Cuts to Block Grants Could Have Major Impact on Nonprofits

Rapid City officials are bracing for the possibility of large cuts to the federal program that provides hundreds of thousands of dollars in grants every year to nonprofit organizations dedicated to improving low-income housing and other social services in the community.

Community Development Block Grant funding, which is administered by the U.S. Department of Housing and Urban Development, is one of many programs caught up in the showdown over the federal budget in Washington, D.C. Proposals have included cuts ranging from 7.5 percent to 60 percent.

In 2011, Rapid City received $451,688 in block grants that was split among 13 organizations, including Club for Boys, Dakota Land Trust and Black Hills Area Habitat for Humanity. That was a decrease of 16.1 percent over 2010, and nationwide, funding for the block grant program was cut by more than $600 million, or about 16.5 percent, in the 2011 continuing budget resolution passed earlier this year, according to HUD.

“We’ve already taken quite a big cut. To have any more, it does directly affect our nonprofits and our ability to do any kind of housing projects,” said Barb Garcia, community development manager for the city of Rapid City. “It would be a significant blow to nonprofits and to the people we are serving.”

The city’s Legal & Finance Committee will discuss the issue at its meeting today.

Mayor Sam Kooiker said given its value to the community, the city needs to look at contingency plans if the funding is cut significantly. But, he said, any city funding would be limited by the current availability of cash.

“We’re looking at our options, but we’re hoping that Washington resolves the impasse soon so we know what kind of Plan B to develop or what Plan B would look like,” Kooiker said. “The situation in Washington is very fluid.”

Kooiker’s predecessor in the mayor’s office, Alan Hanks, also reached out to Sen. Tim Johnson’s office to express concerns about a loss of block grant funding. Johnson, a Democrat, is chairman of the Senate Committee on Banking, Housing and Urban Affairs.

In a July 8 letter to Kooiker, Johnson told Rapid City’s new mayor that he is committed to ensuring a proper level of funding for programs “that support local efforts to build strong communities.”

“As Congress and President Obama work to return our country to a responsible long-term budget, tough choices will have to be made,” Johnson wrote. “I will continue to fight for South Dakota priorities and support common sense solutions that find ways to ensure vital programs remain available for those in need.”

Republican Sen. John Thune and Rep. Kristi Noem did not return calls for comment Monday.

But Garcia said over the past eight years, Rapid City’s funding has already fallen significantly. In 2003, her first year overseeing block grant funding, the city received $614,000 in grants, or 26 percent more than this year.

Part of the decrease is a result of funding cuts at the federal level, Garcia said, but even in years when the funding stayed stable, Rapid City lost dollars as more communities became eligible for the same pot of money. Cities with a population over 55,000 receive an annual appropriation of block grant funding, which is determined by a formula based on the number of homeless, people living below the poverty level, low-income census tracts and minorities.

Of the money received every year, 85 percent must go to low-income housing and public infrastructure projects that in the past have included the Cornerstone Apartments and Stepping Stones, which renovated an eight-apartment complex as transitional housing for young people coming out of the foster care or juvenile correction systems.

Earlier this year, $136,212 helped Cornerstone Rescue Mission to purchase a property for a child-care program for its clients.

Block grant funds have also helped organizations including Behavior Management Systems, Youth & Family Services, Dakota Plains Legal Services, Working Against Violence Inc. and Salvation Army.

“We are able to stretch our money and serve thousands with our little bit, because our agencies are able to provide services at a low cost per person,” Garcia said. “Even though it’s not a lot, we do a lot with it. Our agencies are operating on the verge of not being able to provide the programs if they lose much more in funding.”

Under federal guidelines, the city is also allowed to keep 20 percent of the total award for program administration every year, an amount that once covered the entire budget of the city’s Community Development Division, Garcia said.

But with the city’s allotment falling, the administration portion will only amount to $90,000 in 2011, which Garcia said is not enough to cover the division’s annual $125,000 budget.

“It puts us in jeopardy of being able to keep the office at all,” she said.

Recipients of block grants are also concerned about what would happen to their programs if block grant funding dried up. For 2011, the city received $1,296,441 in funding requests, or nearly three times as much as was available.

Black Hills Area Habitat for Humanity received a $44,000 grant this year, which should allow the nonprofit organization to buy two to three new lots for low-income housing and cover some of the cost of water and sewer infrastructure improvements, executive director Scott Engmann said.

Over the past five years, it has been able to do the same every year, allowing the group, with the help of willing landowners, to replenish its inventory of land to a small but important degree, he said. Habitat builds five or six houses a year.

“We are very concerned with the pressure that CDBG is under; it may mean the challenges of affordable housing will fall more acutely on our local community of donors,” Engmann said.

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