Economic Development Administration: Overview and Issues
The Economic Development Administration (EDA), targeted for elimination or major “reinvention” early in the 104th Congress, gained a new lease on life in the waning days of the 105th. Having been kept alive via appropriations bills since its last authorizing legislation expired in 1982, P.L. 105-393 reauthorized the EDA and its programs for 5 years. On October 27, Congress approved a conference agreement recommending $286.7 million for EDAP and $28 million for S&E, for a totalFY2001 appropriation of$411.9 million for EDA. It became part of the Consolidated Appropriations Act (H.R. 4942, P.L. 106-553) signed into law on December 21, 2000.
Order Code IB95100
CRS Issue Brief for Congress
Received through the CRS Web
Economic Development Administration:
Overview and Issues
Updated August 28, 2003
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
Brownfield-Related Activities
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
Activity in the 107th Congress
Appropriations for FY2002
Appropriations for FY2003
EDA and the Terrorist Attacks
EDA Legislation in the 108th Congress
Appropriations for FY2004
EDA Reauthorization
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
FOR ADDITIONAL READING
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Economic Development Administration: Overview and Issues
SUMMARY
The Economic Development Administra-
of important provisions, and it endorsed nu-
tion (EDA), targeted for elimination or major
merous administrative reforms undertaken by
“reinvention” early in the 104th Congress,
EDA, such as efforts to target assistance to the
gained a new lease on life in the waning days
most distressed areas and encourage greater
of the 105th. Having been kept alive via
regional cooperation in economic develop-
appropriations bills since its last authorizing
ment. The agency’s current authorization
legislation expired in 1982, the EDA was
expires at the end of this fiscal year. On June
reauthorized for 5 years by P.L. 105-393. The
25, the House Transportation and Infrastruc-
Administration is currently seeking another 5-
ture Committee adopted a modified version of
year reauthorization.
the Administration’s 5-year reauthorization
bill (H.R. 2535) for the EDA. The Senate
While EDA’s organizational structure,
Environment and Public Works Committee
strategies, and programs have undergone
has yet to take up the EDA’s reauthoriation.
substantial changes during its 38-year history,
its overall mission remains much the same as
On the appropriations front, EDA has
originally envisioned: to provide grants for
experienced a tumultuous appropriations his-
infrastructure development, business incen-
tory over the past decade. For example, in
tives, and other forms of assistance to help
FY1995, the agency’s appropriation was $408
communities alleviate conditions of substan-
million for its Economic Development Assis-
tial and persistent unemployment in economi-
tance Programs (EDAP), and $32.2 million for
cally distressed areas and regions.
Salaries and Expenses (S&E). Last year, the
Consolidated Appropriations Resolution for
During much of its existence, EDA was
FY2003 (P.L. 108-7) provided EDA with a
roundly criticized for investing public money
total appropriation of $320.8 million — $290
in “questionable” projects. However, despite
million for EDAP and $30.8 million for S&E.
continuing opposition from some small-
And, in the intervening years, EDAP funding
government and tax-reduction groups, this
levels in the House and Senate have differed
little agency — by Washington’s standards —
by as much as $100 million..
appears to have changed its image for the
better in the past few years. Although critics
For FY2004, the Administration is re-
remain, EDA convinced a growing number of
questing $364.4 million for EDA — $331
Members and observers that it has rectified a
million for EDAP and $33.4 million for S&E.
number of shortcomings and is effectively
The CJS bill (H.R. 2799, H.Rept. 108-221)
serving an important economic development
passed by the House on July 23, provides a
role.
total of $318.7 million for the Economic
Development Administration, including
The Economic Development Administra-
$288.1 billion for EDAP and $30.6 million for
tion and Appalachian Regional Development
S&E. The Senate is expected to take up its
Act of 1998 (P.L. 105-393) included a number
version of the bill in September.
Congressional Research Service ˜ The Library of Congress
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MOST RECENT DEVELOPMENTS
On June 25, the House Transportation and Infrastructure Committee adopted a modified
version of the Administration’s 5-year reauthorization bill (H.R. 2535) for the EDA. The
Senate Environment and Public Works Committee has yet to take up the EDA’s
reauthoriation.
On July 23 the Commerce, Justice, State (CJS) appropriations bill for FY2004 (H.R.
2799, H.Rept. 108-221) was passed by the House; the bill provides a total of $318.7 million
for the Economic Development Administration, including $288.1 billion for Economic
Development Assistance Programs (EDAP) and $30.6 million for Salaries & Expenses
(S&E). The Senate is expected to take up its version of the bill in September.
Hearings on the Administration’s proposal for reauthorizing EDA were held on June
4 by the House Subcommittee on Economic Development, Public Buildings & Emergency
Management (for background and testimony go to [http://www.house.gov/transportation/]).
On June 12, a bill (H.R. 2454) to reauthorize the agency for 5 years was introduced; EDA’s
current authorization expires on September 30, 2003.
