\ 1 ‘ ‘ ‘ _‘ CONGRESSIONAL RESEARCH SERVICE LIBRARY OF CONGRESS iv e O l'S ‘ImI“I’iii‘Ii‘iiIilnII"na 6076 10-1038* O ECONOMIC DEVELOPHENT: THREE DOMESTIC PROGRAMS (ARCHIVED--O5/14/80) MINI BRIEF NUMBER HB78256 AUTHOR: Breckenridge, Charlotte Economic Division THE LIBRARY OF CONGRESS CONGRESSIONAL RESEARCH SERVICE HAJOR ISSUES SYSTEH DATE ORIGINATED ggggggzg DATE UPDATED g§41gg§g FOR ADDITIONAL INFORMATION CALL 287-5700 0708 CRS- 1 fiB78256 UPDATE-OS/14/80 l§§Q§_Q§El§l2Z9§ Three Federal regional economic development and public works programs were scheduled to expire on Sept. 30, 1979. The question of their extension has been discussed in Congress and in the Administration. One consideration in the discussions has been the place of these programs in the proposals for reorganization of the Executive Departments. These proposals subsequently have been held in abeyance and are generally regarded as no longer being considered by the Administration. 1 The Administration in an announcement on Mar. 1, 1979, proposed shifting to EDA two programs from other agencies: (1) the business and industry loan program of the Farmers Home Administration, with a $1.1 billion authority in FY79; and (2) the Section 501 and 502 programs of the Small Business Administration, with a $95 million budget in 1979 to provide loans and loan guarantees for State and local development companies. This proposal has not been received with any enthusiasm and is not being pursued by the Administration. The Administration also included in EDA the proposed National Development Bank's authority for loan guarantees and loan purchases, amounting to $3.665 billion in the FY80 budget requests. The current EDA business development program-(Title II), has a budget authority of $21.5 million and supports $313.5 million in business loans. The nev proposals reverse the current emphasis on public works under EDA, and shift it to business loans and guarantees. - §A§E§§QQ§D_ §11.2l.I:1.e£1.. 915... B§.<2§£1.E.. Qezeleemenisi The House and Senate have passed differing hills, which went to conference in Dec. 1979. to resolve differences. The main points of difference regarding the EDA program are as follows: (1) standby Local Public Works authority (House bill. Senate and Administration strongly opposed.) (2) eligibility criteria -- broader in House bill, with 90% of U.S. eligible vs. 67% in Senate hill; (3) project selection criteria, affecting targeting to distressed persons (stronger in Senate bill); and (Q) requiring notification of special assistance for areas facing losses of defense bases or contracts (McKinney amendment to House bill). some of the chief changes in existing legislation that may come from the conference are --- ~ -- roughly a $1 billion budget, with an additional $1.8 billion in loan guarantee authority; -- an interest subsidy program of btween $50 million and $350 million; -- a new provision allowing for grants to cover up to 15% of the costs of private sector development projects; -- authority to capitalize local revolving loan funds fo business development; « - a provision for experimentation with equity financing; CRS- 2 HB78256 UPDATE-05/14/80 —— pgggibly a standby Local Public Works (LPW) program; and -- authority to continue efforts in planning, technical assistance, research, dislocatio assistance, and grants to states. Hist9rical_pg;§pggtigg. Authorizing legislation for the) following three economic development programs expired Sept. 30, 1979: A (1) the Economic Development Administration, or EDA, (Public works and Economic Development Act of 1965, as amended -- P.L. 89-136; 42 U.S.C. et-seg.); (2) the Regional Action Planning Commissions formed under Title V of the EDA Act cited above, and extended along with Appalachian Regional Commission in the Regional Development Act of 1975, (P.L. 94-188, 42 U.S.C. 3181); (3) the Appalachian Regional Commission or ABC (Appalachian Regional Development Act, P.L. 89-4, extended in 1975 as noted above). The proposed legislation transmitted to Congress in the President's April 4 message (House Document No. 96-89) reflected some modification of the March 1 announcement relating to EDA: (1) the