Where We Stand

Impact of Continuing Resolution The CR continues funding at the current rate of operations for federal agencies, programs and services. To meet the agreement under the Budget Control Act to ensure a total rate of operations at $1.047 trillion, a government-wide, across-the-board increase of 0.6 percent over the base rate is also included. In total, including all discretionary spending, the annual rate of the CR is $26.6 billion below last year’s level. Impact of Sequestration The White House release its report on the impact of the sequestration, which will cut non-defense discretionary spending by 8.2 percent. 3

Rural Development Programs ($ in millions) 4 FY11 Final FY12 Final FY13 President FY13 Senate FY13 House FY13 CR Section 502 Direct1, Section 523 SHH Section 515 Rental Section 514 FLH Section 516 FLH Section 504 Loans Section 504 Grants Section 521 RA

HUD Programs ($ in millions) 5 FY11 Final FY12 Final FY13 President FY13 Senate FY13 House FY13 CR CDBG Formula Grants 3,4082,9482,9323,1003,3442,950 HOME1,6101, ,0001,2001,001 SHOP

Taxmageddon/Fiscal Cliff Taxes Expiration of Bush Tax Cuts and AMT Patch $221 billion Expiration of Payroll Tax Cut $ 95 billion Other expiring provisions$65 billion Taxes included in Affordable Care Ac $18 billion $399 billion Spending Across the board cut (Budget Control Act)$65 billion Expansion of long term unemployment $26 billion “Doc Fix” $11 billion $102 billion Increased revenue/ lower spending $105 billion _______________________ $606 billion 6

Simpson-Bowles Cuts to Discretionary Spending*$1.66 trillion Health Care Reform$600 million Social Security Reform$238 million Tax Reform** $996 million Net Interest$673 million _________________________ $4.167 trillion * Over 10 years, defense-discretionary spending would rise from 55% to 62.7% of all discretionary spending. ** Tax Reform would reduce or eliminate $1.1 trillion in tax expenditures, and cut tax rates with the top rate at 29%. 7

Obama Deficit Reduction Plan Cuts Discretionary Spending*$982 billion Mandatory Savings$257 billion Health Savings$320 billion Cap Overseas Contingency Operations$1.084 trillion Tax Reform$1.573 trillion Debt Service Savings $715 billion ___________________________ $4.895 trillion** *Budget Control Act ** Offset of $448 billion for American Jobs Act – which was not enacted. 8

Comparing Budget Plans 9

Community Development Funding (Percent of Federal Total Outlays)

Rural Housing Service Budget Authority ($ in millions)

Corporate Tax Expenditures

Tax Incentives for Economic Development in Low-Income Communities

Dollars That Reach Low-Income Communities *Based on NPS data, 77% of HTC projects are in low-income areas. Source: Nat’l Trust Community Investment Corp. **Based on HUD data, 31% of LIHTC projects are in low-income areas. Source: New Markets Tax Credit Coalition. Source: GAO Report

Rural Definition On March 27, 2013, USDA will update its “rural” definition with 2010 Census Data. As a result, 923 rural communities will no longer be eligible for USDA Rural Housing funding. USDA extended this deadline from October 1, 2012 to correspond with the expiration of the FY13 Continuing Resolution. Impact In California In 2011, California received a combined $768 million in Section 502 Guaranteed Loans ($699 million) and Section 502 Direct Loans ($69.7 million). Nearly 75 percent of the state’s Rural Development funds went to communities that will no longer be eligible for USDA Rural Housing programs as of March 27, Without Congressional action, California will lose an estimated $576 million in USDA Direct and Guaranteed loans. This means that 4,431 fewer rural Californian families will be able to access affordable mortgages through these programs, resulting in 7,753 fewer jobs and nearly $222 million less in local wages. 15

Legislative Opportunities Farm Bill The Senate Farm Bill includes an amendment sponsored by Sen. Nelson (NE), Johanns (NE), Moran (KS), and Johnson (SD) to: (1) extend the grandfathering clause until the 2020 Census; and (2) increase the population limit to 35,000. Rep. Fortenberry (R-NE) offered an amendment to the House Farm Bill, but withdrew it due to jurisdictional issues. Under House rules, the amendment was not “germane.” FY13 Appropriations The Senate Appropriations bill includes language to extend eligibility for all currently eligible communities for 1 year. In the House, Rep. Fortenberry intends to offer an amendment to the Appropriations bill when it gets to the House floor. His amendment would extend eligibility for all currently eligible communities until the end of FY13. Continuing Resolution Language was not included in the CR because Congressional leaders wanted to keep the bill as “clean” as possible. However, 99 Representatives signed onto Rep. Fortenberry’s letter, urging House Leadership to address the issue, and 2 others sent in their own individual letters. 16

GAO Report Findings: Rural Housing Service After reviewing 160 housing assistance programs at USDA, FHA, and VA for overlap, duplication, and fragmentation, the GAO found: FHA’s loan guarantee serves more LMI families in rural areas than the Section 502 Guaranteed Loan program. USDA’s shift towards guaranteed loans provides a stronger argument for consolidation due to its similarity to FHA. USDA does not even set priority goals for housing, unlike HUD. The GAO explicitly recognizes the unique role of Section 502 Direct Loans, which is targeted to very low- and low-income borrowers, has no down payment requirement, and subsidized interest rates. However, it holds that Section 502 Direct has “struggled to make a measurable impact” due to low funding levels and a labor-intensive loan processing system. The GAO makes a stronger case for the unique role of USDA multi-family programs, as being more concentrated in rural areas than HUD programs and LIHTC. These programs also have different income limits, geographic limits, loan terms, and guaranteed loan features. 17

GAO Report Recommendations: The GAO’s recommendations: The Administration’s Task Force − which was announced in February 2011 to evaluate the potential for coordinate or consolidate homeownership loan programs at HUD, USDA, and VA − review their various housing programs and identify potential areas for consolidation and those areas that would require statutory change. Congress should consider requiring HUD and USDA to explore merging their loan guarantee programs and aligning their multi-family management programs. 18