Order Code IB95100
Issue Brief for Congress
Received through the CRS Web
Economic Development Administration:
Overview and Issues
Updated January 17, 2001
Bruce K. Mulock
Government and Finance Division
Congressional Research Service ˜ The Library of Congress
CONTENTS
SUMMARY
MOST RECENT DEVELOPMENTS
BACKGROUND AND ANALYSIS
EDA’s Creation and History
EDA’s Creation
EDA’s History
Agency Structure
Major EDA Programs
Difficulties in Measuring Performance: Does EDA Work?
GAO Report: Results Are Hard To Prove
Rutgers Study: EDA Program Said to Produce Positive Results, But Questions Remain
105th Congress: Major Reauthorization
106th Congress: Funding Issues Predominate
Appropriations for FY2000
Appropriations for FY2001
Prospects for the 107th Congress
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
FOR ADDITIONAL READING
IB95100
01-17-01
Economic Development Administration: Overview and Issues
SUMMARY
The Economic Development Administra-
The Economic Development Administra-
tion (EDA), targeted for elimination or major
tion and Appalachian Regional Development
“reinvention” early in the 104th Congress,
Act of 1998 (P.L. 105-393) included a num-
gained a new lease on life in the waning days
ber of important provisions, and it endorsed
of the 105th. Having been kept alive via
numerous administrative reforms recently
appropriations bills since its last authorizing
undertaken by EDA such as efforts to target
legislation expired in 1982, P.L. 105-393
assistance to the most distressed areas and
reauthorized the EDA and its programs for 5
encourage greater regional cooperation in
years
economic development.
.
While EDA’s organizational structure,
On the appropriations front, EDA has
strategies and programs have undergone
experienced a tumultuous appropriations his-
substantial changes during its 33 year history,
tory over the past few years. Again last year
its overall mission remains much the same as
(2000), House and Senate appropriators rec-
originally envisioned: to provide grants for
ommended sharply differing funding levels.
infrastructure development, business incen-
The House Appropriations committee recom-
tives, and other forms of assistance to help
mended $26.5 million for Salaries &Expenses
communities alleviate conditions of substantial
(S&E) and $361.9 million for Economic De-
and persistent unemployment in economically
velopment Assistance Programs (EDAP), for
distressed areas and regions.
a total Commerce, Justice, State appropriation
of $388.4 million for FY2001, or $48.5 million
Roundly and widely criticized during
less than requested. The CJS bill (H.R. 4690,
much of its existence by taxpayer groups and
H.Rept. 106-680) was passed by the House on
others for putting public money into question-
June 26, by a vote of 214 - 195, 1 present.
able projects, this small agency—by Washing-
For its part, the Senate Appropriations Com-
ton’s standards—appears to have “trans-
mittee recommended (S.Rept. 106-404) $31.5
formed” itself in the past few years. Although
million for S&E and $218 million for EDAP,
critics remain, EDA convinced a growing
for a total appropriation of $249.5 million for
number of Members and others that it has
FY2001. This compares to the Administra-
rectified a number of shortcomings, and is
tion’s request of $27.7 million for S&E and
serving an important economic development
$409.3 million for EDAP, for a total appropri-
role in an efficient and effective manner.
ation of $436.9 million.
More specifically, during the legislative
On October 27, Congress approved a
process of reauthorizing the agency, there was
conference agreement recommending $286.7
bipartisan recognition that EDA has been
million for EDAP and $28 million for S&E, for
effective and successful in responding to
a total FY2001 appropriation of $411.9 million
changing national and international economic
for EDA. It became part of the Consolidated
conditions, including the effects of military
Appropriations Act (H.R. 4942, P.L. 106-553)
base closures, natural disasters, and interna-
signed into law on December 21, 2000.
tional trade agreements.
Congressional Research Service ˜ The Library of Congress
IB95100
01-17-01
MOST RECENT DEVELOPMENTS
On December 21, 2000, the President signed into law (P.L. 106-553) a bill (H.R. 4942)
which included funding for the Economic Development Administration. Previously,
Congress had approved the Commerce, Justice, State (CJS) appropriations bill (H.R. 4690).1
H.R. 4690 is included in Conference Report approved by Congress (H.R. 4942; H.Rept. 106-
1005).2 The bill included $286.7 million for EDAP and $28 million for S&E, for a total
FY2001 appropriation of $411.9 million for EDA. Of the amounts provided, $286.7 million
is for Public Works and Economic Development, $49.6 million is for Economic Adjustment
Assistance, $31.5 million is for Defense Conversion, $24 million is for Planning, $9.1
million is for Technical Assistance (including University Centers), $10.5 million is for Trade
Adjustment Assistance, and $.5 million is for Research.
