levels for the various related agencies funded within the Transportation, HUD, and Related Agencies appropriations bill.

Selected Budget Issues

NeighborWorks America and the National Foreclosure Mitigation Counseling Program

The Neighborhood Reinvestment Corporation, commonly known as NeighborWorks America, is a government-chartered nonprofit corporation that supports a national network of local organizations that engage in a variety of community revitalization and affordable housing activities by providing those local organizations with grants, training, and technical assistance. In addition to receiving an annual appropriation for these activities, since 2008 NeighborWorks has also received additional funding for housing counseling organizations to use solely for foreclosure prevention counseling. This is known as the National Foreclosure Mitigation Counseling Program (NFMCP) and is intended to be a temporary program to address high residential foreclosure rates in recent years.

The President's FY2015 budget requested a total of $182 million for NeighborWorks, including $132 million to support its traditional core activities and $50 million for the NFMCP. This is compared to a FY2014 funding level of $204 million, which included nearly $137 million for its traditional activities and $67.5 million for the NFMCP.

Like the President's budget request, the House-passed bill would provide a total of $182 million for NeighborWorks, with $132 million going to core activities and $50 million going to the NFMCP. The committee report cites improvement in housing markets as a reason for reducing funding for the NFMCP, and the bill allows NeighborWorks to use up to $4 million to begin winding down the program.

The Senate Appropriations Committee-reported bill would provide a total of nearly $187 million to NeighborWorks, about $5 million more than the House-passed bill and the President's request. Of that amount, nearly $137 million would be for NeighborWorks' core programs, and $50 million would be for the NFMCP.