Faced with new regulations and possibly their largest-ever cut in funding, public-housing agencies in Western Pennsylvania and nationwide are trying to figure out how to make ends meet.

The new federal regulation that is likely to have the most impact requires housing authorities to let every development stand on its own financially, with a separate budget. In the past, all developments have been part of a centralized budgeting system.

The new way, some officials say, could prove disastrous for local agencies.

"We just see this as a potential train wreck in the making," said Tim Kaiser, executive director of the Public Housing Authorities Directors Association in Washington, D.C.

Funding cuts could be even more severe for some housing authorities because of a new formula introduced by the U.S. Department of Housing and Urban Development. As part of its calculations, HUD has grouped local agencies in categories it calls "gainers" and "decliners." Housing officials prefer "winners" and "losers."

The Allegheny County Housing Authority is a "decliner,'' based in part on vacancy rates and the number of subsidized-housing vouchers it issues, but the numbers may be two or three years old. The authority will lose $2.8 million during the next five years as part of the regulations that took effect in January, said the agency's executive director, Frank Aggazio.

There have been budget cuts in the past. HUD has not fully funded housing authorities in almost 25 years. But the combination of proposed cuts to the operating budget, which will provide 78 cents for every dollar needed, restrictions on the use of money from capital budgets, and the new regulations for funding based on individual sites will make the job of providing housing to the poor more difficult than ever.

"A lot of cuts we've had in the past, I'm not sure the residents have seen," Mr. Aggazio said. "They'll see them now."

In Allegheny County, as in neighboring counties, a substantial number of public housing residents are elderly, and they will suffer from the budget cuts. The Allegheny County Housing Authority has a program with the county Department of Aging that provides a nurse and a social worker for residents of elderly high-rise buildings a couple of days a week. The budget cuts will eliminate the nurse or the social worker, Mr. Aggazio said.

Other budget cuts have caused a loss of nearly 100 employees during the past three years at the Allegheny County Housing Authority. Other local housing agencies also have lost employees and been forced to reduce the number of subsidized-housing certificates distributed to low-income families.

The housing authority in Beaver County, which lost 35 Section 8 housing vouchers last year from budget cuts, is on the list of HUD "gainers." But that term is not really what it seems, said Carl DeChellis, the authority's executive director.

"All that means is we're not going to lose as much as everybody else," said Mr. DeChellis, who is also president of the Pennsylvania Association of Housing and Redevelopment Agencies.

Lobbying effort

Housing officials have begun a full-court press of elected officials to try to get more money in the HUD budget and to delay implementation of regulations designed to decentralize operations at housing authorities.

Two members of the Senate's appropriations committee, Sens. Chris Bond, R-Mo., and Patty Murray, D-Wash., sent a letter to HUD Secretary Alphonso Jackson last month questioning a HUD directive that conflicts with a 1998 law. The HUD guideline prevents housing authorities from using 20 percent of capital funds for operating costs, a discretionary measure that is included in the Quality Housing and Work Responsibility Act.

Also last month, Mr. Aggazio outlined his agency's woes in a letter to Sen. Arlen Specter, R-Pa. Mr. Aggazio called the new funding regulations "convoluted" and said the "system is fundamentally unfair." He said he had not received a response.

And last week, housing officials and public housing residents from across the state met in Philadelphia to focus attention on the funding problems. A guest speaker was Sen. Rick Santorum, R-Pa., who wrote a letter May 30 to Mr. Jackson in which he complained that the new regulations cut off local autonomy.

The new HUD guidelines and funding changes are designed to allow HUD and housing authorities for the first time to examine the viability of each housing development on its own, said Donna White, a spokeswoman at HUD's Washington, D.C., headquarters.

That way, the housing authorities can "make the necessary management decisions to ensure that each asset is performing as expected," she said.

On their own

The theory behind the new regulations is simple: Each public-housing development would operate on its own, with oversight by the central housing agency. The sites would operate as do private complexes, with their own budgets. That way, each site would be judged based on its merit and would have the autonomy to operate as it sees fit.

Many housing officials favor the decentralized system and say, in the long run, it will benefit the taxpayers and the residents of public housing.

"Personally, I agree with what's going on here," said Fayette County Housing Authority Executive Director Tom Harkless. "This is the professional way. Believe it or not, housing authorities are property-management companies, and we should be run as property-management companies."

But the new system comes with funding changes that housing officials say will cause problems. For example, authorities will receive less in administrative costs from reductions in subsidized-housing vouchers and for units that are vacant or being modernized if the vacancy lasts more than two months.

Previously, housing authorities received credit for vacant units for up to a year.

Unlike private companies, housing authorities can't increase rents to bring in extra money, so they have to make do with the resources HUD provides.

"In the private sector, you're able to raise rents or rent to [tenants with] higher incomes," Mr. Aggazio said. "But we're not able to do that. What are we here for? To serve the most needy. But under project-based management, you're getting away from your mission."

New funding system

Regulations accompanying the conversion to the decentralized system are the result of a process that began eight years ago with the passage of the Quality Housing and Work Responsibility Act. The law required HUD to come up with a new way to fund housing authorities that was not tied to the traditional performance-based system.

In 2003, the Harvard University School of Design provided a study at the direction of Congress that recommended HUD use the decentralized system of management.

HUD calls the system "asset-based management." Housing officials have criticized the system, saying it will apply a "one size fits all" approach to agencies that vary in size and character.

The conversion to the new management and funding systems also will result in fewer poor families being able to use Section 8 rental assistance.

Previously, HUD funded a certain number of Section 8 vouchers so housing authorities knew how many families they could serve and could manage their waiting list accordingly. Now, HUD will provide a set amount of money, and the housing vouchers will be divided from the proceeds.

The vouchers pay two-thirds of the rent for low-income families.

In past years, increases in rents were covered by the vouchers. Now, rent increases will cut into the pot of money for the vouchers. That means fewer families will receive vouchers and time on waiting lists will lengthen.

In Fayette County, families will have to wait an additional six to eight months for the vouchers, Mr. Harkless said.

Serving fewer families also will mean less money in administrative costs to housing authorities.

The HUD funding cuts in the pipeline for the next fiscal year, which begins Jan. 1, are in addition to the $1.5 billion Congress has cut from HUD's budgets over the past five years. The challenge next year will be even greater because of utility costs that have increased 40 percent or more.

Mr. DeChellis said the cuts reflected the priorities of the Bush administration.

"This administration's whole priorities aren't geared toward these domestic programs," Mr. DeChellis said. "When you look at it, the richest people in the country getting tax cuts while we can't even provide for the poorest people in our communities -- there's something wrong."

Joe Schiff, a former HUD assistant secretary under former President George H.W. Bush and now a consultant to Allegheny County and other housing authorities, said he did not believe there were political motives in the funding cuts. But he acknowledged that the reductions will affect a population that doesn't have much of a voice.

"The reality is that, in today's environment, housing is not on the national government's radar scope. I say that in a totally bipartisan manner. Neither party has housing at the top of their priority list."