Previously, the Senate Appropriations Committee approved on July 18, 2000, its
version of the Commerce, Justice, State (CJS) appropriations bill (H.R. 4690) that provided
EDA’s funding. The Senate’s version (S.Rept. 106-404) would have significantly reduced
the agency’s funding for its Economic Development Assistance Programs (EDAP).
Specifically, it would have provided $31.5 million for Salaries and Expenses (S&E) and
$218 million for EDAP, for a total appropriation of $249.5 million for FY2001, or $187.5
million less than requested and $138.9 less than the total approved by the House. This
recommendation was also $138.9 million less than the level appropriated for FY2000.
BACKGROUND AND ANALYSIS
Following a review of EDA’s creation, history, and performance, this issue brief
provides an overview of the agency’s major programs, examines its structure and budget,
summarizes the important legislative changes fashioned by the 105th Congress, provides an
appropriations history for the 106th Congress, and discusses prospects for the 107th Congress.
EDA’s Creation and History
EDA’s Creation
Often referred to as a prime example of one of President Lyndon Johnson’s Great
Society programs, the Economic Development Administration (EDA) — an agency within
the Department of Commerce — was created by the Public Works and Economic
Development Act of 1965 (PWEDA). The Act (P.L. 89-136), had three antecedents worth
noting.
1 For detailed information, see CRS Report RL30509, Appropriations for FY2001: Commerce,
Justice, and State, the Judiciary, and Related Agencies.
2 The measure passed the House by 206 yeas to 198 nays and the Senate by 49 yeas to 42 nays. The
floor debate in the House and Senate is contained in the Congressional Record, Vol. 146, October 27,
2000, pp. H11265-97: S11230-41.
IB95100
01-17-01
First, and foremost, there was a sustained effort by Senator Paul H. Douglas (a former
economics professor) and others for special federal aid to economically depressed areas,
which reached fruition in 1961. Congress, with the endorsement of the Kennedy
Administration, enacted the Area Redevelopment Act (ARA), authorizing $394 million over
the 4-year period 1961-65 for federal aid to areas suffering chronic unemployment. The
emphasis in the program was on assisting depressed communities with economic projects
having long-term growth potential that would help combat unemployment.
Second, in 1962, Congress authorized $900 million for the Accelerated Public Works
program. The emphasis was on creating jobs through federal public works spending aid to
combat the effects of the 1960-61 recession in areas continuing to experience relatively high
unemployment. The program was criticized by many as a pump-priming measure that was
slow to start and that yielded relatively few benefits for the cost involved.
The third antecedent of the PWEDA was the Appalachian Regional Commission (ARC).
The Appalachia-aid bill (P.L. 89-4), passed in March 1965, authorized $1.1 billion for aid to
the depressed 12-state Appalachian region. The bill stressed a regional approach to economic
development and provided federal aid for construction of “infrastructure” (roads, health
facilities, related basic public facilities) needed as the basis for economic growth.
During the debate on the ARC, some Members of Congress made it clear that they
wanted for their own districts the same type of program as was being approved for
Appalachia. By the end of August 1965, PWEDA was signed into law.
The Act provided $3.25 billion over the 5 fiscal years 1966-70 for grants and loans for
public works, development and technical assistance, and other projects to stimulate long-term
and lasting economic growth in areas suffering chronic unemployment. PWEDA relied on
three basic approaches:
! Encourage economically depressed communities to draft and carry out
economic development plans that would help them produce healthy rates of
economic growth. Wherever possible, such plans were to be on a regional
or multi-county basis.
! Assist depressed communities to finance construction of the basic public
facilities (such as harbors, sewage plants, access roads, industrial parks) that
would make the community attractive to private investment.
! Provide special financial aid to private firms to encourage them to build
plants and businesses in depressed areas.
EDA’s History
Over the past 3 decades, two different sources have given rise to a series of legislative
battles over EDA: efforts by Republican Presidents to abolish the agency and its programs,
and by congressional Democrats to make it a vehicle for broader anti-recession programs.
Twice during the Nixon Administration, Congress passed legislation to transform the
EDA program into a counter-cyclical program to combat joblessness. President Nixon
successfully vetoed the bills. Then, in 1973, President Nixon sought to abolish EDA,
IB95100
01-17-01
proposing that its functions be distributed to other agencies. Congress did not go along with
the idea, however, and continued reauthorizing the agency.
