The federal program that can’t be killed — or fixed

San Francisco is one of the nation’s wealthiest cities, reaping the riches of America’s tech economy. Across the country and worlds away, Allentown, Pa., hasn’t fully recovered from the death of Big Steel.

Yet when it comes to federal aid for community development, Silicon Valley wins. Lehigh Valley makes do.

San Francisco will get $19-a-person in community development block grants this year, while Allentown, with twice the poverty and less than half of the median income, will draw a per-capita allotment of $17.53.

President Donald Trump sparked protests when he proposed eliminating block grants, and HUD Secretary Ben Carson drew fire when he said the popular program had lost its way. Mayors have rallied their grassroots, and Republicans and Democrats in Congress are lined up in support of the program.

But the data suggest that the program’s critics have a point.

Community development block grants rely on outdated, 1970s formulas that have increasingly shuttled dollars to wealthy places like Newton, Mass., while other locales in need, such as Compton, Calif., go wanting.

Carson says the program does a poor job targeting need and suffers from “mission creep,” as some communities finance brew pubs and build animal shelters while others struggle to provide basic benefits such as housing and ambulance service.

“We have three to four times as many people who need affordable housing as we’re able to provide,” Carson told POLITICO. “Maybe it’s time for us to stop and take a deep breath, look at what has been the most effective, and maybe analyze those things that have not been particularly effective.”

Few programs, however, inspire as much enthusiasm as this $3 billion entitlement. The elimination of the line item amounted to pennies in Trump’s overall budget but provoked outsized passion. Cities and counties, red and blue, unleashed a grassroots campaign to save it.

OMB Director Mick Mulvaney was — painfully — boxed into justifying grant cuts to Meals on Wheels. Congress swiftly erected a bipartisan bulwark, all but guaranteeing the program’s survival.

Even Allentown Mayor Ed Pawlowski refuses to complain about the block grants. “If San Francisco is getting $19 and I’m getting $17, I’ll take the $17,” said Pawlowski, a Democrat. “I’d rather get $2 less than no dollars at all.”

One reason block grants are so popular is their flexibility. Local officials have freedom to fund almost anything as long as the money benefits low- and moderate-income communities, meets an urgent need or eliminates blight.

At the same time, there’s little agreement on what types of spending have the greatest benefits and the program has become a favorite target of government-waste watchdogs.

At POLITICO’s request, HUD calculated per-capita grant allocations for all 1,258 CDBG recipients and showed how variables in the funding formulas favored some cities over others.

To a large degree, the block grants still send more money to the neediest communities, as originally intended. The Rust Belt cities of Flint, Mich., and Buffalo, N.Y., for example, are among the highest per-capita recipients while many of the wealthiest communities, such as the booming Washington suburb of Loudoun County, Va., receive far less.

But in the broad middle, inequities are cropping up with increasing frequency. CDBG’s funding formulas reward communities with older homes or shrinking populations, for example, even when poverty, blight or unemployment aren’t big challenges.

This year, San Francisco got nearly $12 million in block grant funds simply because it has many old houses. Tiny Brookline, Mass., with a population of less than 60,000 and streets lined with stately colonials, won nearly $1 million in grants because of its historic homes.

Compton has twice the poverty of Brookline — 26.6 percent — and less than half the median household income. It received $14.73 a person in block grants this year, a figure based mostly on overcrowding and poverty — less per capita than Brookline and San Francisco.

Compton Mayor Aja Brown didn’t respond to requests for comment. In San Francisco, a spokeswoman for Mayor Ed Lee called block grants a crucial revenue source that helped renovate and preserve 1,280 affordable housing units last year.

“As cities have seen less and less money from the federal government to tackle some of our most challenging issues, local governments have had to fill the [gap] themselves,” Lee spokeswoman Ellen Canale said. “These funds are a critical tool used to keep people in their homes.”

In the 1970s, when block grant formulas were written, aging dwellings were considered a proxy for inadequate housing and old infrastructure. Since then, however, some distressed cities have demolished outdated tenements while gentrifying communities renovated old homes or converted empty warehouses into lofts.

That dynamic eroded block grant funding for the neediest communities between 1980 and 2000 and in some cases increased funding to their wealthiest peers, according to a 2005 HUD study.

So while Detroit bulldozes entire blocks to fight post-recession blight, it’s also shedding pre-1940s housing and effectively eroding its funding share, while upscale Newton protects its register of historic homes and gets an edge. Between 1980 and 2000, Detroit lost nearly half its pre-1940s housing. Newton lost 2 percent, according to HUD.

This year, Newton collected $19.54 a person in block grants, more than Compton, Allentown, and Pharr, Tex., where more than one in three people live in poverty.

Newton Mayor Setti Warren, through a spokeswoman, declined to comment. Warren, a Democrat, chairs the housing committee of the U.S. Conference of Mayors, which is leading the fight to protect block grant funding.

In an era of federal fiscal austerity and acute local need, block grants might not always be money well spent, say conservatives and liberals alike.

“We have to ask ourselves, what is our main purpose?” Carson said. “Only a quarter of the funds go toward the goal of rehabilitating or constructing housing that’s affordable or safe. It’s not that the other 75 percent isn’t spent for good purposes, but there’s only so much money to go around.”

Even if future funding is eliminated, there are $8 billion in CDBG projects already in the pipeline. Carson said he’ll be encouraging jurisdictions to work on projects that promote housing and job creation.

“We’re going to be definitely looking at the way that money is used and looking at the efficiency and feasibility of things,” Carson said.

Funding cuts have diluted the program’s ability to make a difference. Between 1981 and today, the number of grantees has almost doubled while program funding in real dollars plummeted 74 percent. The money that’s left is spread too thinly to make big change.

In 2005, President George W. Bush made a case for “formula fairness” to better target need, offering new ways to allocate grants. It was a zero-sum game. For every winner there were losers, including Kansas City, Mo., where grants could have fallen as much as 22 percent, and Bellevue, Wash., which stood to lose up to half its funding.

Not surprisingly, the Bush proposals didn’t sit well with Sens. Kit Bond (R-Mo.) and Patty Murray (D-Wash.), then chairman and ranking member of the Appropriations Committee’s housing panel, respectively.

“When you’re proposing to redistribute a limited pot of funds, no matter how justified, that creates winners and losers and contentious politics,” said Dennis Shea, a HUD assistant secretary under Bush.

Even Shaun Donovan, President Barack Obama’s HUD secretary, pondered changes to the program, but decided it was a political no-win.

“We had a brief discussion about it but we never followed up on it because of the political ramifications,” said Allentown’s Pawlowski, vice chair of the housing committee at the Conference of Mayors. “The issue was who do you eliminate? And if you eliminate them do you make them an enemy of the CDBG program?”

“There are issues with the formula,” he said. “That doesn’t mean you disband the entire program. You adjust it and you fix it.”