Updated June 1, 2022
Areas of Economic Distress for EDA Activities and Programs
Congress has used program criteria to direct federal
responsibilities in some EDA programs. Generally,
assistance to areas that are economically distressed or
EDA funds 50% of total costs for PWEAA projects.
comparatively disadvantaged. Place-based measures
EDA regulations outline the maximum allowable federal
frequently associated with economic distress include
investment rate for projects based on levels of economic
indicators such as poverty, unemployment rates, and
distress, among other factors (13 C.F.R. §301.4). For
income levels. The term “economically distressed area”
nondisaster PWEAA grants, the maximum EDA
lacks a standardized definition and may vary by agency,
investment rate may increase by an additional 30%
program, or executive branch initiative. This In Focus
based on regional needs that reflect conditions of
summarizes the criteria as well as the data sources and
economic distress (42 U.S.C. §3144). EDA may provide
mapping tools used for determining economic distress for
disaster recovery and other assistance at an even lower
activities and programs administered by the Department of
cost-sharing rate.
Commerce, Economic Development Administration (EDA).
 Economic distress criteria are also used to designate
It also includes considerations for Congress regarding the
EDA’
Economic Development Districts (EDDs). EDDs must
s criteria.
“contain at least one geographic area that fulfills the
Economic Distress Criteria in PWEDA
economic distress criteria” among other requirements
(42 U.S.C. §3171).
Section 301(a) of the Public Works and Economic
Development Act (PWEDA) of 1965 (42 U.S.C. §3161(a))
 EDA-supported University Centers are required to
describes the economic distress criteria and thresholds that
provide services that benefit distressed areas (13 C.F.R.
qualify areas as eligible for assistance through selected
§306.5(a)).
EDA programs and for other purposes. In PWEDA,
economic distress is determined by one or more of the
Unlike the items above, there are typically no requirements
following calculations or thresholds:
to meet minimum levels of economic distress for EDA’s
training, research, and technical assistance programs or
 Low per capita income—the area has a per capita
planning investments (13 C.F.R. §301.3(b)), or for EDA
income of 80% or less of the national average;
programs authorized by the Stevenson-Wydler Technology

Innovation Act of 1980, as amended (15 U.S.C. §3701 et
Unemployment rate above national average—the area
seq.) or the Trade Act of 1974, as amended (19 U.S.C.
has an unemployment rate that is, for the most recent
§2341 et seq.).
24-month period for which data are available, at least
one percent greater than the national average
Measuring Economic Distress
unemployment rate; or
For EDA purposes, data from the U.S. Census Bureau and
 Special Need—an area that “has experienced or is about the Bureau of Labor Statistics (BLS) are generally the
to experience a special need arising from actual or
primary sources used to measure economic distress.
threatened severe unemployment or economic
According to statute and regulations
adjustment problems resulting from severe short-term or
 Low per capita income may be determined by Per
long-term changes in economic conditions (42 U.S.C.
Capita Money Income (PCMI) data (five-year data from
§3161(a)(3)).” Special needs have included substantial
the Census Bureau’s American Community Survey
out-migration or population loss, military base closures,
(ACS)); and
and negative effects of changing trade patterns.
 Unemployment rate may be determined by the most
How Does EDA Apply Economic Distress Criteria?
recent data published by the BLS’s Local Area
Since authorizing the agency in 1965, Congress has
Unemployment Statistics (LAUS).
directed EDA to address long-term economic distress and
economic adjustment concerns resulting from short-term
If the ACS or BLS data are not the most recent or available
disruptions in various ways. For instance
federal data, EDA considers federal data from other

