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National Needs Statement:

• Encourage economically and socially viable and attrac

tive urban neighborhoods and rural areas.
Strengthen State and local government capacity to

revitalize economically and socially depressed areas.
• Develop mutually supportive relationships among central

cities, suburban areas, rural towns, and the countryside.
• Provide relief to areas that suffer from natural disasters.

To help achieve these national needs, the Federal Government will spend an estimated $8.7 billion in 1979 in support of the following major missions:

• Community development: $4.0 billion.
• Area and regional development: $3.7 billion.
• Disaster relief and insurance: $1.0 billion.

This administration recognizes that Federal resources must be combined with State and local government and private sector resources to meet the long-term needs of community and regional development. Federal resources will be used as a catalyst to encourage greater and more innovative local efforts to revitalize and redevelop depressed urban neighborhoods and rural areas. Federal resources will also emphasize the rehabilitation and the redevelopment of existing neighborhoods and facilities rather than encouraging their abandonment.

To carry out these missions, the following proposals are emphasized in this budget. • A $150 million increase in budget authority for the community

development block grant program. • Continuation of the urban development action grant fund with

budget authority of $400 million for 1979. • A $95 million increase in budget authority for the rehabilitation

loan program. • Increased funding for the urban reinvestment task force. • A proposed urban extension program.

Increased funding for economic development assistance especially

to cities in both 1978 and 1979. The major missions are supported by the programs shown on the table on the following page.

Urban assistance. The Federal Government currently provides a substantial amount of assistance to urban areas through a vast array of programs. While the community and regional development


[Functional code 450; in millions of dollars]

[blocks in formation]

function contains many of these programs, a substantial number of them have as their primary purpose meeting other national needs and, therefore, are classified in other functional areas although they also support urban areas. These programs are concentrated in the commerce and housing credit; income security; transportation; health; education, training, employment, and social services; and general purpose fiscal assistance functions. The number of individual programs involved, conceptual problems about the definition of urban assistance, and a data base that does not presently relate certain expenditures to particular geographic areas, all make a precise accounting of the amount of Federal resources currently allocated to urban areas difficult. However, approximate data do exist on the portion of Federal grants to State and local governments that go to standard metropolitan statistical areas (SMSA's). These areas are essentially urban in character, but include more than central cities. Therefore, the data include benefits for metropolitan areas as a whole, including both central cities and suburban areas. These data indicate that the budget includes an estimated $55 billion in grants for SMSA's in 1979. This is compared with $51 billion in 1978 and $44 billion in 1977. The resources going to SMSA's are, therefore, increasing at 12% per year over this period.

It is also possible to estimate urban assistance targeted to specific urban problems of our cities. This can be done by combining outlays for major urban programs in the Departments of Housing and Urban Development, Commerce, Labor, and Transportation. This includes:

• most of the HUD programs; • the urban portion of the Department of Labor's employment and

training programs; • many of the Economic Development Administration (EDA) pro

grams of the Commerce Department; and • the urban highway and mass transit programs of the Department

of Transportation. Outlays estimated in the budget for major direct urban programs total $16.1 billion in 1979, an increase of $2.6 billion or 19% over 1978. Outlay estimates in this category increase to $20.0 billion in 1980. These estimates exclude outlays for general purpose revenue sharing, countercyclical revenue sharing assistance, outlays of the Department of Health, Education, and Welfare for social programs, and numerous other smaller programs. These programs, when combined, represent substantial assistance to urban areas.

The HUD housing programs and the urban-related programs of the Departments of Labor and Transportation are described in other national needs sections; the development programs of the Department of Commerce and the Department of Housing and Urban Development are discussed below.

The most essential ingredients for urban progress are local and State leadership acting in concert with private sector resources. However, both the amount and the form of Federal assistance are important. The amount of Federal resources assisting urban areas is substantial. Improvements are proposed in this budget to increase the efficiency of existing Federal programs and thereby aid local leadership to improve urban areas. An example of this effort in the community development area is the proposed urban extension program in the Department of Housing and Urban Development. This program would encourage a greater sharing of urban program implementation experiences among communities, thereby permitting more effective use of Federal funds. Coordination among departments will also be improved. EDA and HUD's Community Planning and Development Administration are coordinating their urban development programs, and are jointly financing certain of their projects. Examples of similar proposed improvements in other functional areas include: • interest subsidies for the construction of middle-income housing in central cities; • a private sector initiative in employment and training to improve the relation of training to permanent jobs and link with economic development; and • joint SBA, EDA, and HUD sponsorship of technical assistance to cities in neighborhood, commercial, and industrial revitalization. A number of proposed program expansions and new programs have been designed to fill gaps among the current programs providing assistance to urban areas. In the community and regional development area, the direct rehabilitation loan program (section 312) has been increased to ensure that credit for housing rehabilitation is available in distressed urban neighborhoods not well served by the private market. In addition, funding for EDA investment in cities through public works grants and loans and business development loans has been increased to help foster the location of industrial and commercial enterprises in economically distressed urban areas. Programs serving youth who have very high unemployment rates, especially in cities, will be substantially increased. These proposals represent the first phase of the administration's program to support local efforts to improve and revitalize distressed urban areas. They reflect a greater emphasis on creating stronger local economies with accompanying increases in permanent employment. Coupled with imaginative local and State leadership, they represent the administration's intent to help develop urban resources and support local policies that facilitate the establishment of healthy economies.

Community development.—A variety of Federal programs, administered by several agencies support the mission of community development by providing Federal grants, loans, and technical assistance to States and localities. Outlays for the mission are estimated to total $4.0 billion in both 1978 and 1979.

Department of Housing and Urban Development (HUD).-The community development block grant program, begun in 1975, provides a flexible system of Federal assistance for activities developed by local governments based on local priorities. Activities funded under this program include property acquisition, the construction of public facilities, the rehabilitation of buildings, the provision of social services, and planning and management. Funds are allocated by formula on the basis of objective measures of need. The Housing and Community Development Act of 1977 provided metropolitan cities and urban counties the choice of receiving allotments under either of two formulas: • the original formula, composed of poverty (50%), population (25%), and overcrowded housing (25%); or • an alternative formula, composed of poverty (30%), population growth lag, as represented by below average growth rates since 1960 (20%), and age of housing stock (50%). The alternative formula addressed the physical deterioration in older urban areas. The proposed level of new commitments for block grants in 1979 is $3.8 billion, $1.3 billion above the highest level achieved under the seven categorical programs replaced by block grants. Outlays reflect the rate at which State and local governments carry out their projects and are expected to increase from $2.6 billion in 1978 to $2.8 billion in 1979. The Housing and Community Development Act of 1977 also established the urban development action grant fund within the block grant program. This was a major urban initiative requested by President Carter in his 1978 budget revisions. Under this program, severely distressed cities and urban counties receive discretionary grants to supplement local government and private sector financing for major urban rehabilitation projects. The 1979 budget requests $400 million in budget authority, the same amount as appropriated for 1978. Outlays are estimated to rise from $24 million in 1978 to $159 million in 1979. Outlays for categorical programs replaced by block grants will continue to decrease as approved projects are completed. Loan disbursements and repayments from prior commitments under these categorical programs will also continue for several years.

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