State & Local News Washington's Labyrinthine Ways By Otto J. Hetzel Otto J. Hetzel is a professor of law at Wayne State University and also practices law in Washington, D.C. with the firm of Pepper, Hamilton & Scheetz. Surprise Departure of Candidate Dole from Senate Accelerates Congressional Issues for Campaign. Senator Dole became full-time presidential candidate Dole in mid-June, after bringing several measures before Congress that were to define his issues for the fall's election campaign. Among the issues he attempted to generate before leaving were proposals related to Welfare Reform, Medicare Reform, Health Care Portability, and a new effort at Budget Reform. In addition, he forced another, again unsuccessful, vote on a balanced budget constitutional amendment. Many seem to be betting that any progress on enactment of these provisions will be directly dependent upon political evaluation of public perceptions on particular issues. Both sides recognize that they cannot be seen as generating another stalemate such as at the end of last year. How the game will play out over the next months should be very interesting. The question will be whether any of the legislation will bear fruit before the election. Big Battle Likely over Medicare Reform. With the announcement by trustees of Medicare that it is likely to go broke earlier rather than later, unless adjustments are made, allocation of blame for Medicare problems is likely to be with us through the election period. Democrats have been successful thus far with attaching blame for threatened cuts on Republicans, but the latter now have additional ammunition to again attempt to justify cuts on the need to economize to strengthen the overall system. The stakes are high, because the winner could reap a huge payback at election time. Republicans blame Clinton for vetoing legislation that would have made Medicare cuts, while the White House accuses Republicans of trying to decimate health care for seniors and devote savings to tax cuts for the wealthy. It seems unlikely that any compromise will occur before the election, given the dynamics of the issue in both parties' campaigns. Accounting approaches actually undergird the two sides strategy for solving the problem. Clinton would transfer $55 billion out of the Medical Trust Fund and cover the costs from general funds of the Treasury, while Republicans would impose strict limits on spending that could severely curb access to treatments or require additional contributions from seniors. What is interesting is that Clinton's approach was proposed by Republicans last year in their efforts to stabilize the system by transferring out costs of home health care from the Medicare Trust fund. Imitation can be flattery if anyone remembers. Housing Becomes a Campaign Focus as Legislation Moves Forward in Congress to Change HUD as We Have Known It. Congressional leaders in both parties and the Administration, led by HUD Secretary Cisneros, are close to limiting HUD's role or even dismantling it depending upon who is talking. Significant changes are in store for the public housing program that has operated for almost sixty years, since enactment of the 1937 Act. Transfer of FHA's role out of HUD has also been proposed. These are key provisions in the legislation being considered. An attempt to transfer fair housing enforcement to the Department of Justice, achieved through a continuing appropriation's resolution last year, has now been reversed but not abandoned by Republicans. Ultimately, if only administration of CDBG and HOME development and housing programs remain, it could be difficult to justify continuation of the Department. Dramatic Changes in Public Housing Underway. Senator Dole gave the issue unaccustomed prominence by referring to public housing as one of the "last bastions of Socialism" in calling for elimination of HUD, or certainly its downsizing, and substitution of vouchers to public housing's 1.4 million tenants, instead of continued federal funding to local authorities. That position differs from that of the congressional Republican leadership of housing committees that feel that encouraging tenants to leave marginal housing stock risks total loss of the units which are dependent in part on an income stream from rents. The situation is still fluid as the legislation moves through Congress, although the House version that passed contains significant programmatic changes. In fact, even the 1937 Act is scheduled to be repealed, thereby voiding almost all current HUD regulations relating to public housing and requiring a new look at what is required. That's one way to impose sunset legislation on program regulations. The overall approach to public housing's future seems to be taking shape. The current legislation calls for releasing over 300 of the 3,400 local housing authorities from federal oversight and regulations within three years. A reasonable prediction is that most local public housing authorities will be provided with significant independence in operations, free of many federal requirements and with an obligation sometime in the future to compete