In 1976 and 1977, Congress approved the Local Public Works program, which received
a total of $6 billion for counter-cyclical public works projects to be spent by EDA. The first
year, the aid was approved over a veto by President Ford; the second year, it was approved
with President Carter’s support. Carter later sought to expand EDA’s lending power as part
of his urban policy. The proposal died in Congress following the election of Ronald Reagan.
Following a period of rejuvenation and increased funding during President Carter’s term,
both the Reagan and Bush Administrations proposed abolishing the agency, arguing that it
was limited in scope, its initiatives — if justified — should be funded by state or local
governments, and it financial assistance too often based on political clout rather than on need.
EDA’s choice of projects seemed to sometimes be at odds with its stated goals of helping
distressed areas. As recently as 1994, it awarded a $500,000 grant to Wofford College in
Spartanburg, SC, for an athletic stadium that was used for training by the Carolina Panthers
football team.
Prior to enactment of the Economic Development Administration and Appalachian
Regional Development Act of 1998, the EDA’s programs had last been authorized by
Congress in 1980: that authorization expired at the end of FY1982. Both the Reagan and the
Bush Administrations proposed abolishing the agency, arguing that it was limited in scope and
that its initiatives should be funded by state or local governments, but Congress kept EDA
alive through appropriations bills. The Clinton Administration, in contrast, has sought to
revitalize the agency.
Since 1965, according to EDA, the agency has funded more than 43,000 projects,
investing over $17 billion in more than 8,000 communities. It is estimated that EDA
assistance has helped create 4,340,000 jobs, and leveraged more than $130 billion in private-
sector investment.3
Agency Structure
The EDA, an agency within the Department of Commerce, is headed by the Assistant
Secretary of Commerce for Economic Development. The agency has six regional directors
who are responsible for coordinating with local communities about economic planning and
development. EDA has economic development representatives, primarily located away from
the regional offices, who are responsible for providing information about the agency’s
programs and activities. They also assist prospective grantees and borrowers in preparing
applications for financial, planning, and technical assistance.
3 U.S. Dept. of Commerce, Economic Development Administration, Economic Development in the
21st Century: FY2001 Congressional Request.
IB95100
01-17-01
Major EDA Programs
EDA administers programs and provides grants for infrastructure development, business
incentives, and other forms of assistance designed to help communities alleviate conditions
of substantial and persistent unemployment in economically distressed areas and regions. The
agency provides assistance to local and state governments as well as to businesses. Major
EDA programs include:
Public Works — The Public Works and Economic Development program has
traditionally been EDA’s largest program. Grants are provided to help distressed communities
attract new industry, encourage business expansion, diversify local economies, and generate
long-term private jobs. Among the types of projects funded are water and sewer facilities
primarily serving industry and commerce; access roads to industrial parks or sites; port
improvements; and business incubator facilities. The FY2000 appropriation for the program
was $205,850,000. EDA has requested $251,200,000 for FY2001. As originally passed by
the House, H.R. 4690 would have provided $251.7 million for this program for FY2001. The
Senate Appropriations Committee recommended $144 million for public works grants. P.L.
106-553 provides $286.7 million for this program for FY2001.
Economic Adjustment — The Economic Adjustment Assistance program assists states
and local areas design and implement strategies for facilitating adjustment to changes in their
economic situation that cause or threaten to cause serious structural damage to the underlying
economic base. Such changes may occur suddenly (Sudden and Severe Economic
Dislocation) or over time (Long-Term Economic Deterioration), and result from industrial
or corporate restructuring, new federal laws or requirements, reductions in defense
expenditures, depletion of natural resources, or natural disasters. The Economic Adjustment
Program receives annual appropriations for its Regular Economic Adjustment Programs and
Defense Adjustment activities. The FY2000 appropriation for the regular program was $34.6
million. EDA has requested $80 million for FY2001. As originally passed, H.R. 4690 would
have provided $34.6 million for this program for FY2001. The Senate Appropriations
Committee recommended $10 million for economic adjustment grants. P.L. 106-553
provides $49.6 million for this program for FY2001.
Defense Conversion — For Defense Conversion activities (sometimes referred to as
Defense Adjustment), the agency received $77.3 million for FY2000. EDA requested $31.4
million for FY2001. This decrease, according to EDA, reflected the continued phase down
of defense adjustment activity, particularly base closures. As originally passed, H.R. 4690
would provide the full amount requested. In contrast, no funds were recommended for this
program for FY2001 by the Senate Appropriations Committee. P.L. 106-553 provides $31.5
million for the program for FY2001.