In February, the President made his FY2004 budget request to Congress. For EDA the
Administration requested $364.4 million — $331 million for EDAP and $33.4 million for
S&E.
For FY2003, the Administration requested a total appropriation of $349.9 million for
EDA, a reduction of $15.7 million or 4.3% from what the agency received in FY2002. More
specifically, it requested $317.2 million for EDAP and $32.7 million for S&E. The
Consolidated Appropriations Resolution for FY2003 (P.L. 108-7) provided EDA with a total
appropriation of $320.8 million — $290 million for EDAP and $30.8 million for S&E.
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 107th Congress, and discusses the
reauthorization and appropriations bills being considered by the 108th 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
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Development Act of 1965 (PWEDA). The Act (P.L. 89-136), had three antecedents worth
noting.
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.
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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,
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, 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.1
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
1 U.S. Dept. of Commerce, Economic Development Administration, Economic Development in the
21st Century: FY2001 Congressional Request.
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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.
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 the following:
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. For FY2003 the Administration
requested $234 million for Public Works grants; the conference agreement provided $205
million. The President’s FY2004 budget request is $232 million.
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 funding level requested by the Administration for
FY2003 was $44 million; the conference agreement provided $40.9 million. The President’s
FY2004 budget request is $55 million.
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 funding level requested by the Administration for FY2003 was $22 million;
the conference agreement provided $24 million. The President’s FY2004 budget request is
$22 million.
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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 funding level requested by the
Administration for FY2003 was $1 million; the conference agreement provided $500,000.
The President’s FY2004 budget request is $1 million.
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. For FY2002, the
conference agreement provided an appropriation of $9.1 million, the same level as requested
by the Administration. The funding level requested by the Administration for FY2003 was
$9 million; the conference agreement provided $9.1 million. The President’s FY2004 budget
request is $9 million. (Note: Appropriations for Technical Assistance program includes
funding for university centers.)
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 funding level requested by the Administration for FY2003 was $13
million; the conference agreement provided $10.5 million. The President’s FY2004 budget
request is $13 million.
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
a partnership to coordinate hazard mitigation programs and disaster preparedness activities
designed to help communities become more resistant to natural disasters.
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Brownfield-Related Activities2
EDA has a longstanding role in supporting the economic redevelopment of abandoned,
idled, and contaminated industrial and commercial sites. It has a substantial history of
supporting the Brownfields Initiative of the Environmental Protection Agency (EPA).
Indeed, EDA was the first federal agency to enter into a partnership agreement with EPA —
signing a memorandum of understanding (MOU) in 1995. Last year EDA invested $55
million in 58 brownfield projects; since 1997, it has invested over a quarter of a billion
dollars in more than 250 brownfield redevelopment projects.
EDA’s various economic development program tools have assisted local governments,
nonprofit organizations, and regional Economic Development Districts in overcoming their
brownfields revitalization challenges. Under existing statutory authority, EDA provides
assistance to brownfields-impacted communities designed to achieve long-term economic
revitalization. In assisting with brownfields redevelopment activities, EDA has used a
variety of different program tools to address various phases of brownfields redevelopment,
including:
! Providing targeted planning and technical assistance investments to support
market feasibility studies and geographic information system (GIS)
inventories of brownfields;
! Assisting communities with infrastructure investments to rehabilitate land
and building and attract private capital investment that, in turn, creates jobs;
and
! Making investments to capitalize local revolving loan funds used to provide
gap financing in support of local business development.
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.
2 From testimony of David A. Sampson, Assistant Secretary for Economic Development, U.S.
Department of Commerce, before the Senate Committee on Environment and Public Works, March
6, 2002, available at [http://www.osec.doc.gov/eda/HTML/1a_1add_Mar2002PR.htm], visited April
11, 2003. For more information on brownfields, see CRS Issue Brief IB10114, Brownfields and
Superfund Issues in the 108th Congress, by Mark Reisch.
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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.
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.
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! 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 sub-optimal allocation of resources.
105th Congress: Major Reauthorization
The Economic Development Administration and Appalachian Regional Development
Act of 1998 (S. 2364) passed the Senate by unanimous consent on October 12, 1998, and
passed the House under suspension of the rules on October 13th. The Act, signed into law
by President Clinton on November 13th , was 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 1998 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
! 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
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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%.
Activity in the 107th Congress
Appropriations for FY2002
For FY2002, the Administration requested a substantial reduction in EDA’s overall
funding. While the request included a small increase for S&E, it called for significant
reductions in EDAP. Specifically, EDA’s request of $335 million for EDAP represented a
$76 million decrease from the FY2001 EDAP adjusted appropriation of $411 million. The
agency did not request any funding for the Defense Economic Adjustment program, which
received $31.4 million in FY2001. The proposed elimination of funding for this program
was consistent with the continued phase-down of defense adjustment activity, particularly
base closures, according to EDA’s budget submission. The requested funding level for the
Public Works Program was $250 million, which represented a program reduction of $36
million from the FY2001 appropriation. The amount requested for the Economic
Adjustment Program was $40.9 million, or $8.6 million less than it received in FY2001.