for tenant rent vouchers with the private market. These vouchers would be in addition to the 1.2 million vouchers or certificates currently being provided private market tenants by HUD. How successful that effort will be can only be surmised. To the extent that there can be price competition, housing authorities will have some advantage over private rentals, but they will also have to tighten their belts as federal income sources are reduced and they actually become subject to tenant preferences as to where to live. Special Treatment for Troubled Housing Authorities. At the same time as it moves to deregulate most public housing, HUD has indicated that the troubled authorities, so designated when scores on a Public Housing Management Assessment Program (PHMAP) fall below passing levels, will be much more closely supervised. In appropriate cases, they will be taken over by HUD, put into court receivership, or under third-party management through voluntary agreements with local governments. An example of the first is San Francisco, the second, D.C.'s Authority operating under court-appointed receiver, and, the third, by contracting out management, as occurred in New Orleans. Where a low rent public housing program has been operated by a municipality, HUD has also frequently demanded creation of an independent authority, such as has occurred in Detroit, supposedly to allow for more flexibility in operations and reduction of patronage in jobs and access to units. While previously prevented by congressional advocates for the poor, with Republican control of Congress, HUD has been authorized to demolish many of the older, uneconomic public housing, some dating to the 1930s. HUD has asked local authorities to assess the viability of any development larger than 300 units to determine relative costs of repair or demolition. Past requirements for one-for-one replacement have been abandoned. Vice President Gore announced at a Summit on Public Housing held in early June that HUD intends to allow local authorities to raze some 100,000 units by the year 2000, 30,000 by the end of this year. "These crime-infested monuments to a failed policy are killing the neighborhoods around them," Gore stated. Plans are to replace big tower blocks with town houses and low-rise buildings, reducing density and providing for better security. Preparing Public Housing Authorities to Compete for Tenants. The demolition and repair activity is also intended to prepare local housing authorities for a new era in which federal regulations will be minimal and tenants will be provided housing vouchers that can be utilized anywhere in the local area. Market competition, thus, will come to the public housing sector, forcing local authorities to make their units more attractive to tenants in order to retain them. These changes are intended to reverse the whole paternal structure of public housing as it has evolved. Whether this new approach will succeed represents a major gamble with the sizeable governmental investment represented in these units. Location and amenities may suddenly become key variables as well as competitive rent levels. Along with deregulation and competition, the House bill already passed would permit local authorities to impose higher percentages of income for rents on most tenants exceeding the 30 percent of income limits now imposed. Authorities would also be permitted to discontinue disincentives to work created by current requirements that as families' incomes rise they must pay higher rents. The increased rent has been a controversial element to the proposed changes, with critics contending it would result in loss of needed housing for poor working families. The change would mean public housing would no longer constitute an affordable housing resource, its justification for almost sixty years. This approach to public sector housing is a significant reversal of prior policies that made it a holding area for the poorest families and the housing of last resort. Local authorities would be permitted to devote up to 50 percent of their units to persons earning as much as 80 percent of the area's median income, averaging about $33,000 nationally. Tenants would be expected, moreover, to "graduate" from public housing over time into regular market rate housing as their situation improved. Other initiatives are also under way to support tenant responsibility for management and creation of Campuses of Learners to increase employability of residents, through selection of housing developments in fifteen communities for a five year computer training center program for adults and children. No longer will it be a chicken in every pot, but rather a computer in every apartment. No Strikes and You Can Be Out of Public Housing. Incentives to implement public housing's "one strike and you're out" policy for eviction of tenants committing criminal acts, whether on or off premises, have been increased by a Clinton Administration proposal to tie bonus funding to public housing authorities to local authorities effectuating prompt evictions of tenants accused of a criminal act, even if they are not