Planning — The Planning Program for Economic Development Districts, Indian Tribes,
and Redevelopment Areas provides grants to support the formulation and implementation of
economic development programs designed to create or retain full-time permanent jobs and
income for the unemployed and underemployed in areas of economic distress. The program
supports 320 Economic Development Districts (EDD) and 65 Indian tribes or representative
organizations that focus on long-term economic challenges. EDDs are the coordinating
entities for a number of other federal and state programs. EDA’s Planning, Technical
Assistance and Research and Demonstration programs are designed to build the local capacity
for comprehensive and collaborative economic development activities. The FY2000
IB95100
01-17-01
appropriations for the program was $24 million. EDA requested $25.3 million for FY2001.
The Senate Appropriations Committee recommended $10 million for planning assistance for
FY2001. P.L. 106-553 provides $24 million for planning for FY2001, the same figure that
was in H.R. 4690 when it passed the House on June 14, 2000.
Revolving Loan Fund (RLF) — The RLF program is designed to assist areas to
overcome specific capital market gaps and to encourage greater private sector participation
in economic development. In concert with private lenders, RLF grantees make fixed asset
and/or working capital loans to area businesses. Since the program’s inception in 1976, the
agency has provided initial capital for more than 480 local RLFs. These locally administered
funds have made more than 7,200 loans to private businesses and have leveraged over $1.9
billion in private capital, according to EDA. Upon repayment, principal and interest stay in
the community for re-lending and further economic development activity.
Research and Evaluation — Under the Research and Evaluation program, grants and
cooperative agreements are awarded (1) to undertake studies that will increase knowledge
about emerging economic development issues, the causes of economic distress, and ways to
alleviate barriers to economic development; and (2) to measure the performance and
effectiveness of economic development programs. The FY2000 appropriations for the
program was $500,000, the same amount provided by H.R. 4690 for FY2001, and identical
to EDA’s request for FY2001. The Senate Appropriations Committee has recommended no
funding for this program. P.L. 106-553 provides $500,000 for FY2001.
Technical Assistance — Grants awarded under the Local Technical Assistance Program
are designed to assist in solving specific economic development problems, respond to
developmental opportunities, and build and expand local organizational capacity in distressed
areas. The majority of local technical assistance projects focus on technical or market
feasibility studies of economic development projects or programs. The FY2000
appropriations for Technical Assistance, including University Centers, was $9.1 million. EDA
requested $10.3 million for FY2001. H.R. 4690 would have provided slightly more, $10.5
million, for FY2001. The Senate Appropriations Committee’s recommendation provides no
funding for this program. P.L. 106-553 provides $9.1 million for FY2001.
Trade Adjustment Assistance — EDA funds a network of twelve Trade Adjustment
Assistance Centers (TAAC) through cooperative agreements. TAACs aid firms in applying
for benefits under Chapter 3 of Title II of the Trade Act of 1974, as amended. Firms affected
by import competition may petition for certification of impact. If a firm submits a petition and
is certified it may apply for technical assistance in diagnosing its problems and assessing its
opportunities. TAAC then helps the firm develop and adjustment proposal which outlines the
firm’s recovery strategy and any need for implementation technical assistance. The FY2000
appropriations for the program was $10.5 million. This is the same amount requested by
EDA for FY2001, and identical to the amount provided by H.R. 4690. The Senate
Appropriations Committee recommended $24 million for trade adjustment assistance. P.L.
106-553 provides $10.5 million for FY2001.
Disaster Mitigation and Economic Recovery — EDA provides post-disaster
economic assistance for communities affected by declared natural disasters. The agency’s
assistance is separate from, yet intended to be a complement to, the disaster relief efforts of
Federal Emergency Management Agency and other agencies. The Economic Development
Administration (EDA) and Federal Emergency Management Agency (FEMA) have forged
IB95100
01-17-01
a partnership to coordinate hazard mitigation programs and disaster preparedness activities
designed to help communities become more resistant to natural disasters.
Difficulties in Measuring Performance: Does EDA Work?
EDA has been working to support economic development and growth for more than 30
years. Through its various programs, the agency has attempted to achieve one principle goal:
alleviate the conditions of substantial and persistent unemployment and underemployment in
economically distressed areas and regions by providing assistance to local and state
governments as well as to businesses. Has it worked? Are taxpayers getting their money’s
worth? Is it deserving of continued funding? Until recently, there did not appear to be any
clear-cut answers to these questions. A May 1997 performance evaluation prepared for EDA
by a research team headed by Rutgers University gave the agency’s Public Works Program
high marks.
GAO Report: Results Are Hard To Prove
In 1996, responding to a congressional request, the General Accounting Office published
a report (GAO/RCED-96-103, April 1996) about the impact of economic development
assistance provided by EDA, the Tennessee Valley Authority (TVA) and the Appalachian
Regional Commission (ARC), and on the “performance ratios” they calculate. Only the first
issue is discussed here. Specifically, GAO was asked to review studies that evaluate the
impact on economic development of these agencies’ programs.