shifting of programs from the Farmers Home Administration and the Small Business Administration was not included, but was reportedly to be proposed in separate draft legislation at a later date; and (2) the National Development Bank element is almost absent, although there is ta greatly expanded EDA business sdevelopment program reflecting a return to the old Area Redevelopment Administration's (1961~1965) original program emphasis. This resulted in a change in "committee jurisdiction in the Senate. The Senate Committee on Environment and Public iorks now shares jurisdiction with the Committee on Banking, Finance and Urban Affairs for the EDA legislation, and the latter committee has sole jurisdiction over the business development sections.. §§g§t§_A§tiQn. S. 914 Title I. National Public Works and Economic Development Act of 1979. (Congressional Record, Aug. 1, 1979, pp. S. 11059-5. 11106.) The Senate Committees on Environment and Public Works, and on Banking, Housing and Urban Affairs, jointly reported S. 914 on Aug. 1, 1979, and it was passed by a vote of 83 to 17. Title I of this bill extends the EDA, and Title 11 extends the Appalachian and Title V Regional Commission Programs, for four years beginning Oct. 1, 1979. It takes the approach of amending the existing EDA Act, incorporating some of the changes in the Administration's proposal as well as changes suggested by the Committees. This is in contrast to the original 5. 914 introduced April 5, which represented Administration proposals for a substantial overhaul of the existing EDA law. The bill passed by the Senate authorized increased funding for business development: $1.8 billion in loan guarantees, $150 million in direct loans, $50 million in contract authority for interest subsidies, and $27.923 million to cover losses in loan guarantees in default under existing law. These amounts are considerably below those asked by the Administration, although they are significantly larger than the present program. The following tables show 5. 914 authorizations for the EDA programs, and compare them with fiscal year 1979 authorizations. They are reproduced from the Congressional Record of Aug. 1, 1979, p. S. 11065. cns— 3 MB78256 UPDATE-05/1n/80 S. 91a National Public Works and Economic Development Act Authorizations FY80-FY83 (In millions of dollars) Fiscal Year 1980 1981 1982 1983 Economic development and adjustment grants 615.2 715.0 715 715 Sec. 106 (Public works; revolving fund, adjustaent) (555.2) (600.0) (600) (600) Sec. 304 (State grants) (20.0) (75.0) (75) (75) Sec. #03 (10% bonus grants; economic development centers) (40.0) (00.0) (90) (#0) Other grants 99.78 105.0 115 125 Planning, technical assistance (sec. 305) (89.78) (95.0) (105) (115) Research and demonstrations (sec. 303) (10.00) (10.0) (10) .(10) Business development financing (a) 227.923 195.920 Direct loans (150.0) (150.0) Interest subsidies (50.0) (0) Reserve against default (27.923) (45.920) Administrative expenses (b) __§g;1§1_____§g_____§g_____§g__ Total 902.903 1,015.92 830 8&0 Total including admin. expenses 1,oo5.08u (a) Banking committee jurisdiction. Does not reflect $1,800,000,000 in loan guarantee authority (90% of face value of loans). (b) Revised administration request. No specific limit on authorization- Note: Sec. 17 of S. 914 authorizes a non—EDA program of grants to local agencies for the construction of school facilities to assist in providing education to immigrant children, $45,000,000 to be available in fiscal years 1980 and 1981 is authorized to be appropriated to the Southwest Border Regional Committsion for this purpose. CRS- 4 fiB73255 UPDETE—O /T4/30 National Public Works and Economic Development Act Comparison of S. 914 and Previous Authorizations (In million of dollars) Adminis- I tration S. 914 (as Authoriza-Appropria- request reported) tion FY79 tion FY79 (S. 914) FY80 Public works and economic development and adjustment 670 334.5 9 595.2 615.2 Title I (public works) (425) (196.0 (555.2) Sec. 304 (State grants) (75) (20.0) (20.0) Sec. 403 (10% bonus; economic development centers) (45) (30.0) (40.0) Title IX (Special economic adjustment) (100) (88.5) Sec. 404 (Indian economic development (25) (0) Planning, technical assistance, research 75 61.425 94.78 99.78 Planning (sec. 302) (47) (38.245) (37.28) (40.40) Technical assistance (sec. 301) (20) (a)(15.180) (53.50) (49.38) Research and evaluations . A (sec. 301) (8) (8.00) (4.00) (10.00) Business development 325 191.758 569.35 (b)227.923 Title II (loans and ‘ guarantees) (325) (21.0) Trade Act (95.758) Appropriations ___--_____12§;QQQL_._.