The agency’s FY2002 request for funding its other programs reflected only minor
changes. EDA requested $24 million for Planning, $9.1 million for Technical Assistance,
$500,000 for Research and Evaluation, and $10.5 million for Trade Adjustment Assistance.
On June 27, 2001, the House CJS Subcommittee marked up and passed by voice vote
its CJS appropriation (H.R. 2500), which mirrored the Administration’s request, i.e., $30.6
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million for S&E and $335 million for EDAP, for a total EDA appropriation of $365.6
million. The full House Appropriations Committee agreed with the subcommittee’s totals
and passed the bill on July 10, 2001. The Senate Appropriations Committee recommended
slightly more — $371.6 million.3
Prior to the release of the Administration’s FY2002 budget proposal, which reduced
funding for EDA, the Council for Urban Economic Development (CUED) and associated
national and regional economic development organizations called for an increased
appropriation, noting “EDA remains the main (federal) agency devoted to enabling local
economic development and has a proven ability to leverage private investment to meet
development goals.”4
CUED praised the agency, stating “EDA has proven to be an effective agency with its
impact limited predominately by underfunding,” and further noting:5
EDA is the main discretionary source for infrastructure development and strategic
planning for economic development purposes, and leads other federal agencies in its
adherence to the Government Performance Review Act, regulatory reform and leveraging
of private sector dollars. EDA funds also have been an important source of local
creativity, and the agency, through national technical assistance, has ensured that these
innovations and best practices have been disseminated nationwide. The local reputation
of regional EDA offices is one of flexibility and good government. As infrastructure
remains a critical component of competitive places, a strong EDA is critical to the long-
term strength of the U.S. economy.
The conference agreement, reached on November 9, 2001, provided $30.6 million for
S&E and $335 million for EDAP, for a total FY2002 appropriation of $365.6 million. The
bill was signed into law (P.L. 107-77) on November 28.
Appropriations for FY2003
For FY2003, the Administration requested a total appropriation of $349.9 million for
EDA. More specifically, it is requested $317.2 million for EDAP, which represented a net
$17.8 million decrease from FY2002. Program decreases were requested for: Public Works,
$17.9 million; Planning, $1.7 million; and Technical Assistance, $.665 million. Additional
funding in the amount of $2.5 million was requested for the Trade Adjustment Assistance
Program (TAA). The request of $32.7 million for S&E represented a $2.1 million increase
over the FY2002 appropriation. According to the agency’s FY2003 congressional request,
the S&E increase reflected only adjustment to base increases that included the full cost of the
Administration’s pension and health benefits proposal.
3 The Senate Appropriations Committee also recommended $30.6 million for S&E, but
recommended $341 million for EDAP, $6 million above both the budget request and the House
recommendation.
4 National Council on Economic Development, Partnership for Prosperity: A Federal Economic
Development Agenda, February 2001, p. 18.
5 Ibid., p. 17.
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The Senate Appropriations Committee reported out its CJS appropriations bill (S. 2778;
S.Rept. 107-218) on July 24, 2002. The Committee recommended a total FY2003
appropriation of $366.2 million, including an appropriation of $335 million for EDAP. The
recommendation was $17.8 million above the Administration’s request and was identical to
the FY2002 funding level. More specifically, the Committee recommendation provided
funding of $250 million for public works grants (Title I), $24 million for planning assistance,
$10.5 million for trade adjustment assistance, $40.9 million for economic adjustment grants
(Title IX), and $9.1 million for technical assistance.
Meanwhile, in the absence of an enacted appropriation, EDA programs are operating
at FY2002 levels under a Continuing Appropriation resolution, (H.J.Res. 18) that funds
federal agencies through February 20, 2003. Another FY2003 continuing resolution,
H.J.Res. 2, is the vehicle to complete final funding decisions on the 11 remaining regular
appropriations bills. Although the House-adopted version is a temporary resolution, the
Senate-adopted version includes the full-text of each of the outstanding regular bills. It
would provide EDA with a total FY2003 appropriation of $288.7 million ($30.8 million for
S&E and $258 million for EDAP).
EDA and the Terrorist Attacks
The Economic Development Administration will most certainly have a role to play in
the recovery and rebuilding of the World Trade Center site devastated by the September 11th
terrorist attacks. Under existing statutory authority, EDA administers disaster program funds
through targeted grants to disaster-impacted communities designed to achieve long-term
economic recovery.
It appears that several EDA programs fall within the funding purposes enumerated in
the emergency supplemental appropriations bill (H.R. 2888) passed by Congress in response
to the terrorist attacks of September 11, 2001. And it appears likely that additional funding
will be made available as recovery plans are developed and refined. What exact role EDA
will play, however, is currently under active consideration by the Administration and
Congress.
