Living Cities Washington Update

1. Living CitiesWashington Update April 19, 2011

2. Overview • The domestic agenda of the 112th Congress continues to be dominated by fundamental questions about the role of government and government spending. • Republicans have emphasized dramatic, across-the-board reductions in federal spending, debt and regulation as key to unleashing private sector job creation. • Democrats have called for spending cuts, but with strategic investments in education, innovation and infrastructure. • Democrats have said these investments are necessary to out-educate, out-innovate and out-build the rest of the world to “win the future.” • Republicans have in turn responded that “Government can’t win the future.”

3. Key Issues • FY2011 Budget Compromise • Debt Ceiling • FY2012 Budget • Long Term Deal on Spending/Debt?

4. Background:Composition of the Budget

5. Composition of the Budget

6. Composition of the Budget

7. FY2011 Appropriations

8. Key Outcomes for Living Cities • Transportation / Urban Development • Continues TIGER program • Cuts transit New Starts • Ends High Speed Rail • Continues Sustainable Communities planning grants • Allows Choice Neighborhoods to continue • Cuts CDBG 16%

9. Key Outcomes for Living Cities • Education • Funds Promise Neighborhoods at $30 million • Funds i3 Fund at $150 million • Funds Race to the Top at $700 million • Creates new Early Learning Component • Funds Corporation for Community and National Service • Expectation that Social Innovation Fund will continue

10. Key Outcomes for Living Cities • CDFI Fund • CDFI funded at $227 million, $20 million less than FY2010.   • However, in FY2010, $80 million was directed to the Capital Magnet Fund that is not continued.  • So, effectively, CDFI has more money for FA and TA awards and other uses. • Other Healthy Food Financing • HHS $18 million (half of FY2010) • USDA no specific authority

11. Key Outcomes for Living Cities • Workforce Development • WIA programs took substantial hit • But Workforce Innovation Fund given $125 million • New program to encourage State/Regional partnerships to reform the program and improve outcomes

12. Overall View of FY2011 Compromise • Government goes on • But these cuts were very real, where they were made (i.e. EPA) • The role of rescissions • Resulting political dynamics • Boehner loses almost 60 Republicans in the final vote • How does this set stage for Debt Ceiling and FY2012?

13. The Debt Ceiling

14. Debt Ceiling Vote • Will need to be raised in May / June timeframe • Exceedingly complex / contentious politics • Usually carried by majority • Has to be raised • Leverage for Republicans for deal on spending cuts? • Backed into a corner and have to vote for more debt?

15. FY2012 Budget

16. FY2012 Budget • President Obama’s February 14th Budget not relevant • House Passes Ryan Budget • $100 billion reduction in domestic discretionary spending • $6.2 trillion in spending cuts, including entitlement reform • $4.2 trillion in tax cuts / extensions • President Obama went on offensive, offered conceptual alternative • Charged VP Biden to lead bi-partisan, bi-cameral group to come up with compromise plan by June • Senate will offer alternative after Easter Recess

17. Surface Transportation Reauthorization

18. Where are We Now? • The current authorization legislation, SAFETEA-LU, expired on September 30, 2009. • Congress has just passed its seventh extension to continue SAFETEA-LU through the end of FY2011 to provide time to consider a long-term bill. • The Administration released its reauthorization proposal with the President’s FY2012 Budget Proposal. • The House and Senate are currently working on legislation. • The House has been particularly active in holding a number of hearings across the country.

19. Prospects for Enactment • The Administration, House and Senate are committed to completing a bill. • The revenue challenge and overall fiscal / political environment remain steep challenges. • Current revenue is inadequate to fund the program at even currently authorized levels. • Approximately $70 billion gap over the next five years according to most recent CBO projections. • A shorter-term bill remains possible given the revenue constraint, although the Administration and House Chairman John Mica (R-FL) are committed to a six-year bill.

20. Administration’s Proposal • The President’s Budget for FY2012 laid out an extremely ambitious proposal, but did not indicate how it would be funded. • $556 billion over six years • $119.2 billion for transit (a 128 percent increase over SAFETEA-LU); • $336 billion for highways (a 48 percent increase over SAFETEA-LU); • $53.6 billion for high speed and intercity passenger rail; • $30 billion for a national infrastructure bank.