GAO — despite reviewing the available literature, and requesting that the agencies
provide any internal or external studies or other documentation — was unable to find any
study that established a strong causal linkage between a positive economic effect and an
agency’s economic development assistance.
As GAO made clear in its report, successfully completing studies of this nature would
be difficult.
A persuasive study of a program’s impact would require three elements. First, it would
have to document that there had been some improvement in the targeted area. Second, it
would have to link specific elements in the program to the economic changes. Finally, it
would have to measure the growth stemming from other influences on the region’s economy
in order to isolate the impact that could be attributed to the economic development
program.
Thus, the absence of studies documenting the effectiveness of EDA’s programs does not
mean they do not work or are not effective. The lack of evidence, however, underscores an
important point to keep in mind regarding virtually all economic development efforts: It is
difficult to know what works.
IB95100
01-17-01
Rutgers Study: EDA Program Said to Produce Positive Results, But
Questions Remain
With a grant provided by EDA, a research team led by Rutgers University (prime
contractor) evaluated 205 EDA Public Works Program projects that received their lat
payment in FY1990. Thus, at the time of the research — 6 years later — the projects had
been sufficiently established to make their evaluation possible. The evaluation was
undertaken using performance measures developed by EDA specifically to evaluate these
types of projects. Performance measures primarily involved numbers of various types of jobs
created or retained and amounts of private- and public-sector funds leveraged.
The report showed that EDA assistance helped distressed communities create jobs (at
a cost of $3,058 per job), expanded the local tax base (an increase of $10 for every $1 of
EDA investment), and leveraged private investment ($10 for every $1 of EDA investment).
Among the report’s major conclusions:
! Most of EDA’s public works projects achieved EDA’s objectives of
providing communities with the necessary infrastructure to expand their
economic base.
! Jobs and private investment have occurred in many areas that would not have
experienced this without EDA presence.
! EDA public-sector economic stimuli create private-sector jobs at high levels
of success and low levels of cost.
! EDA offices, as an instrument of government, and EDA field representatives
who interact with grantees, are well-regarded by the constituencies.
The Rutgers study’s estimated effects on growth and job creation are conceptually quite
straightforward: it endeavors to examine the direct jobs created by the projects, and also
attempts to measure any related businesses that are deemed to have developed. Thus, as
noted above, the study satisfies the first of the three elements identified by GAO that are
required for a persuasive study of a program’s impact., i.e., it documents improvement in the
targeted areas. However, the other two elements are absent. And, their absence would tend,
other things equal, to overstate the effects of the EDA grants on the projects in question.
To restate and elaborate on the missing elements: First, no account can be taken of the
growth that would otherwise have occurred because there is no way to observe what would
have happened in an alternative world. Second, by and large the growth is likely to have been
at the expense of growth in some other areas — quite likely, ones that are also poor and
underdeveloped, and ones that are in near proximity. (It is not necessary to believe, as some
do, that virtually all economic development is essentially a zero-sum game, to recognize that
something akin to this phenomenon is generally occurring. Also, from a federal policy
perspective, it is useful to note there are usually reasons why businesses do not choose to
locate in particular places. Normally, one would think that location choices are the result of
a reasonably efficient market allocation. To interfere with this allocation, it may be argued,
is to obtain a suboptimal allocation of resources.
IB95100
01-17-01
105th Congress: Major Reauthorization
As part of the Administration’s on-going efforts, EDA has recently implemented various
management reforms, according to agency officials. Results include: streamlined staffing
levels and an agency reorganization for more efficient program delivery; a re-engineering of
the grants process that delegated decision making authority to field staff and simplified
application forms; focusing resources to areas of highest economic distress; the
implementation of a program performance evaluation system in accordance with the
provisions of the Government Performance and Results Act of 1996; and, an accelerated audit
resolution process with the office of the Inspector General. Agency spokespersons say
reauthorization of EDA will continue the transformation process by reducing burdens on local
communities, preserving valuable program tools, strengthening the focus of resources,
achieving programmatic consistency, eliminating obsolete authorities and encouraging
cooperation among federal agencies.
Legislation (H.R. 1430) entitled “The Economic Development Partnership Act of 1997
(EDPA)” was introduced on April 24, 1997. Pursuant to the Administration’s Fiscal Year
1998 Budget, it seeks a 5-year reauthorization for EDA, retaining a number of provisions
contained in legislation considered in the 104th Congress (H.R. 300). It was referred to the
Committee on Transportation and Infrastructure (and, in addition, to the Committee on
Banking and Financial Services). The subcommittee on Public Buildings and Economic
Development held hearings on July 10, 1997.