In the past, the agency has contributed to disaster response efforts, and it has the
statutory authority to assist communities in long-term economic recovery efforts. EDA has
participated in over 20 major disaster adjustment efforts since Hurricane Camille in 1969,
and has received in excess of $600 million in supplemental appropriations to deal with
disasters since 1992.
Some guidance regarding EDA’s role in the economic revitalization of New York City
was provided by the recent testimony of David A. Sampson, Assistant Secretary of Economic
Development for the Department of Commerce. The following are excerpts of his testimony
on November 1, 2001, before the Senate Committee on Environment and Public Works:
! Under existing statutory authority, EDA administers disaster program funds
through targeted grants to disaster-impacted communities designed to achieve
long-term economic recovery.
! When asked to participate with disaster recovery, EDA has a comprehensive and
flexible set of program tools, including: (1) targeted economic recovery planning
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and technical assistance; (2) revolving loan fund grants to address unmet business
financing needs where other financing is insufficient or not available; and (3)
infrastructure construction grants to rebuild an environment attractive to private
investment for the re-creation of job opportunities.
! While [the agency’s] program tools are flexible, EDA has a clearly defined target
group of those eligible to receive EDA investment dollars. Those eligible include
state and local governments, public and private nonprofit organizations, and
regional economic development districts. Businesses are not eligible for direct
assistance under EDA’s major programs.
! Were EDA to be assigned a responsibility for a portion of New York economic
revitalization and recovery efforts, [the agency] would, as [it] has in past disasters,
assemble a special disaster response team comprised of existing headquarters
personnel as well as existing personnel from the six regional economic
development offices around the country.
EDA Legislation in the 108th Congress
Appropriations for FY2004
For FY2004, the Administration has requested a total budget of $364.4 million. More
specifically, EDA is requesting $331 million for its Economic Development Assistance
Programs (EDAP) (a $13.8 million increase over the President’s budget request for FY2003)
and $33.4 million for Salaries and Expenses (S&E) (an increase of $2.6 million over the
FY2003 request).
Traditionally, the appropriations bill for the Departments of Commerce, Justice, State,
the Judiciary, and Related Agencies is known as the “CJS” bill. The CJS bill (H.R. 2799,
H.Rept. 108-221) passed by the House on July 23, provides a total of $318.7 million for the
Economic Development Administration, including $288.1 billion for EDAP and $30.6
million for S&E. The House total is nearly $46 million below the President’s request.
Historically, the House CJS bill has protected and maintained funding for EDA, while
the Senate version has often proposed severe reductions in the agency’s budget. However,
the political dynamics in both chambers appear to have significantly changed during the past
2 years, and it is far from clear whether the House and Senate will reverse roles for this
appropriations cycle or whether both chambers will decide to substantially reduce funding
for EDA. The Senate is expected to take up its version of the bill in September.
EDA Reauthorization
The EDA’s current authorization expires on September 30, at the end of the current
fiscal year (FY2003). The Administration presented its proposal for a 5-year reauthorization
for the agency at a hearing held on June 4, 2003, by the House Transportation and
Infrastructure Committee’s Subcommittee on Economic Development, Public Buildings and
Emergency Management (for background and testimony go to the committee’s website at
[http://www.house.gov/transportation/]).
On June 12, a bill (H.R. 2454) to reauthorize the agency for 5 years was introduced.
Among a number of important changes, the legislation would create a performance based
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incentive bonus program. The bill authorizes $400 million for fiscal year 2004 for EDA
programs, and $25 million increases for each subsequent fiscal year through 2008. In
addition, the bill authorizes $33 million for FY2004 for salaries and expenses, and such sums
as may be necessary thereafter.
H.R. 2454 updates the findings and declarations to reflect current economic conditions
and emphasize the need to increase innovation, productivity and entrepreneurship, and attract
private sector investment; grants the Secretary of Commerce new authorities relating to
existing programs, creates a performance based incentive bonus program, and eliminates
several little used provisions.
On June 25, the House Transportation and Infrastructure Committee adopted a modified
version of the Administration’s 5-year reauthorization bill (H.R. 2535, H.Rept. 108-242) for
the EDA. The Senate Environment and Public Works Committee has yet to take up the
EDA’s reauthoriation.
The Subcommittee also held hearings on April 2 and April 9 on “Regional Economic
Development Issues Relating to the Reauthorization of the Economic Development
Administration.” Background information and testimony are available on the committee’s
website: http://www.house.gov/transportation/.
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 pp.
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 pp.
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,
105th Congress, 1st session. July 10 and 17, 1997. Washington, U.S. Govt. Print. Off.,
1998. 258 pp.
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 pp.
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U.S. General Accounting Office. Economic Development: Multiple Federal Programs Fund
Similar Economic Development Activities. September 2000. GAO/RCED/GGD-00-
220 [Washington]. 79 pp.
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.
Ellen, Ingrid Gould and Amy Ellen Schwartz. Cautionary Notes for Competitive Cities. The
Brookings Review, v. 18, no. 3, Summer 2000: 44-47.