-_--_-_-_.-_._-_-; Total 1,170 618.104 1,259.33 942.9034 Administration 30.601 (c)62.181 . --- jj (a) Additional $19,400,000 for technical assistance to business included in Trade Act appropriation. V (b) Banking Committee jurisdiction. Does not reflect $1,800,000,000 in loan guarantee authority (90% of face value of loans). (c) Revised administration request. No specific limit on authorization. CRS- 5 HB78256 UPDATE-O5/1H/80 There was considerable discussion on the Senate floor of S. 835, the original bill to reauthorize the regional commissions. {Congressional Record of July 31, 1979, pp. S. 10877-5. 10911.) However, the bill as passed, transformed into Title II of S. 91¢, does not differ significantly from the original bill. some of its main features are (1) authorization of a new one-state commission covering Alaska; and (2) intention of Congress being that each area of the Nation be included in not\ more than one development region, and that every region consist of two or more states, except for Alaska. The regional commissions under title II of the bill are authorized at not to exceed $250 million for each of the fiscal years 1980, 1981, 1982, and 1983. The nonhighuay program authorization for the Appalachian Regional Commission is $3uo million for the 2-fiscal-year period 1980 and 1982, and $380 million for the 2-fiscal-year period 1982 and 1983. The Appalachian Development Highway Program authorizations are $350 million for fiscal year 1981 (an increase of $180 million); $400 million for fiscal year 1982; $050 million for fiscal year 1983; $500 million for fiscal year 198a; and $500 million for fiscal year 1985. Minority views opposed the extension of the Title V Commissions to cover virtually the entire country, on the basis that this changes the legislation's original purpose of targeting assistance to distressed areas, and that the Administration's proposal was not received by the Committee in ,ime for adequate consideration of such a change. There were also requests to reduce the~anount of increase in the Appalachian highway program, and to give more consideration to the special additional‘ features of the Alaska Regional Development Commission. - §gg§g_AgtiQg. On Nov. 1, the House Committee on Rules reported out H.R. 2063, reauthorizing the EDA and Regional Commission programs. Among the major differences between this bill and S. 910 passed by the Senate are (1) the inclusion of a stand—by authorization for counter-cyclical local public works; (2) wider eligibility for the program; and (3) amounts to be authorized for the expanded business loan program, and restrictions on its implementation. H.B. 2013 was passed Nov. 14, 1979. The two bills sent to conference in December to reconcile differences. H.R. 2063 authorizes a total of $1.851 billion for EDA compared to S. 91u's $1.005 billion. It authorizes $350 million for interest subsidies on business loans, compared to a one-year $50 million demonstration program in S. 914. The House also authorized greater fundings for public works, planning grants, and business loans. §;§g;9g§_App§gpgiatiQn§. Appropriations in recent years for EDA, the Regional Action Planning Commissions, and the Appalachian Regional Commission (including the highway program), have been as follows: Fiscal Year Appropriations (thousands of dollars) CBS- 6 MB78256 UPDATE-05/14/80 592291 1.9223. 