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Senate Panel Told Some HUD Cuts Should Be Gradual

January 19, 1995

WASHINGTON (AP) _ Eliminating the Department of Housing and Urban Development _ or lopping off major parts that don’t work _ would not undo long-term contracts that are pushing costs up, its inspector general said Thursday.

HUD Inspector General Susan Gaffney told a Senate appropriations subcommittee that the department is too complicated to quickly break down into large pieces, as proposed under a plan by Secretary Henry Cisneros.

Binding, long-term contracts permeate HUD’s rental assistance programs, she said, and those contracts would endure even if the programs that created them are eliminated.

``As august members of the Congress have recently said, the devil is in the details,″ Gaffney testified. ``In some instances, the nature of HUD’s major programs warrants a staged or gradual change, rather than immediate wholesale change.″

The Senate panel on HUD and Veteran Affairs gathered to discuss Cisneros’ five-year plan to trim $800 million and 4,400 jobs. It was the first in a series of hearings on scaling down the $30 billion agency and finding a way to make it more efficient.

But at least one GOP senator said Cisneros’ plan does not cut deeply enough and leaves some programs untouched. The solution, he said, is to dispose of HUD altogether.

``HUD must be eliminated. It is a monster that refuses to die,″ said Sen. Lauch Faircloth, R-N.C. ``The Cisneros plan and other plans simply are tinkering on the margins. I think we need to put this department to rest, and quickly,″ he said.

Other Republicans, however, were more cautious. Sen. Connie Mack, R-Fla., the new chairman of the separate Senate subcommittee on housing, suggested ``significant changes and a new approach″ at HUD. Sen. Richard Shelby, R-Ala., called for a reorganization that would prevent various housing contracts from consuming greater shares of future HUD budgets.

``Such action will be painful, but I believe it is necessary to maintain the agency’s viability,″ Shelby said.

President Clinton had considered eliminating a Cabinet agency, possibly HUD, to make room in the budget for his promised middle-class tax cut. But Clinton instead opted to make drastic cuts to four agencies.

Cisneros promptly proposed to rearrange 60 HUD programs into block grants to cities and states and is looking at consolidation or elimination of other HUD programs. For example, he said, HUD would no longer provide any direct federal money to public housing authorities by 1998. Instead, HUD would provide housing certificates to residents so they can choose where to live.

Beyond the $800 million, further reductions are coming in Clinton’s budget proposal for fiscal 1996, to be presented next month, Cisneros said. He said over five years HUD’s budget outlay, the amount of actual spending, would be reduced by $13 billion.

Sen. Kit Bond, R-Mo., the subcommittee’s chairman, said he wanted to rein in HUD’s budget, now at $30 billion, because unspent money devoted to long-term contracts has ballooned to more than $200 billion.

``We are facing a train wreck,″ Bond said. ``Even if HUD were abolished ... its budget outlays would still go up.″

Cisneros urged the committee to keep HUD alive, as a means of giving cities and states a helpmate in federal government.

``We need HUD, in fact now more than ever,″ Cisneros said. ``But we need a radically different HUD.″

Cisneros told reporters afterward that he expected someone to press for eliminating HUD. He said he doesn’t consider such proposals hostile.

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