Operating Fund Proration Increases as Funding Decreases

According to HUD, PHAs will see an increase in the proration for the Public Housing Operating Fund from 85 to 92.9 percent. This reflects funding included in the appropriations bill, or omnibus, recently passed by Congress. The 2017 omnibus provides $4.4 billion to support the operation and management of public housing. This is $100 million less than 2016 funding levels, $100 million less than what was proposed by the 2017 House Appropriations bill, and $175 million less than the Senate bill. Although 2017 Operating Fund levels are less than 2016 levels, the funding provided by the omnibus is sufficient to fund 92.9 percent of PHAs’ anticipated formula eligibility for 2017, higher than the 2016 proration. This is due to declines in Operating Fund formula eligibility from 2016 to 2017. The decline in formula eligibility was caused by high formula income inflation factors and utility expense level deflation due to declining oil and natural gas costs.

Although the proration in 2017 is higher than the proration in 2016, PHAs may still receive smaller subsidies in 2017 than 2016 due to the overall decline in Operating Fund formula eligibility. Less money will be made available to the Operating Fund overall due to the impact of these inflation and deflation factors on formula eligibility. As not all PHAs have seen increases in incomes or declines in utility expenses, some PHAs will experience declines in Operating Fund subsidies for 2017 as compared to 2016, even though the proration for 2017 is higher. PHAs need to be prepared since this issue will not disappear next year without changes to the subsidy eligibility formula. Any formula change would be a substantial process that would result in gainers and decliners for Operating Fund subsidy distribution, and will involve a lengthy process at HUD headquarters.

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