sources. If no federal data are available, EDA may consider
Among other requirements, PWEDA specifies that
data from the state (42 U.S.C. §3161(c)). The circumstances
projects that receive Public Works and Economic
for distress qualifying as a special need are specified in
Adjustment Assistance (PWEAA) funding shall serve
legislation, regulations (13 C.F.R. §301.3), and funding
areas that meet one or more of the economic distress
notices. EDA reviews the evidence of special need provided
criteria (42 U.S.C. §3161(a)).
by grant applicants. For EDA purposes, designations of
 Areas that meet certain thresholds of the economic
economic distress may change at different intervals because
distress criteria may qualify for reduced cost-sharing
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Areas of Economic Distress for EDA Activities and Programs
unemployment rate data are updated monthly and PCMI
levels. For example, in comparing unemployment rates and
data are updated annually.
income data in the early 2000s, researchers observed that
urban areas were more likely to demonstrate conditions of
How Are EDA Project Areas Determined?
distress based on unemployment rates, and rural areas were
As noted, PWEDA requires projects that receive PWEAA
more likely to do so based on income levels. (See EDA and
assistance to serve areas that meet one or more of the
U.S. Economic Distress 1965–2000). As noted, EDA
economic distress criteria. Since EDA directs applicants to
program criteria allow areas to qualify based on
self-define project areas geographically, project areas may
unemployment or income levels, as well as special needs.
contain one or more census tracts, counties, or parts thereof.
According to EDA regulations, “Geographic areas
Economic distress may involve a complex set of
comprising a region need not be contiguous or defined by
contributing factors, including noneconomic variables, and
political boundaries, but should constitute a cohesive area
indicators could measure the causes and/or effects of
capable of undertaking self-sustained economic
distress. Additionally, economic distress conditions may be
development” (13 C.F.R. §300.3). The economic distress
due to structural, long-term factors or to cyclical factors
criteria apply to both rural and urban areas.
related to shocks or business or financial conditions. Both
sets of factors can impart long-lasting negative impacts on
Stats America Measuring Distress Tool
regional economies. Congress may review whether
To determine whether an area may meet the EDA threshold
proposed changes would impact areas that experience
for economic distress, the Indiana Business Research
distress as a result of one or both causes. Congress may also
Center, through its online Stats America service, created a
review whether new or modified distress criteria would
“Measuring Distress” tool. The tool calculates a project
measure conditions or issues that the agency and grantees
area’s threshold based on recent unemployment and per
have the capacity to influence.
capita income data (https://www.statsamerica.org/distress/).
Stats America is supported in part by the EDA. The tool
In considering potential changes to the criteria, Congress
provides data at several levels—for one or more regions,
may also evaluate the level of agency discretion involved in
counties, or census tracts. The tool’s threshold calculation
determining economic distress and the associated cost share
reflects the difference between the rate or value for the
requirements. Congress may also examine if data for
selected county or census tract and the rate or value for the
potentially new criteria are available for small geographic
United States. By example, if Area A has a 24-month rate
units and how frequently are they updated. If data are not
of 6.9 and the U.S. rate is 7.9, the difference shown in the
available at the county and/or census tract level, Congress
threshold calculation is -1.0—meaning it is one point lower
may review whether to provide one or more options for
than the U.S. value.
areas to qualify. If Congress wants to provide flexibility in
how project areas may be designated, policymakers may
Considerations for Congress
seek to provide options for alternative measures and/or for a
The authority for the EDA programs established by
special need designation. Changes to economic distress
PWEDA does not expire, but the authorization of
criteria may impact EDA’s EDD designations as well as
appropriations to fund the programs expired on September
non-EDA programs that refer to 42 U.S.C. §3161(a) in
30, 2008. If Congress considers legislation to reauthorize
statute (e.g., Federal Aviation Administration and other
program appropriations and/or amend PWEDA,
programs).
policymakers may seek to maintain or change EDA’s
current criteria, the thresholds for economic distress, and/or
Non-EDA Examples of Economic Distress Criteria
related cost-share requirements.
Policymakers may seek to review other programs and
initiatives that use place-based socioeconomic criteria to
If policymakers maintain the current distress criteria, then
designate areas of economic distress. Such criteria may
EDA’s framework will continue to provide two threshold
involve similar measures of poverty, unemployment, or
measures and several types of special need scenarios for
income, but may also include population size or rate of
areas to qualify as economically distressed. In addition to
decline, and other indicators. Time period criteria and data
the scenarios and conditions provided by Congress in
thresholds may vary by program (i.e., the most recent two-,
statute, the agency may further describe areas of special
three-, or ten-year periods or specific thresholds compared
need in notices of program funding, and areas may continue
to state or metropolitan area levels). Agencies may apply an
to qualify based on actual or threatened severe
index- or rank-based approach in order to compare county
unemployment or economic adjustment problems.
data to national levels (e.g., the Appalachian Regional
Commission’s county economic classification system).
Alternatively, Congress may seek to add or modify the
Examples include the Small Business Administration’s
criteria or thresholds used to designate areas of economic
Historically Under-utilized Business Zones (HUBZones)
distress and the related cost-share requirements. Such
program; federal tax incentives such as the New Market
changes could be designed to limit or expand access to
Tax Credits and Opportunity Zones; and the Department of
grants for certain areas. Congress may seek to examine the
Housing and Urban Development Distressed Cities
impact of such changes on communities of different sizes
Technical Assistance program. Additionally, the Promise
and in various regions, among other characteristics and
Zones initiative was implemented during the Obama
variables. In considering changes, policymakers may also
Administration to provide assistance to urban, rural, and
seek to examine whether there are biases or limitations
tribal communities based on poverty and other data.
associated with any new proposed indicators or threshold
https://crsreports.congress.gov

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Areas of Economic Distress for EDA Activities and Programs

Julie M. Lawhorn, Analyst in Economic Development
Policy
IF12074


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https://crsreports.congress.gov | IF12074 · VERSION 3 · UPDATED

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