Assessing the Allocation of CDBG to Community Development Need
This article evaluates how well the current allocation formula for the Community Development Block Grant (CDBG) program allocates funds with respect to community development need. We assemble an index of community development need from a variety of demographic and economic indicators which capture the components of need that can be addressed directly by the CDBG program based on its statutory objectives. We use this index to estimate the relation between funding levels and community development need and how this relation has changed over time. In particular, we assess the effectiveness of targeting by examining the horizontal and vertical equity of the formula. Results suggest that the relation between the formula data inputs and community development need has deteriorated over the past two decades. The present formula is shown to underfund Formula A grantees conditional on need and to overfund a select number of high-income, slow-growth, older communities. Finally, we consider several alternative formula...