HUD Ache

ne day last May, Housing and Urban Development Secretary Andrew Cuomo waved a pen and raised HUD's magic number from 7,500 to 9,000. An audible sigh of relief wafted through HUD headquarters in Washington and at the agency's offices around the country. Maybe, some optimists thought, this new number would end years of employee turmoil and be the key to HUD's long search for effective management. But others scoffed that 9,000 was an inadequate number and held no more magic than earlier figures. And some skeptics, dismissing the whole exercise as political posturing, doubted whether a magic number exists at all.

The number Cuomo changed refers to the employment level at the department, a figure that has taken on a magical quality at HUD and across the government since the Clinton administration embarked on its effort to slash the federal workforce in 1993.

In December of 1994, then-Secretary Henry G. Cisneros proposed to cut HUD's staff almost in half by fiscal year 2000, to 7,500 employees, as a way to make the department more efficient and save it from the congressional ax that had hovered over it for years. The workforce--already on the decline from more than 17,400 employees in 1979 to 13,500 in 1992--shrank to 10,500 in 1997. It had dwindled further, to about 9,100, by May when Cuomo decided to stop the cuts--at least for now.

"The new HUD is 9,000 strong," he wrote in a special message to the staff on May 20. "Each and every person is an essential member on our team. We will move forward together, facing challenges and opportunities as one family."

In a subsequent interview, Cuomo explained that the 7,500-employee target depended on wholesale streamlining and merging of HUD programs that Congress had yet to consider. "We can make the department smaller if we consolidate programs," he said. "Until Congress takes action consolidating programs, however, we will be at the current staffing level of 9,100."

By mid-August, the 7,500 goal had receded further into a hazy future. Cuomo announced that all current HUD employees had been given permanent assignments. "Everyone has an important, long-term role in the HUD family," he wrote in a message to HUD staff on Aug. 13.

But the General Accounting Office and HUD's own inspector general have questioned whether the arbitrary number of 9,100 employees is adequate to operate the department's programs effectively.

"For at least the last five years, our reports have continuously questioned the adequacy of staffing," HUD IG Susan Gaffney testified at a June 2 hearing of the Senate Banking, Housing and Urban Affairs Subcommittee on Housing Opportunity and Community Development. "Necessary work activities, such as property inspections and financial statement reviews, are not being done . . . [and] in some cases the department is compensating for staff voids through contracting."

Magic Number

Does 7,500 remain the ideal size? Was it always an impossible goal? Is 9,100 more realistic? No one knows, but the topic is grist for many arguments in Congress, within HUD and among public administration analysts.

For that reason, in HUD's fiscal 1998 appropriation measure Congress commissioned the National Academy of Public Administration (NAPA) to help the agency figure out how to systematically calculate its true staff requirements. Because of staff shuffles and program reorganizations at HUD, the magic number remains elusive.

"There is really no way for anyone to come up now with a number of what staff resources they might need in 2000," says Gregory J. Ahart, NAPA's senior consultant on the HUD project, which is due to be completed by the end of the year. "I think everybody is in agreement on this, including HUD." So NAPA is working with several HUD offices to design a model for calculating staff needs.

For nearly two decades, HUD's size has been based on political calculation rather than administrative requirements. Downsizing HUD has been part of a bigger game of reorganizing HUD, which in turn has been the traditional departmental response to threats to eliminate the agency altogether.

Opponents have called for HUD's abolition practically since its creation in 1965. In late 1994, flushed with their victory in the fall congressional elections, the Republicans escalated their long-simmering threat to eliminate several Cabinet agencies, including Education, Energy and HUD. The notion of offering HUD up as a sacrifice floated around the White House. Cisneros' promise to halve the department as part of a sweeping reorganization plan was a dramatic, last-ditch effort to save the agency from its own administration as well from Congress.

The White House relented and began to support HUD, and Congress failed to make good on its abolition threats. Even so, the agency was still under attack when Cuomo took over at the beginning of President Clinton's second term. So, in mid-1997, Cuomo kicked off his own comprehensive management reform plan, called HUD 2020.

"There's certainly an element of 'improve or die' in the [reform] equation," says David Osborne, the public management consultant who helped craft not only HUD 2020 but Vice President Al Gore's governmentwide reinvention effort.

The Cuomo scheme called for radically restructuring the department's organization and operations. HUD 2020 streamlined the department's mission statement and divided employees into two categories: "public trust officers," the bureaucrats who run the programs; and locally based "community builders," an elite new corps of customer-relations specialists assigned to deal with mayors, community groups, builders and other HUD constituents.

The new structure envisioned the consolidation of dozens of HUD programs and the privatization of others, enabling HUD to reach the downsizing target of 7,500 employees.

