CDBG vs LGA

Here in Minnesota, it’s easy to get caught up in one very specific type of intergovernmental grant: local government aid, or LGA, which the state government grants to local units of government. However, as we discussed in class, there are many other types of intergovernmental grants, and I’d like to focus on Community Development Block Grants, or CDBG. Funding for CDBG is currently being scrutinized as Congress tries to create a budget, and for a period of time deep cuts to CDBG were being discussed. This creates some interesting parallels to the LGA situation here in Minnesota, though the grants themselves are actually pretty different.

What is CDBG? It is a grant program administered by the U.S. Department of Housing and Urban Development, who describes the program on their website as “a flexible program to address a wide range of unique community development needs.” HUD notes that CDBG was created in 1974 and that currently over 1200 local governments receive grants. There are many different categories (click here for details) and distinctions within the umbrella of CDBG programs, and funds can be used for a variety of needs like housing, economic opportunity, disaster assistance, neighborhoods, and environmental clean-up (from HUD website). There are strict requirements for service areas: HUD's website specifies that “not less than 70 percent of CDBG funds must be used for activities that benefit low- and moderate-income persons,” and programs must be developed that “provides for and encourages citizen participation.” CDBG entitlement communities receive annual grants based on a formula. Criteria to become eligible for entitlement grants include size of city (principal MSAs, or cities with population over 50,000 people) or urban counties. You can check out the entitlement communities website for more details. There are many requirements for planning and though spending is flexible, there are limits. In Minnesota, there are many CDBG entitlement communities; click here for a detailed list. You may be surprised by some of the eligible communities.

It is interesting to compare CDBG and LGA as different intergovernmental grants. LGA allots funding on a need-based formula, but local governments have no significant restrictions on spending or requirements for civic participation. CDBG is allocated in different ways depending on the specific program, but for entitlement communities there is also a need-based formula. Communities that received CDBG are required to have a detailed plan that includes elements of civic engagement, while LGA does not include any requirements for civic participation (though in Minnesota, there are some state requirements for civic participation in the budget process, like holding public hearings). LGA is a general, revenue sharing grant while CDBG is granted for more limited and specific purposes.

CDBG and LGA both have had significant impacts on local governments. For some interesting examples and analysis of LGA’s impact, check out the Thank LGA website and the city stories that are shared on it. There is currently some debate about the funding formula or how cities spend LGA, but this website provides some great examples. To see how CDBG affects local communities in Minnesota, check out this data on CDBG Accomplishments. This comparison brings up another interesting point: LGA recipients do not have to provide any sort of report on how they spend their funds, while CDBG has very strict requirements.

There are so many kinds of intergovernmental grants. It's interesting to compare one that is frequently in the Minnesota news as a state program with a federal program.

(Sources: HUD's CDBG websites, Minnesota Department of Revenue 2009 Property Tax Law Summary, thanklga.com, class discussion)