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.
Wirtz, Ronald A. Local Economic Development: A Recipe for Stone Soup. Fedgazette,
Federal Reserve Bank of Minneapolis, v. 12, no. 2, April 2000: 9-10.
CRS-14
CRS Issue Brief for Congress
Received through the CRS Web
Economic Development Administration:
Overview and Issues
Updated August 28, 2003
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
Brownfield-Related Activities
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
Activity in the 107th Congress
Appropriations for FY2002
Appropriations for FY2003
EDA and the Terrorist Attacks
EDA Legislation in the 108th Congress
Appropriations for FY2004
EDA Reauthorization
CONGRESSIONAL HEARINGS, REPORTS, AND DOCUMENTS
FOR ADDITIONAL READING
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Economic Development Administration: Overview and Issues
SUMMARY
The Economic Development Administra-
of important provisions, and it endorsed nu-
tion (EDA), targeted for elimination or major
merous administrative reforms undertaken by
“reinvention” early in the 104th Congress,
EDA, such as efforts to target assistance to the
gained a new lease on life in the waning days
most distressed areas and encourage greater
of the 105th. Having been kept alive via
regional cooperation in economic develop-
appropriations bills since its last authorizing
ment. The agency’s current authorization
legislation expired in 1982, the EDA was
expires at the end of this fiscal year. On June
reauthorized for 5 years by P.L. 105-393. The
25, the House Transportation and Infrastruc-
Administration is currently seeking another 5-
ture Committee adopted a modified version of
year reauthorization.
the Administration’s 5-year reauthorization
bill (H.R. 2535) for the EDA. The Senate
While EDA’s organizational structure,
Environment and Public Works Committee
strategies, and programs have undergone
has yet to take up the EDA’s reauthoriation.
substantial changes during its 38-year history,
its overall mission remains much the same as
On the appropriations front, EDA has
originally envisioned: to provide grants for
experienced a tumultuous appropriations his-
infrastructure development, business incen-
tory over the past decade. For example, in
tives, and other forms of assistance to help
FY1995, the agency’s appropriation was $408
communities alleviate conditions of substan-
million for its Economic Development Assis-
tial and persistent unemployment in economi-
tance Programs (EDAP), and $32.2 million for
cally distressed areas and regions.
Salaries and Expenses (S&E). Last year, the
Consolidated Appropriations Resolution for
During much of its existence, EDA was
FY2003 (P.L. 108-7) provided EDA with a
roundly criticized for investing public money
total appropriation of $320.8 million — $290
in “questionable” projects. However, despite
million for EDAP and $30.8 million for S&E.
continuing opposition from some small-
And, in the intervening years, EDAP funding
government and tax-reduction groups, this
levels in the House and Senate have differed
little agency — by Washington’s standards —
by as much as $100 million..
appears to have changed its image for the
better in the past few years. Although critics
For FY2004, the Administration is re-
remain, EDA convinced a growing number of
questing $364.4 million for EDA — $331
Members and observers that it has rectified a
million for EDAP and $33.4 million for S&E.
number of shortcomings and is effectively
The CJS bill (H.R. 2799, H.Rept. 108-221)
serving an important economic development
passed by the House on July 23, provides a
role.
total of $318.7 million for the Economic
Development Administration, including
The Economic Development Administra-
$288.1 billion for EDAP and $30.6 million for
tion and Appalachian Regional Development
S&E. The Senate is expected to take up its
Act of 1998 (P.L. 105-393) included a number
version of the bill in September.
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MOST RECENT DEVELOPMENTS
On June 25, the House Transportation and Infrastructure Committee adopted a modified
version of the Administration’s 5-year reauthorization bill (H.R. 2535) for the EDA. The
Senate Environment and Public Works Committee has yet to take up the EDA’s
reauthoriation.
On July 23 the Commerce, Justice, State (CJS) appropriations bill for FY2004 (H.R.
2799, H.Rept. 108-221) was passed by the House; the bill provides a total of $318.7 million
for the Economic Development Administration, including $288.1 billion for Economic
Development Assistance Programs (EDAP) and $30.6 million for Salaries & Expenses
(S&E). The Senate is expected to take up its version of the bill in September.
Hearings on the Administration’s proposal for reauthorizing EDA were held on June
4 by the House Subcommittee on Economic Development, Public Buildings & Emergency
Management (for background and testimony go to [http://www.house.gov/transportation/]).
On June 12, a bill (H.R. 2454) to reauthorize the agency for 5 years was introduced; EDA’s
current authorization expires on September 30, 2003.
In February, the President made his FY2004 budget request to Congress. For EDA the
Administration requested $364.4 million — $331 million for EDAP and $33.4 million for
S&E.
