Federal Policy Update Matt Josephs Senior Vice President for Policy Policy Briefing August 30, 2017
115 th Congress Number of New House Members: 55 Number of New Senators: 7 Two independents caucus with the Democrats
Party Distribution in LISC s Footprint 100 90 House of Representatives 80 70 Senate 2 80 70 60 50 40 30 20 10 0 12 67 Local Offices Democrats 55 33 Rural LISC Republicans 60 50 40 30 20 10 0 37 14 35 28 Local Offices Rural LISC Democrats Republicans Independents
FY 18 Budget/Appropriations o The FY 2018 appropriations are subject to stringent caps for both defense and non-defense programs, as mandated by the Budget Control Act of 2011. o Congress will attempt to pass a FY 2018 budget resolution: o Would establish caps for various defense and non-defense accounts; o Would provide reconciliation instructions for tax reform. o President s FY 2018 budget proposes $54b in cuts to non-defense programs, to be shifted instead to fund increases in the defense budget
Budget Cap Impacts $700,000 Total Discretionary Spending (in Millions) $600,000 $500,000 $400,000 $300,000 $200,000 $551,068 $518,531 $603,000 $553,000 $549,040 $515,599 $603,000 $461,639 $100,000 $0 FY 17 FY 18 (Pre-Sequestration) FY 18 (Post-Sequestration) Defense Nondefense Nondefense Trendline FY 18 (Defense Restored)
Federal Spending Projected for 2027 Medicare (18%) Medicaid (10%) Other Health Programs (2%) Social Security (26%) Defense (11%) Net Interest (12%) Other Mandatory Spending (11%) Domestic Discretionary (11%) Agriculture (0.2%) Other Health Programs includes: Health insurance subsidies, exchanges, and related spending; Department of Defense Medicare- Eligible Retiree Health Care Fund (including TRICARE for Life); Children s Health Insurance Program, and other programs. Other Health Programs includes: Health insurance subsidies, exchanges, and related spending; Department of Defense Medicare- Eligible Retiree Health Care Fund (including TRICARE for Life); Children s Health Insurance Program, and other programs. Source: The Congressional Budget Office. The Budget and Economic Outlook: Fiscal Years 2017 to 2027, January 2017. Source: The Congressional Budget Office. The Budget and Economic Outlook: Fiscal Years 2017 to 2027, January 2017. 6 Slide provided courtesy of the Bipartisan Policy Center
Distribution of Current Housing Subsidies 7
HUD Programs Program FY 2016 FY 2017 FY 2018 Request 2018 House Bill 2018 Senate Bill Community Development Block Grants $3 B $3 B -------- $2.96 B $3.06 B HOME Investment Partnerships Program Section 4 Capacity Building Program Choice Neighborhoods Program Section 8 Tenant- Based Rental Assistance Project Based Rental Assistance Public Housing Capital Fund Public Housing Operating Fund $950 M $950 M -------- $850 M $950 M $35 M $35 M -------- $30 M $35 M $125 M $137.5 M -------- $20 M $50 M $19.6 B $20.3 B $19.3 B $20.5 B $21.4 B $10.6 B $10.8 B $10.4 B $11.1 B $11.5 B $1.9 B $1.9 B $628 M $1.85 B $1.95 B $4.5 B $4.4 B $3.9 B $4.4 B $4.5 B 8
USDA Programs Program FY 2016 FY 2017 FY 2018 Request FY 2018 House Bill FY 2018 Senate Bill Section 306 - Community Facilities (Loans, Grants, and Guarantee) Section 502 -Single Family Direct Loans Section 502 -Single Family Guaranteed Loans Section 514 -Farm Labor Housing Direct Loans Section 515 -Rural Rental Housing Section 521 -Rental Assistance (1 year contracts) Section 523 -Self-Help Housing Loans Rural Community Development Initiative 2.373 B 2.6 B (direct loans) 3 B (Direct Loans) 2.6 B (direct loans) 3 B (direct loans) 900 M 1 B 0 900 M 1 B 24 B 24 B 24 B 24 B 24 B 23.855 M 23.855 M 0 15 M 23.855 M 28.398 M 35 M 0 28.4 M 35 M 1.389 M 1.405 B 1.35 B 1.345 B 1.345 B 27.5 M 30 M 0 25 M 30 M 4 M 4 M 0-4 M 9
Estimated Costs Fiscal Impact of Current of Tax Reform Tax Proposals Reform Proposals President Trump vs House GOP Current Policy Revenues 2016-2025 In Billions of Dollars (CBO August 2016) President Trump In Billions of Dollars House GOP In Billions of Dollars $39,931 $34,505 to $34,703 (-$5,426 to -$5,228) Tax Policy Center $37,073 to 37,607 (-2,858 to -$2,323) Tax Policy Center Debt Held by Public Debt/GDP in 2025 84.0% $ (-$5,906 to -$2,640) Tax Foundation 106.8% to 107.6% Tax Policy Center $37,513 to $39,740 (-$2,418 to -$191) Tax Foundation 94.9% to 96.7% Tax Policy Center Sources: Congressional Budget Office, August 2016. Tax Policy Center An Analysis of Donald Trump s Revised Tax Plan, October 2016; An Analysis of the House GOP Plan, September 2016. Tax Foundation Details and Analysis of the Donald Trump Tax Reform Plan, September 2016; Details and Analysis of the 2016 House Republican Tax Reform Plan, July 2016. 10 Slide provided courtesy of the Bipartisan Policy Center