In the Senate, nearly identical legislation (S. 1647) was introduced on February 12,
1998. The Senate Environment and Public Works Subcommittee on Transportation and
Infrastructure held a hearing on July 14, 1998. During the hearing, Senator Chafee testified:
As Chairman of the full Committee, I should be up-front about my stance on EDA: I
historically have not been a big fan of the EDA. In fact, in 1985 I sponsored an
amendment to eliminate the agency. But in recent years, I have taken notice of the changes
at the agency and its efforts to streamline its operations and target its efforts to truly
distressed communities. I have come to believe that we should move forward with a
reauthorization bill that locks in some the changes that the agency has undertaken.
Therefore, over the past few weeks I have been review S. 1647 (the legislation before us
today), and my staff has been working intensively with the EDA staff to develop a
bipartisan, common-sense substitute that can pass the Senate. I hope to circulate that draft
to all members this week. It will not be easy to enact an EDA reauthorization bill this year,
but I will do what I can to get it done.
On July 24, the House Transportation and Infrastructure Committee approved by voice
vote a 5-year reauthorization bill (H.R. 4275) for EDA and the Appalachian Regional
Commission (ARC).
The new legislation, introduced by Representatives Bud Shuster,
James Oberstar, Jay Kim and James Traficant, was reported to the House on August 6
(H.Rept. 105-684, Part I). The committee report endorsed EDA’s reauthorization and
stresses the value of the planning and technical assistance provided by Economic
Development Districts (EDDs). Specifically, the report asserts:
! Funding of EDDs has been and remains an integral element of successful
economic development grants awarded under this Act. Economic
IB95100
01-17-01
Development Districts also are the coordinating entities for a number of
other federal and state programs.
! Funding levels for EDDs have actually decreased from their original levels
in addition to not being adjusted for inflation in over 30 years. Currently, the
average planning grant to districts is approximately $54,000, the same
amount as in 1966 at the start of the program. Adjusted for inflation, the
value of a 1998 planning grant is only $10,800, or about 20% on the dollar,
when compared to its original purchasing power.
! For the past 30 years, EDDs have leveraged and stretched these small but
significant planning grants to help thousands of America’s small metropolitan
and rural communities forge ahead and create jobs and opportunities for their
citizens.
! EDA’s planning assistance program is an excellent tool for fostering local
economic development efforts through EDDs, particularly in rural areas
where resources are limited and regional cooperation in achieving common
economic goals is difficult.
! EDA is encouraged to allow EDDs to provide funds to purchase geographic
information systems and global positioning systems. By using the latest
technology, EDDs can dramatically enhance their ability to map out industrial
sites; local sewer lines, access roads and other infrastructure; develop
enhanced overall economic development plans; and analyze local economic
development trends. The agency is encouraged to provide training for EDDs
that addresses the potential for the systems.
On July 29, the Senate Environment and Public Works Committee reported out a 5-year
reauthorization bill (S. 2364) for EDA. The legislation was introduced by Chairman John
Chafee and the committee’s ranking minority member, Max Baucus. (Unlike the House
version, the new Senate bill, as introduced, contained no reauthorization language regarding
the ARC; a 3-year reauthorization for ARC was added during conference.)
The Economic Development Administration and Appalachian Regional Development Act
of 1998 (S. 2364) passed the Senate by unanimous consent on October 12th and passed the
House under suspension of the rules on October 13th. The new Act, signed into law by
President Clinton on November 13th , is the first major rewrite of the authorization statutes
for the EDA and for the ARC since the 1970s. The following is a summary of the major
changes made by the new reauthorization legislation to existing law and current practices:
! Establishes an economic development information clearinghouse on the
economic development, economic adjustment, disaster, defense conversion
and trade adjustment assistance activities of federal, state and local
governments. The clearinghouse is also intended to help potential applicants
identify potential resources and receive technical information on how to
alleviate unemployment.
! Consolidates nine separate criteria for public works and economic adjustment
grants into three basic distress factors — high unemployment, low income
and special need
IB95100
01-17-01
! Limits EDA’s share of all grants to 50% (with supplements that may bring
the federal share to 80%), with recipients allowed to use cash and in-kind
contributions to reach the cost sharing requirements. (Previously, match
rates varied by program. The committees argued that this change was made
to reflect the importance of local participation and investment in economic
development activities.) Grant recipients are also required to submit regular
evaluation reports on all projects for up to 10 years.