For FY2003, the Administration requested a total appropriation of $349.9 million for
EDA, a reduction of $15.7 million or 4.3% from what the agency received in FY2002. More
specifically, it requested $317.2 million for EDAP and $32.7 million for S&E. The
Consolidated Appropriations Resolution for FY2003 (P.L. 108-7) provided EDA with a total
appropriation of $320.8 million — $290 million for EDAP and $30.8 million for S&E.
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 107th Congress, and discusses the
reauthorization and appropriations bills being considered by the 108th 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
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Development Act of 1965 (PWEDA). The Act (P.L. 89-136), had three antecedents worth
noting.
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.
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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,
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, 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.1
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
1 U.S. Dept. of Commerce, Economic Development Administration, Economic Development in the
21st Century: FY2001 Congressional Request.
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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.
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 the following:
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. For FY2003 the Administration
requested $234 million for Public Works grants; the conference agreement provided $205
million. The President’s FY2004 budget request is $232 million.
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 funding level requested by the Administration for
FY2003 was $44 million; the conference agreement provided $40.9 million. The President’s
FY2004 budget request is $55 million.
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 funding level requested by the Administration for FY2003 was $22 million;
the conference agreement provided $24 million. The President’s FY2004 budget request is
$22 million.
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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 funding level requested by the
Administration for FY2003 was $1 million; the conference agreement provided $500,000.
The President’s FY2004 budget request is $1 million.
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. For FY2002, the
conference agreement provided an appropriation of $9.1 million, the same level as requested
by the Administration. The funding level requested by the Administration for FY2003 was
$9 million; the conference agreement provided $9.1 million. The President’s FY2004 budget
request is $9 million. (Note: Appropriations for Technical Assistance program includes
funding for university centers.)
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 funding level requested by the Administration for FY2003 was $13
million; the conference agreement provided $10.5 million. The President’s FY2004 budget
request is $13 million.
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
a partnership to coordinate hazard mitigation programs and disaster preparedness activities
designed to help communities become more resistant to natural disasters.
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Brownfield-Related Activities2
EDA has a longstanding role in supporting the economic redevelopment of abandoned,
idled, and contaminated industrial and commercial sites. It has a substantial history of
supporting the Brownfields Initiative of the Environmental Protection Agency (EPA).
Indeed, EDA was the first federal agency to enter into a partnership agreement with EPA —
signing a memorandum of understanding (MOU) in 1995. Last year EDA invested $55
million in 58 brownfield projects; since 1997, it has invested over a quarter of a billion
dollars in more than 250 brownfield redevelopment projects.
EDA’s various economic development program tools have assisted local governments,
nonprofit organizations, and regional Economic Development Districts in overcoming their
brownfields revitalization challenges. Under existing statutory authority, EDA provides
assistance to brownfields-impacted communities designed to achieve long-term economic
revitalization. In assisting with brownfields redevelopment activities, EDA has used a
variety of different program tools to address various phases of brownfields redevelopment,
including:
! Providing targeted planning and technical assistance investments to support
market feasibility studies and geographic information system (GIS)
inventories of brownfields;
! Assisting communities with infrastructure investments to rehabilitate land
and building and attract private capital investment that, in turn, creates jobs;
and
! Making investments to capitalize local revolving loan funds used to provide
gap financing in support of local business development.
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.
2 From testimony of David A. Sampson, Assistant Secretary for Economic Development, U.S.
Department of Commerce, before the Senate Committee on Environment and Public Works, March
6, 2002, available at [http://www.osec.doc.gov/eda/HTML/1a_1add_Mar2002PR.htm], visited April
11, 2003. For more information on brownfields, see CRS Issue Brief IB10114, Brownfields and
Superfund Issues in the 108th Congress, by Mark Reisch.
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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.
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.
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! 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 sub-optimal allocation of resources.
105th Congress: Major Reauthorization
The Economic Development Administration and Appalachian Regional Development
Act of 1998 (S. 2364) passed the Senate by unanimous consent on October 12, 1998, and
passed the House under suspension of the rules on October 13th. The Act, signed into law
by President Clinton on November 13th , was 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 1998 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
! 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
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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%.
Activity in the 107th Congress
Appropriations for FY2002
For FY2002, the Administration requested a substantial reduction in EDA’s overall
funding. While the request included a small increase for S&E, it called for significant
reductions in EDAP. Specifically, EDA’s request of $335 million for EDAP represented a
$76 million decrease from the FY2001 EDAP adjusted appropriation of $411 million. The
agency did not request any funding for the Defense Economic Adjustment program, which
received $31.4 million in FY2001. The proposed elimination of funding for this program
was consistent with the continued phase-down of defense adjustment activity, particularly
base closures, according to EDA’s budget submission. The requested funding level for the
Public Works Program was $250 million, which represented a program reduction of $36
million from the FY2001 appropriation. The amount requested for the Economic
Adjustment Program was $40.9 million, or $8.6 million less than it received in FY2001.
The agency’s FY2002 request for funding its other programs reflected only minor
changes. EDA requested $24 million for Planning, $9.1 million for Technical Assistance,
$500,000 for Research and Evaluation, and $10.5 million for Trade Adjustment Assistance.