1.22 12.7.9 1222. FDA *385,378 391,000 494,000 507,525 Title V Commissions 64,062 63,600 64,750 62,800 Appalachian A Regional Commission 290,070 303,000, 323,700 368,700 *Bxcluding $374 million for the Special Title X Job Opportunities Program, which was not funded in subsequent years. By comparison, the counter-cyclical local public works programs of 1976 and 1977 (administered by EDA under P.L. 94-369 and P.L. 95-28), were appropriated $2 billion and $4 billion respectively. §ggi§gg_§§gg§t_g;gpg§g;§_§g;_§Qg While the proposed reauthorization for EDA remains in a House-Senate Conference, the Agency (like the Regional Commissions included in S. 914) has been functioning under a continuing resolution at the same funding levels as Fiscal 1979. Meanwhile, on Mar. 31, 1980, the Administration released FY81 budget revisions that would affec EDA: planned reductions from the originally proposed budget authority would be $400 million in 1980 and in 1981; and reductions in outlays would be $100 million in 1980 and $200 million in 1981. Funding levels will be determined through the Congressional authorizations and appropriations process. In its First Concurrent Resolution on the Budget-—FY81 (Report No. 96-857, March 26, 1980, pp. 88, 89 and 175), the House Committee on the Budget recommends a reduction of 50% in funds for new EDA programs in Fiscal 1981. It assumes that the proposed new programs will continue in FY82 and FY83 at approximately the Fiscal 1981 level. The Senate Committee on the Budget has not released a report. AQ213.1l.QF..3.L-1l§E.1§B.E.§ §§_.§Q§B.§.1.?§ Amending the Public Works and Economic Development Act, Report No. 96-153, Senate Committee on Environment and Public Works (to accompany S. 1145) Chinitz, Benjamin. National Policy for Regional Development, in Essays in Regional Economics, edited by John F. Kain and John R. Meyer, Harvard University Press, Cambridge, Hassachusetts, 1971. Congressional Record. August 1, 1979. pp. S. 11059-3. 11106 Development Financing Act of 1979, Report of the Senate Committee on Banking, Housing, and Urban Affairs to accompany S. 1150, Report No. 96-165, May 15, 1979. Library of Congress. Congressional Research Service. Multi-State cns- 7 HB78256 uPDATm—o5/in/80 Economic Development Commissions: History and Background. Report No. 79-121 Gov. (Sandra 5. Osbourn.) Regional Development Act of 1979, Report No. 96-171 of the Senate Committee on Environment and Public Works, may 15, 1979 (to accompany S. 835) Econoaic Development. In Housing and Development Reporter, Reference Service. July 31, 1978. p. 15: 0001. Economic Development Programs under the jurisdiction of the Committee on Public Works and Transportation, U.S. House of Representatives. Committee Print 96-1, March 1979. Eligibility criteria for EDA title IV: an examination. December 1978. (Charlotte Breckenridge, Economics Division.) Federal regional policy: Federal programs to promote economic development. In Selected essays on patterns of regional change: the changes, the Federal role, and the Federal response. (Charlotte Breckenridge, Economics Division). Committee print. Coamittee on Appropriations U.S. Senate. October 1977. House Committee on the Budget. First Concurrent Resolution on the Budget--Fiscal year 1981. Report Ho. 96-857. March 26, 1980. House Committee on Public Works and Transportation., H-R. 2063, Committee Print may 9, 1979, to amend the Public Works and Economic Development Act of 1965. Martin, Curtiss H. and Leone,Robert A. Local Economic Development: The Federal Connection. Lexington, D.C. Health and Company, 1977. 138 p. National Public Works and Economic Development Act of 1979: Message from the President of the United States transmitting a draft of proposed legislation. House Document No. 96-89, Apr. 0, 1979. Patterns of regional change-—interpretation and highlights. Committee print, Committee on Appropriations, U.S. Senate. September 1978. (Prepared by Charlotte Breckenridge, Economics Division). President Carter's Fiscal 1931 Budget Revisions, Released March 31, 1980. Review of title V commission plans. A study prepared by Congressional Research Service for the Committee on Environment and Public Works U.S. Senate. (Charlotte Breckenridge, Economics Division, and Sandra Osbourn, Government Division). Committee print No. 95-9. November 1977. Should the Appalachian Regional Commission be used as a model for the nation? United States General Accounting Office Report CED-79-50, Apr. 27, 1979. UNIVERSITY ' FE‘ _ ST. LO.U‘,/¢..> MO.