! Continues previous legislative language that requires approved projects to
be part of an overall investment strategy. The new term “comprehensive
economic development strategy” serves the purpose of an “overall economic
development program” or an “economic adjustment plan” in the Public
Works and Economic Development Act. The agency may accept
comprehensive plans developed under another federally supported program.
! Requires EDA to conduct regular performance evaluations of university
centers and economic development districts. University centers will be
evaluated to determine which are performing well and deserve continued
assistance whereas the district evaluation will focus on management
standards, financial accountability and program performance.
! Incorporates language regularly used in the agency’s annual appropriations
which allows the agency to fund projects on a military or Department of
Energy (DOE) installation even if the applicant does not have title to the
property or a leasehold interest in the property.
! Authorizes appropriation for defense conversion and disaster economic
recovery activities including pilot projects for privatization and economic
development activities for closed or realigned military or DOE installations.
The bill allows the federal share of disaster activities to be up to 100%.
106th Congress: Funding Issues Predominate
Appropriations for FY2000
The Economic Development Administration (EDA) has experienced a tumultuous
appropriations history over the past few years. Its funding level was sharply reduced by the
104th Congress, but the cuts in funding were partially restored by the 105th. Funding for its
programs was again under the knife during the 1st session of the 106th Congress; the Senate-
passed version of the Commerce, Justice, State Appropriations bill for FY2000 would have
reduced EDA’s funding for its Economic Development Assistance Programs (EDAP) by
45%.
More specifically, the Senate Appropriations Committee completed action on its version
of the CJS (Commerce, Justice, and State, the Judiciary, and other related agencies)
appropriations bill (S. 1217, S.Rept. 106-76)) on June 10, 1999.4 The Committee approved
only $203.4 million for EDAP and $24.9 million for S&E — which would have provided
EDA a total FY2000 appropriations of $228.3 million
4 The full committee filed its CJS report (S.Rept. 106-76) on June 14, 1999.
IB95100
01-17-01
On August 5, 1999, the House, following the recommendation of its Appropriations
Committee, approved (H.R. 2670, H.Rept. 106-283) $364.4 million for EDAP and $24
million for S&E, for a total FY2000 appropriation of $388.4 million.
On November 22, 1999, the Consolidated Appropriations Act for FY2000 (H.R. 3194,
H.Rept. 106-479) was presented to the President. The Act (P.L. 106-113) provided EDA
with a total FY2000 appropriation of $388.4 million ($361.8 million for Economic
Development Assistance Programs and $26.5 million for Salaries and Expenses. This amount
is approximately $4 million less than the agency’s FY1999 funding level.
Appropriations for FY2001
For FY2001, the Administration requested $27.7 million for S&E and $409.3 million for
EDAP, for a total appropriation of $436.9 million. On June 19, the House Appropriations
committee recommended $26.5 million for S&E and $361.9 million for EDAP, for a total CJS
appropriation of $388.4 million for FY2001, or $48.5 million less than requested. The CJS
bill (H.R. 4690, H.Rept. 106-680) was passed by the House on June 26, by a vote of 214 -
195, 1 present.
On July 18, 2000, the Senate Appropriations Committee approved its version of the
Commerce, Justice, State (CJS) appropriations bill (H.R. 4690) that provides EDA’s funding.
The bill is awaiting floor action in the Senate. The Senate’s version (S.Rept. 106-404) would
significantly reduce the agency’s funding for its Economic Development Assistance Programs
(EDAP) Specifically, it would provide $31.5 million for Salaries and Expenses (S&E) and
$218 million for EDAP, for a total appropriation of $249.5 million for FY2001, or $187.5
million less than requested and $138.9 less than the total approved by the House. This
recommendation is also $138.9 million less than the level appropriated for FY2000.
On October 27, 2000, Congress approved the Commerce, Justice, State (CJS)
appropriations bill (H.R. 4690).5 The President threatened to veto the measure.
Subsequently, on December 21, 2000, the President signed into law (P.L. 106-553) a bill
(H.R. 4942) which included funding for the Economic Development Administration.
Previously, Congress had approved the Commerce, Justice, State (CJS) appropriations bill
(H.R. 4690). H.R. 4690 was included in a Conference Report approved by Congress (H.R.
4942; H.Rept. 106-1005).6 The bill included $286.7 million for EDAP and $28 million for
S&E, for a total FY2001 appropriation of $411.9 million for EDA. Of the amounts provided,
$286.7 million is for Public Works and Economic Development, $49.6 million is for
Economic Adjustment Assistance, $31.5 million is for Defense Conversion, $24 million is for
Planning, $9.1 million is for Technical Assistance (including University Centers), $10.5
million is for Trade Adjustment Assistance, and $.5 million is for Research.