Tax Expenditures: What is the current distribution? Some of the government s largest tax expenditures compared with those that benefit low-income populations (costs over ten-year period) Foregone Revenue ( in Millions) 3500000 3000000 2500000 2000000 1500000 $2,934,710 $1,222,550 1000000 $958,460 $895,920 $783,270 500000 0 Exclusion of employer contributions for medical insurance premiums and medical care Exclusion of net imputed rental income Defined contribution employer plans Deductibility of mortgage interest on owner-occupied homes Source: Department of Treasury, Income Tax Expenditures Ranked by Total Fiscal Year 2017-2016 Project Revenue Effect Deductibility of nonbusiness State and local taxes other than on owneroccupied homes $94,630 Credit for lowincome housing investments $25,510 $13,150 $7,600 $6,470 Earned income tax credit Low and moderate income savers credit New markets tax credit Work opportunity tax credit 11
Threats/Opportunities in Tax Reform 1. Protect and expand LIHTC 2. Make fixes to LIHTC to preserve the value of the credit 3. Make NMTCs a permanent part of the tax code 4. Promote the Neighborhood Homes Tax Credit 12
Affordable Housing Credit Improvement Act o Legislation has been introduced in the Senate (S.548) and the House (H.R. 1661) to enhance and improve the Low Income Housing Tax Credit and Housing Bond programs. o Key provisions Include: o Income averaging permitted for certain properties; o An additional basis boost for properties serving ELI populations; o A minimum floor for 4% credits; o Standardization of rural income limits; o Facilitating investments in housing in Native American communities o S. 548 would also provide a 50% increase to the Housing Credit formula allocation, phased in over five years. 13
New Markets Tax Credit Legislation o NMTC is currently authorized at $3.5 billion per year through 2019. o Bills have been introduced in the House (HR 1098) and the Senate (S.384) that would: o Make the NMTC a permanent part of the tax code; o Provide approximately $5 billion of allocation annually, indexed for inflation; and o Allow NMTC investments to offset the Alternative Minimum Tax (AMT) 14
Neighborhood Homes Tax Credit o A policy proposal that LISC and other advocates are hoping will be introduced as legislation later this year. o A tax credit to cover the appraisal gap for owner-occupied single family homes developed or rehabbed in severely distressed communities. o Allocated competitively and administered by state agencies (like LIHTC); but available to developers, investors or lenders (like NMTC). o Tax credit covers up to 35% of acquisition and rehabilitation costs. o Maximum home price cannot exceed 4x area MFI. o 90% of homes must be occupied by families making less than 140% of area MFI. 15
Survey Results Rural LISC Partners Question: Please indicate which of the following federal programs you or your partners have utilized over the past 5 year. (62 responses) 90.0% 80.0% 70.0% Percentage of respondents 60.0% 50.0% 40.0% 30.0% 20.0% 80.65% 75.81% 64.52% 62.90% 59.68% 10.0% 0.0% HUD Sec. 4 HOME CDBG LIHTC Sec. 502 Direct Programs 16
Survey Results Rural LISC Partners The following programs listed were chosen most frequently when asked what for top three priorities. (62 responses) 30 Top 3 Program Priorities 25 Number of responses 20 15 10 27 26 23 17 5 10 0 HUD Sec. 4 LIHTC HOME Sec. 502 Direct USDA/RD Sec. 523 Programs 17
Survey Results Rural LISC Partners Question: How would you characterize your relationships with your Congressional delegation? (62 responses) 70.00% 60.00% Percentage of respondents 50.00% 40.00% 30.00% 20.00% 59.68% 37.10% 10.00% 0.00% 3.23% Strong Moderate Limited Answers 18
Survey Results Rural LISC Partners Question: To what extent does your organization need/desire more direct involvement from the LISC policy team in assisting you in your federal policy advocacy efforts? (62 responses) 60.00% 50.00% Percentage of respondents 40.00% 30.00% 20.00% 51.61% 33.87% 10.00% 0.00% 9.68% 4.84% Very Much Somewhat Very Little Not at all Responses 19