The impetus for reinventing and trimming down HUD might have been political, but the administrative weaknesses decried by the politicians were real. HUD has always offered a big, slow-moving target for anti-government snipers. Its responsibilities--housing and community development--are by their nature expensive and extremely complicated. The Federal Housing Authority (FHA), for example, manages more than $450 billion in mortgage insurance. Many HUD programs, such as public housing and fair housing enforcement, are controversial. And the agency has compounded its other problems with a history of inept management, heavy-handed regulations, scandal, waste, fraud and abuse.

Indeed, NAPA concluded a 1994 study of HUD with an unusually ominous recommendation: "If, after five years, HUD is not operating under a clear legislative mandate and in an effective, accountable manner, the President and Congress should seriously consider dismantling the department and moving its core programs elsewhere."

The combined effects of the Cisneros and Cuomo reorganizations and the dislocation caused by constant downsizing have created turmoil in the ranks of HUD employees. But the effort seems to have appeased at least some opponents in Congress. When House Budget Committee Chairman John R. Kasich, R-Ohio, suggested eliminating departments this spring, HUD was not on his list. And HUD has received its biggest budget in a decade for fiscal 1999.

Others are still gunning for the department, however. At a Senate housing subcommittee hearing on the HUD 2020 plan last spring, Sen. Lauch Faircloth, R-N.C., said, "I hope HUD doesn't think it is going to exist until the year 2020."

The Fewer the Better

HUD decided to downsize first, and then devised a reorganization plan to accommodate the personnel reductions. That might be a politically expedient approach, but public administration specialists see it as illogical, backwards and insupportable.

"HUD's target staffing levels were not based upon a systematic analysis of needs," Judy A. England-Joseph, director of housing and community development issues at GAO, testified at a May Senate hearing. "Our finding is consistent with that of HUD's inspector general, who reported that the department's target of 7,500 staff was adopted without first performing a detailed analysis of HUD's mission and projected workload."

NAPA reached similar conclusions in its 1994 report, saying HUD lacked a means to systematically determine staff requirements. NAPA recommended several ways to build such capacity, but that advice "was basically ignored," Ahart says. His current project is HUD's attempt to respond at last.

Instead, HUD reformers hacked away at the parts of the agency that presented the largest targets. The biggest operation at HUD is the FHA; not surprisingly, that's where most of the cuts came. The FHA's single-family-housing program began in 1994 with 2,700 employees. But HUD 2020 decreed that by 1999 it should have no more than 759.

Some former FHA managers say the process of reaching the reductions was arbitrary. "Somebody came down to me one day [in late 1997] and said, 'You need to cut staff by 30 percent,' " says a former official who asked not to be identified. "There was no discussion around what does that mean, what's reasonable. Just, 'You need to cut that.' There was a feeling that the plans were being developed in a vacuum without input from the folks who did the work--but that, when things didn't work out, they were the ones who were going to be held responsible."

Cuomo tried to minimize the impact of the reductions on HUD employees. He negotiated agreements with HUD's two major unions to make the cuts by 2002 without layoffs. He offered buyouts--taken by hundreds of HUD's most experienced employees--and set up a nationwide job market for HUD employees to transfer among HUD offices.

"From the beginning, we said that nobody would be fired," Cuomo told the Senate housing subcommittee in May. "We knew that our employees are our biggest asset. So, we went through two rounds of buyouts, with no reductions-in-force and with no directed reassignments. . . . Implementing such an employee-friendly process was the humane thing to do."

Turmoil still ensued. Despite the buyouts, the liberal transfer policy and natural attrition, the department had 1,300 excess employees last spring, designated "unplaced," whose jobs were to be terminated in 2002.

"Morale is garbage because people keep leaving and there are not enough people to do the work," said a veteran employee in a HUD field office, who asked not to be identified. "And the unplaced people are sitting around, and don't have real jobs. It's insanity."

In May, with the stroke of a pen, Cuomo ended the "unplaced" designation and promised everyone currently in the agency a permanent job, a task that was completed by August. Union official Tim Coward, president of the National Council of HUD Locals, says, "Now that we have put word out that everybody is 'placed,' I would expect to turn the corner on the morale problem."

While HUD 2020 eliminated thousands of jobs, it simultaneously opened the door to several hundred new people, the customer-relations field personnel called "community builders." The reorganization plan called for 600 community builders, half veteran HUD transferees and half new hires from the communities they would serve. This new blood will be crucial to revitalizing HUD, many observers believe.

"Over the last 20 years, as HUD has been downsizing, there really wasn't an ongoing infusion of new talent," says Nicolas P. Retsinas, who served as assistant HUD secretary for housing and FHA commissioner from 1993 until early this year.