21. Administration’s Proposal • Approximately $50 billion of the increase is frontloaded in FY2012 to provide an “up front economic boost.” • Includes $2 billion for TIGER and $450 million for TIFIA in FY2012 • The budget calls for a total of $231 billion in new revenue over six years to finance the proposal. • It does not provide a revenue source. • These funding increases are not politically achievable at this point.

22. Administration’s Proposal: Policy Highlights • New Transportation Trust Fund (TTF) • Historic investments in transit, high speed rail and an I-Bank • $32 billion for “Transportation Leadership Awards” modeled on Race to the Top • $28 billion at FHWA for Livability Programs, plus a new Transit Expansion and Livable Communities account at FTA funded at $20.6 billion • Program consolidation

23. Chairman Mica’s Vision • There is a dramatic gap between the President’s proposal and House Transportation and Infrastructure Committee Chairman John Mica’s (R-FL) focus on “doing more with less.” • Chairman Mica has said that a revenue increase is “off the table” • The House bill will instead stabilize the Highway Trust Fund so that spending is equal to receipts. • The House will seek to get the most out of limited funding by “focusing their programs on the ‘core functions’ of highways and transit” and eliminating or consolidating more tangential programs.

24. Chairman Mica’s Vision • Chairman Mica has also outlined a plan to make existing resources go farther by: • Recapturing unspent federal transportation funds. • Utilizing PPPs and innovative financing to leverage federal funds. • Reducing costs by streamlining programs and expediting project delivery.

25. Innovative Finance • The President, Chairman Mica and Chairman Boxer have called for increased leveraging – but with different views as to how. • Administration Proposal for a National Infrastructure Bank • The Administration’s Proposal calls for $5 billion in FY2012 and $30 billion over six-years for a National Infrastructure Bank within DOT for transportation-related investments. • The I-Bank will provide both grants and loans to finance projects of regional and national significance. • The budget assumes a significant portion of I-Bank resources dedicated to grant funding, estimating that $2.2 billion in grants will be obligated in FY2012. • The Administration would fund TIFIA and TIGER in FY2012 but then subsume them as part of the I-Bank in the out years.

26. Innovative Finance • The President, Chairman Mica and Chairman Boxer have called for increased leveraging – but with different views as to how. • Expanding TIFIA • The House and Senate appear more inclined to expand the successful TIFIA program • At a field hearing in Los Angeles, Boxer and Mica indicated a willingness to expand TIFIA from $122 million currently to well over $375 million. • There remains considerable wariness about creating an I-Bank • Concern about creating a large discretionary program in the Administration • Concern about re-Inventing the wheel when successful credit programs exist

27. Prospects for Action • Arguments for a short term (two year) bill • Potential timeframe in the House is to get a bill ready for Committee consideration by Memorial Day. • All parties agree that completing work on a bill this Fiscal Year is imperative.

28. Other Key Issues

29. Housing and Foreclosure Prevention • The House has repealed all major foreclosure prevention and mitigation programs • NSP • HAMP • FHA Short Term Refinance • HUD Emergency Loans • The Senate will not take up any repeal legislation, but is expected to hold hearings to consider policy and program changes. • While the Senate will not repeal or rescind existing NSP funding, a future round of NSP funding is not expected.

30. No Child Left Behind • President Obama has convened a bicameral, bipartisan group of legislators to discuss the reauthorization of No Child Left Behind, although action this session faces very large hurdles.

31. WIA Reauthorization • The Senate is said to have a draft, with the intention of marking up this Spring. • Action this Congress again faces very large hurdles.

32. New Markets Tax Credit • The Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 reauthorized the NMTC program for two years (FY2010 and FY2011) at $3.5 billion annually. • FY2010 NMTC awards made: • http://www.cdfifund.gov/news_events/Treasury-Announces-3.5-Billion-in-Awards-For-Economic-Development-and-Community-Revitalization.asp • The President’s FY2012 Budget proposes increasing NMTC authority to $5 billion annually. • Also calls for NMTC Reform, including AMT exemption

33. Build America Bonds (BABs) • Legislative initiatives continue to re-introduce BABs, but strong resistance remains from ranking Republicans on the House Ways and Means and Senate Finance Committees.