On June 27, 2001, the House CJS Subcommittee marked up and passed by voice vote
its CJS appropriation (H.R. 2500), which mirrored the Administration’s request, i.e., $30.6
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million for S&E and $335 million for EDAP, for a total EDA appropriation of $365.6
million. The full House Appropriations Committee agreed with the subcommittee’s totals
and passed the bill on July 10, 2001. The Senate Appropriations Committee recommended
slightly more — $371.6 million.3
Prior to the release of the Administration’s FY2002 budget proposal, which reduced
funding for EDA, the Council for Urban Economic Development (CUED) and associated
national and regional economic development organizations called for an increased
appropriation, noting “EDA remains the main (federal) agency devoted to enabling local
economic development and has a proven ability to leverage private investment to meet
development goals.”4
CUED praised the agency, stating “EDA has proven to be an effective agency with its
impact limited predominately by underfunding,” and further noting:5
EDA is the main discretionary source for infrastructure development and strategic
planning for economic development purposes, and leads other federal agencies in its
adherence to the Government Performance Review Act, regulatory reform and leveraging
of private sector dollars. EDA funds also have been an important source of local
creativity, and the agency, through national technical assistance, has ensured that these
innovations and best practices have been disseminated nationwide. The local reputation
of regional EDA offices is one of flexibility and good government. As infrastructure
remains a critical component of competitive places, a strong EDA is critical to the long-
term strength of the U.S. economy.
The conference agreement, reached on November 9, 2001, provided $30.6 million for
S&E and $335 million for EDAP, for a total FY2002 appropriation of $365.6 million. The
bill was signed into law (P.L. 107-77) on November 28.
Appropriations for FY2003
For FY2003, the Administration requested a total appropriation of $349.9 million for
EDA. More specifically, it is requested $317.2 million for EDAP, which represented a net
$17.8 million decrease from FY2002. Program decreases were requested for: Public Works,
$17.9 million; Planning, $1.7 million; and Technical Assistance, $.665 million. Additional
funding in the amount of $2.5 million was requested for the Trade Adjustment Assistance
Program (TAA). The request of $32.7 million for S&E represented a $2.1 million increase
over the FY2002 appropriation. According to the agency’s FY2003 congressional request,
the S&E increase reflected only adjustment to base increases that included the full cost of the
Administration’s pension and health benefits proposal.
3 The Senate Appropriations Committee also recommended $30.6 million for S&E, but
recommended $341 million for EDAP, $6 million above both the budget request and the House
recommendation.
4 National Council on Economic Development, Partnership for Prosperity: A Federal Economic
Development Agenda, February 2001, p. 18.
5 Ibid., p. 17.
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The Senate Appropriations Committee reported out its CJS appropriations bill (S. 2778;
S.Rept. 107-218) on July 24, 2002. The Committee recommended a total FY2003
appropriation of $366.2 million, including an appropriation of $335 million for EDAP. The
recommendation was $17.8 million above the Administration’s request and was identical to
the FY2002 funding level. More specifically, the Committee recommendation provided
funding of $250 million for public works grants (Title I), $24 million for planning assistance,
$10.5 million for trade adjustment assistance, $40.9 million for economic adjustment grants
(Title IX), and $9.1 million for technical assistance.
Meanwhile, in the absence of an enacted appropriation, EDA programs are operating
at FY2002 levels under a Continuing Appropriation resolution, (H.J.Res. 18) that funds
federal agencies through February 20, 2003. Another FY2003 continuing resolution,
H.J.Res. 2, is the vehicle to complete final funding decisions on the 11 remaining regular
appropriations bills. Although the House-adopted version is a temporary resolution, the
Senate-adopted version includes the full-text of each of the outstanding regular bills. It
would provide EDA with a total FY2003 appropriation of $288.7 million ($30.8 million for
S&E and $258 million for EDAP).
EDA and the Terrorist Attacks
The Economic Development Administration will most certainly have a role to play in
the recovery and rebuilding of the World Trade Center site devastated by the September 11th
terrorist attacks. Under existing statutory authority, EDA administers disaster program funds
through targeted grants to disaster-impacted communities designed to achieve long-term
economic recovery.
It appears that several EDA programs fall within the funding purposes enumerated in
the emergency supplemental appropriations bill (H.R. 2888) passed by Congress in response
to the terrorist attacks of September 11, 2001. And it appears likely that additional funding
will be made available as recovery plans are developed and refined. What exact role EDA
will play, however, is currently under active consideration by the Administration and
Congress.
In the past, the agency has contributed to disaster response efforts, and it has the
statutory authority to assist communities in long-term economic recovery efforts. EDA has
participated in over 20 major disaster adjustment efforts since Hurricane Camille in 1969,
and has received in excess of $600 million in supplemental appropriations to deal with
disasters since 1992.