5 For detailed information, see CRS Report RL30509, Appropriations for FY2001: Commerce,
Justice, and State, the Judiciary, and Related Agencies.
6 The measure passed the House by 206 yeas to 198 nays and the Senate by 49 yeas to 42 nays. The
floor debate in the House and Senate is contained in the Congressional Record, Vol. 146, October 27,
2000, pp. H11265-97: S11230-41.
IB95100
01-17-01
Prospects for the 107th Congress
The Economic Development Administration was reauthorized by P.L. 105-393 through
FY2003. Thus, the agency’s reauthorization will not be an issue during the 107th Congress.
Appropriations, on the other hand, are another matter. Based on recent history, as discussed
earlier, it is fair to anticipate that funding process for EDA’s various programs will again be
contentious.
Of particular importance in the area of appropriations will be the level of funding for the
agency’s Salaries & Administration (S&E). The funds requested for S&E support an
economic development program which includes: (1) planning assistance to local communities;
(2) technical assistance in the formulation and coordination of economic development
proposals and applications; (3) project monitoring and implementation assistance to assure
effectiveness in project execution; (4) evaluation of EDA projects; (5) and, internal and
external economic research. Some observers have expressed concerns that insufficient
funding of S&E will compromise EDA’s ability to perform these functions, including the
agency’s ability to host the Economic Development Information Clearinghouse (EDIC). The
EDIC, which was considered a key component of the Economic Development Administration
Reform Act of 1998, provides information of programs and resources available to assist
communities across the nation with their economic development needs.
Other issues will become clearer when EDA submits its congressional request for
FY2002. In the agency’s FY2001 submission, the agency proposed “to address the ‘Digital
Divide’ through an E-Commerce Initiative, to meet the needs of one of the Nation’s most
distressed populations through a Native American Economic Development Assistance
Program, to mitigate the challenges of rapidly changing trade patterns and their uneven impact
on local communities through the Community Economic Adjustment Initiative, to provide
comprehensive support for economic development efforts in the highly distressed lower
Mississippi Delta region and to develop economic adjustment strategies in direct response to
the Northeastern states fisheries disaster.”
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
U.S. Congress. House. Committee on Appropriations. Subcommittee on the Departments
of Commerce, Justice, and State, the Judiciary, and Related Agencies. Departments of
Commerce, Justice, and State, the Judiciary and Related Agencies Appropriations for
FY2000. Part 1: Justification of the Budget Estimates. Hearings, 106thCongress, 1st
session. Economic Development Administration (p. 75-159). Washington, U. S Govt.
Print. Off., 1999. 1878 p.
U.S. Congress. House. Committee on Transportation and Infrastructure. Economic
Development Partnership Act of 1998. Report to Accompany H.R. 4275. H.Rept. 105-
684, Part 1, 105th Congress, 2nd session. August 6, 1998. Washington, U.S. Govt. Print.
Off., 1998. 128 p.
U.S. Congress. House. Committee on Transportation and Infrastructure. Subcommittee
on Public Building and Economic Development. Reauthorization of the Economic
Development Administration and the Appalachian Regional Commission. Hearings,
IB95100
01-17-01
105th Congress, 1st session. July 10 and 17, 1997. Washington, U.S. Govt. Print. Off.,
1998. 258 p.
U.S. General Accounting Office. Economic Development: Limited Information Exists on
the Impact of Assistance Provided by Three Agencies. April 1996.
GAO/RCED-96-103 [Washington] 32 p.
FOR ADDITIONAL READING
A Path to Smarter Economic Development: Reassessing the Federal Role. National
Academy of Public Administration, Washington, 1996. 70 p.
Chintz, Ben. What Role for the Economic Development Administration in the New
Economy? Economic Development Quarterly, v. 9, no. 3, August 1995: 203-206.
DeWitt, John. Shifting Responsibilities: Federalism in Economic Development. National
Governors’ Association, Washington, 1987. 149 p.
Hill, Edward W. Principles for Rethinking the Federal Government’s Role in Economic
Development. Economic Development Quarterly, v. 12, no. 4, November 1998: 299-
312.
Ota, Alan K. Assailed Development Agency Retains Enough Hill Support to Win a Five-
Year Reprieve. CQ Weekly, October 17, 1998. p. 2821.
The Effects of State and Local Public Policies on Economic Development. New England
Economic Review, Federal Reserve Bank of Boston (whole issue) March/April 1997.
Thornburgh, Dick A Path to Smarter Federal Leadership in Economic Development:
Learning, Leveraging, and Linking. Economic Development Quarterly, v. 12, no. 4,
November 1998: 291-298.