The U.S. House of Representatives recently approved an appropriation of $500 million for fiscal 1992 for a new federal program designed to provide housing and to states and localities -- far below the $1.5 billion level housing lobbyists are hoping to get from Congress.

"We're very disappointed," said John C. Murphy, the executive director of the Association of Local Housing Finance Agencies.

Mr. Murphy added that he hopes the Senate will approve a higher level of funding and that its figure will ultimately prevail. The Bush administration has said it wants Congress to appropriate at least $1 billion for fiscal 1992.

Enacted in November, the National Affordable Housing Act requires the federal government to match financial contributions that state and local governments make to rental housing and home ownership programs for low-income people.

State and local housing officials are hoping tax-exempt bonds will play an important role in financing their part of the program, but first they must clear a hurdle presented by the Department of Housing and Urban Development.

HUD proposed rules for the program in February that do not allow states and localities to count tax-exempt bonds in the financial contributions that would be eligible for federal matching funds.

Since then, housing officials and lobbyists have been pressing HUD to revise its position in the final rules due to be released later this year. They got a little help from the House, which included language in its appropriations bill saying that HUD "is strongly urged to provide the greatest flexibility possible in the matching requirements of this program."

Mr. Murphy said the language, though helpful, is not strong enough, and lawmakers will probably have to pass legislation requiring HUD to change the regulations.

State legislators last week warned Congress not to undertake budget actions that will have an adverse effect on the already deteriorating state fiscal conditions.

In testimony before the House Budget Committee, Ohio state Rep. Patrick Sweeney said, "In fiscal terms, the current state of the states is not good." He noted that in January, the National Conference of State Legislatures, on whose behalf he testified, reported that 29 states were facing deficits, totaling $10.3 billion.

But now, he said, 31 sates face deficits totaling $15.3 billion.

"Much federal action of the past decade has had the effect of shifting cost to state and local governments," Rep. Sweeney said. "Congress should avoid any proposals that could further aggravate fiscal difficulties at the state and local level."

He said state and local governments should not be viewed as special interests.

"State and local governments serve the general interest," he said. "Our constituents are the federal government's constituents. Any burden imposed upon us, ultimately must fall on them."

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