Some guidance regarding EDA’s role in the economic revitalization of New York City
was provided by the recent testimony of David A. Sampson, Assistant Secretary of Economic
Development for the Department of Commerce. The following are excerpts of his testimony
on November 1, 2001, before the Senate Committee on Environment and Public Works:
! Under existing statutory authority, EDA administers disaster program funds
through targeted grants to disaster-impacted communities designed to achieve
long-term economic recovery.
! When asked to participate with disaster recovery, EDA has a comprehensive and
flexible set of program tools, including: (1) targeted economic recovery planning
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and technical assistance; (2) revolving loan fund grants to address unmet business
financing needs where other financing is insufficient or not available; and (3)
infrastructure construction grants to rebuild an environment attractive to private
investment for the re-creation of job opportunities.
! While [the agency’s] program tools are flexible, EDA has a clearly defined target
group of those eligible to receive EDA investment dollars. Those eligible include
state and local governments, public and private nonprofit organizations, and
regional economic development districts. Businesses are not eligible for direct
assistance under EDA’s major programs.
! Were EDA to be assigned a responsibility for a portion of New York economic
revitalization and recovery efforts, [the agency] would, as [it] has in past disasters,
assemble a special disaster response team comprised of existing headquarters
personnel as well as existing personnel from the six regional economic
development offices around the country.
EDA Legislation in the 108th Congress
Appropriations for FY2004
For FY2004, the Administration has requested a total budget of $364.4 million. More
specifically, EDA is requesting $331 million for its Economic Development Assistance
Programs (EDAP) (a $13.8 million increase over the President’s budget request for FY2003)
and $33.4 million for Salaries and Expenses (S&E) (an increase of $2.6 million over the
FY2003 request).
Traditionally, the appropriations bill for the Departments of Commerce, Justice, State,
the Judiciary, and Related Agencies is known as the “CJS” bill. The CJS bill (H.R. 2799,
H.Rept. 108-221) passed by the House on July 23, provides a total of $318.7 million for the
Economic Development Administration, including $288.1 billion for EDAP and $30.6
million for S&E. The House total is nearly $46 million below the President’s request.
Historically, the House CJS bill has protected and maintained funding for EDA, while
the Senate version has often proposed severe reductions in the agency’s budget. However,
the political dynamics in both chambers appear to have significantly changed during the past
2 years, and it is far from clear whether the House and Senate will reverse roles for this
appropriations cycle or whether both chambers will decide to substantially reduce funding
for EDA. The Senate is expected to take up its version of the bill in September.
EDA Reauthorization
The EDA’s current authorization expires on September 30, at the end of the current
fiscal year (FY2003). The Administration presented its proposal for a 5-year reauthorization
for the agency at a hearing held on June 4, 2003, by the House Transportation and
Infrastructure Committee’s Subcommittee on Economic Development, Public Buildings and
Emergency Management (for background and testimony go to the committee’s website at
[http://www.house.gov/transportation/]).
On June 12, a bill (H.R. 2454) to reauthorize the agency for 5 years was introduced.
Among a number of important changes, the legislation would create a performance based
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incentive bonus program. The bill authorizes $400 million for fiscal year 2004 for EDA
programs, and $25 million increases for each subsequent fiscal year through 2008. In
addition, the bill authorizes $33 million for FY2004 for salaries and expenses, and such sums
as may be necessary thereafter.
H.R. 2454 updates the findings and declarations to reflect current economic conditions
and emphasize the need to increase innovation, productivity and entrepreneurship, and attract
private sector investment; grants the Secretary of Commerce new authorities relating to
existing programs, creates a performance based incentive bonus program, and eliminates
several little used provisions.
On June 25, the House Transportation and Infrastructure Committee adopted a modified
version of the Administration’s 5-year reauthorization bill (H.R. 2535, H.Rept. 108-242) for
the EDA. The Senate Environment and Public Works Committee has yet to take up the
EDA’s reauthoriation.
The Subcommittee also held hearings on April 2 and April 9 on “Regional Economic
Development Issues Relating to the Reauthorization of the Economic Development
Administration.” Background information and testimony are available on the committee’s
website: http://www.house.gov/transportation/.
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 pp.
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 pp.
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,
105th Congress, 1st session. July 10 and 17, 1997. Washington, U.S. Govt. Print. Off.,
1998. 258 pp.
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 pp.
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U.S. General Accounting Office. Economic Development: Multiple Federal Programs Fund
Similar Economic Development Activities. September 2000. GAO/RCED/GGD-00-
220 [Washington]. 79 pp.
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.
Ellen, Ingrid Gould and Amy Ellen Schwartz. Cautionary Notes for Competitive Cities. The
Brookings Review, v. 18, no. 3, Summer 2000: 44-47.
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.
Wirtz, Ronald A. Local Economic Development: A Recipe for Stone Soup. Fedgazette,
Federal Reserve Bank of Minneapolis, v. 12, no. 2, April 2000: 9-10.
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