How Many Will It Take?

Critics of HUD's management practices say the effort now should not be to downsize the department any further, but to calculate the number of employees needed to operate the agency efficiently. GAO, the HUD IG and others don't believe 9,100 is that number.

HUD managers "don't know whether 9,100 is enough," England-Joseph says. When GAO auditors delve into a program, they find that the 2020 design doesn't address what she calls "the real meat" of running that program. So one day, she says, HUD managers will realize, "Oh! You know, we do need more people."

England-Joseph and others point to the reorganization of FHA, which supervises HUD's portfolio of multi-family apartment buildings (other than public housing) and provides mortgage insurance and real estate management for single-family homes. HUD 2020 consolidated the FHA's 81 field offices into four processing centers and opened a single center in Oklahoma City to deal with loans for single-family homes that are in default. The plan also calls for contracts with private firms to handle foreclosures when nothing can be done to save the loan.

Private-sector management experts praise outsourcing as the new way to do business. But government auditors who have looked at how HUD handles these programs contend that the agency doesn't have the kind of resources and expertise that private firms find crucial in adopting these practices. England-Joseph's auditors found that oversight and supervision of several FHA programs that used contractors and were managed by the 81 field offices before reorganization, for example, were woefully inadequate.

"The condition we saw with these contractors was indicative of HUD's lack of capacity to oversee them and hold them accountable--and that was when they had 81 offices," she said. "Even then, [the field offices] didn't have enough people to oversee these contractors. And they've been cut out now; they don't exist anymore." With just four locations, "it's going to be next to impossible to oversee contractors around the country. It's like they didn't think it through."

Others are more optimistic about HUD's prospects in contractor oversight, but are still wary of privatization. "The question is, can HUD really put a lot of that work out to various partners in industry?" says Casimir J. Kolaski, who was director of HUD's housing office in Boston until he took a buyout late last year. "If they can do that, then I think it can work."

The ability of HUD headquarters to direct the whole show is of more concern to some of HUD's customers than the field operation. "There's been a real brain drain in Washington," says Dan Burke, vice president of the Chicago Community Development Corp., an affordable-housing development company. "If a matter is highly complex or controversial or needs clarification from Washington, there's really nobody home."

Like many private companies, HUD is turning to technology as a substitute for manpower. For years, GAO and the HUD IG have criticized the FHA for failing to adequately inspect HUD-assisted multi-family projects. A major part of the problem was insufficient inspectors to cover all the properties. Instead of adding more inspectors, HUD 2020 introduced computers to the inspection process. Inspectors are being equipped with hand-held computers called "palmpads." The inspectors simply fill in the blanks on the computer's checklist and the machine figures out whether the property passed or failed inspection.

The palmpads have generated considerable excitement among HUD reformers. But skepticism persists. "I've never seen a property where you can make a decision like that based on a single number," says Vincent F. O'Donnell, director of development for the Community Economic Development Assistance Corp., a Boston-based agency that works with nonprofit housing organizations in Massachusetts. "It's over-reliance on what I call the spurious precision of a technological instrument that doesn't have in it the capacity to deal with nuance."

HUD officials concede that HUD 2020 may need some fine tuning. "HUD has further to go. We're not bumping up against perfection yet," Cuomo said in an interview. "But we are moving and we have progressed, and that's the bottom line."

William C. Apgar, assistant secretary for policy development and research, who arrived at HUD a year ago from Harvard University's Joint Center for Housing Studies, says, "the basic principles of management reform that we're teaching up at the Kennedy School--they're being played out here. It's not that they invented them here, but they're making them work here."

Osborne agrees. HUD 2020 "seeks to rebuild HUD's credibility, outsource to the private sector where it makes sense, better align its workforce with its workload, and do it all in partnership with its unions," he wrote in the preface to a strategic assessment of the reform plan, released in May. The strategy "required an extraordinary amount of discipline and focus. But it was HUD's only choice, and perhaps last chance, to get its house in order." In Osborne's opinion, it's working. "If HUD continues down the road it is going today . . . the agency that was a symbol for government scandal in the 1980s could very well be a model for reinvention in the 1990s," he wrote.

Gaffney, who disagrees with Cuomo and Osborne on many issues, concurs that a great deal of change has taken place within HUD. "My office has closely watched the reform effort as it has progressed over the last 10 months," she told a Senate subcommittee last May. "The reform has had a profound impact on nearly every aspect of the department's operations. Staff has been downsized, offices consolidated, and new organizations are being established. We must move forward," she warned, "because HUD is not staffed to turn back at this point."

Rochelle Stanfield is a staff correspondent at National Journal.