convicted. Utilization of the eviction policy would be added to the factors under the Public Housing Management Assessment Program (PHMAP) criteria which rates public housing management. Allocation of points on a 100 point scale can effect the level of funds received from HUD, particularly bonus amounts called for in 1997 HUD budget proposals. The ACLU has pointed out that not even one strike would be required to throw out a tenant or deny access to an applicant. Procedural protections are applicable to tenants contesting evictions; however, the Justice Department which designed the new requirement noted that eviction was a civil not criminal matter and so a criminal conviction was not required to justify eviction. Access to the FBI's National Crime Information Center will be used to screen applicants. Thus, some tenants might not even make it up to bat. Who Did Win the Budget Battle of 1995-96? Not until April was final budget legislation agreed to. The results in terms of actual cuts reflect a different picture than the public perception that the President blunted much of the conservative Republican effort to cut back government's role. Key to understanding what happened is the impact that the agreement to balance the budget by the year 2000 had on expenditures. Substantial cuts were needed in 1996 to reach that objective. Thus it should not be surprising that significant reductions in federal department budgets were actually imposed by the April end of the budget battle. In a number of agencies, reductions from amounts for the 1995 fiscal year totaled over 20 percent. While the defense expenditures increased by $1.9 billion, domestic expenditures were reduced $22.3 billion. To keep matters in perspective, however, one must recognize that the final resolution of the stalemate encompassed only 10 percent of the $1.6 trillion national budget. Much of the budget, as well involves entitlement programs not subject to annual appropriations, as such. For agencies and departments relevant to state and local governments, the results were mixed. Considering that any cuts from 1995 levels also understate the affects of foregone increases for inflation, the effects were: Commerce. The Economic Development Administration at Commerce suffered a 20 percent cut and the Minority Business Development Agency a 25 percent reduction. Education. Most of its programs were finally restored except for less than $5 million of their $25.2 billion overall budget. Cuts in funding for math, reading and other educational programs for poorer school districts, the Goals 2000 program to raise academic standards, and the Safe and Drug Free Schools program survived basically intact. The Perkins loan program for disadvantaged students suffered almost a 30 percent reduction. EPA. The Agency ended up after all the fuss with only a 1.5 percent reduction, going from $6.6 billion to 6.5 billion. None the less, delays in providing funding have created an enormous backlog of required work. Health and Human Services. Given $29.4 billion in the end, this resulted in only a 1.3 percent cut. HUD. It got $19.4 billion, losing only $643 million from last years totals, but must inform Congress by September how it will reduce its staff by 7,500 positions, about half its total workforce. Interior. About $6 billion was received for major programs at the Department such as Land Management, Fish and Wildlife, National Park Service, U.S. Geological Survey and Bureau of Indian Affairs. Several existing agencies were terminated, including the Bureau of Mines, resulting in layoffs of 1,200 staff just in that program. Administration of the endangered species act, moreover, reflecting congressional objections to such designations as the red-legged frog, took a 39 percent hit. Justice. It, in contrast with other domestic actors, received a 17.8 percent increase. Cuts threatened to the President's effort to put 100,000 police back on the street survived with $1.4 billion in funding. Only the Community Relations Service that deals with community conflict suffered, dropping 74 percent from $20 to $5 million. Legal Services Corporation. Perhaps the biggest loser was Legal Services that endured a 31 percent cut along with restrictions on handling class-action lawsuits, prohibitions on challenging welfare reform laws, voting rights cases, abortion rights, prisoners, or illegal aliens. Lawyers were also restricted from representing public housing residents accused of drug crimes. About one-third of its 1,200 neighborhood law offices will have to be closed and hundreds of its 4,700 lawyers laid off. Labor. While absorbing a 7 percent cut overall, the biggest losses were to employment and training programs that help disadvantaged adults, laid off workers, and summer youth programs. The latter lost 28 percent from last year. The Job Corps survived because of direct Presidential intervention. All in all, the threats were far less than the bite actually taken. But, just wait until the 1997 budget process comes to center stage. It makes an excellent vehicle to target Administration programs disfavored by congressional Republicans.