Remarks by: SANDY K. BARUAH ACTING ASSISTANT SECRETARY OF COMMERCE FOR ECONOMIC DEVELOPMENT, ALASKA MUNICIPAL LEAGUE CONFERENCE - ANCHORAGE, ALASKA

WEDNESDAY, NOVEMBER 9, 2005

Remarks by:
SANDY K. BARUAH
ACTING ASSISTANT SECRETARY OF COMMERCE
FOR ECONOMIC DEVELOPMENT
ALASKA MUNICIPAL LEAGUE CONFERENCE
ANCHORAGE, ALASKA
WEDNESDAY, NOVEMBER 9, 2005 –12:00PM

Thank you, Assemblyman Sprague, for that kind introduction. It is truly a pleasure to be here today in beautiful Alaska to speak with the state’s leaders in creating great communities. Thank you for the invitation.

The Economic Development Administration is proud of our partnership with the state of Alaska, in which EDA has invested over $92 million in 122 projects since 2001.

As a result of this partnership, thousands of jobs throughout Alaska have been created and saved, and many millions of dollars have been invested by both the private sector and by the state and other partners. I would like to recognize and thank Bernie Richert, the Economic Development Representative for EDA here in Alaska, who has done the real heavy lifting on the EDA side in these efforts—much of the credit belongs to him.

I have been asked to provide an overview on a policy initiative by President Bush to, for the first time in over a generation, fundamentally reform the Federal approach to important community and economic development—namely, the Strengthening America’s Communities Initiative.

If the President’s vision is fulfilled, it will be the first time that the Federal Government places a serious emphasis on regional economic development approaches and focuses Federal efforts on communities with the most dire need. Ultimately, this proposal is about helping Alaska’s communities—and those across the nation—that are most in need, and it’s about doing so in a more effective manner.

This initiative is about creating a better, more efficient and clearer mechanism for delivering critical important resources to America’s communities.

As for efficiency and clarity, you can see the current Federal approach does not offer that to any great degree.

There’s widespread duplication and overlap across these programs, and, while the basic mission of these programs are similar since all are grant programs aimed at economic and community development organizations—the regulations, eligibility standards, application procedures, deadlines, and reporting requirements differ and even conflict with each other.

What’s more, many of these programs lack clear goals or performance measures, and many of them are unable to sufficiently demonstrate any measurable long-term impact at the macro level.

For many of America’s distressed communities, the current maze presents an impediment to a more prosperous economy.

As stewards of Federal programs geared to help communities, it is incumbent upon us to ask the tough question: “Is the Federal Government as effective as possible in helping all American communities build prosperity—especially in a new century that presents new economic challenges and opportunities?”

Though the question is rhetorical, the answer is still nonetheless NO.

In fact, thought leaders on community and economic development—from all philosophical corners—have called for some form of consolidation of duplicative development programs.

Some of these are the Progressive Policy Institute, the Government Accountability Office (GAO), the Organization for Economic Cooperation and Development (OECD), Federal Reserve Chairman Alan Greenspan, the Heritage Foundation and the Council on Competitiveness

Clearly, the Administration is not the only group that thinks we can and should do better.

Essentially, the Strengthening America’s Communities Initiative takes 18 of the 35 Federal economic and community development programs—these are only the direct grant programs that focus on community and economic development and make grants to local government entities, and non-profits—and combines them into a new consolidated program.

On the right side of this slide are the 18 programs to be combined into the new program. The left side of the slide represents the community and economic development programs that remain essentially unchanged.

The Strengthening America’s Communities Initiative is built around several key concepts, with an overarching theme that we can and should do better.

While we may not agree on several facets of the proposed initiative, I can tell you two things on which I think we do. First, if we were locked in a room and asked to build a new Federal delivery system for community and economic development, we would certainly disagree on a variety of issues. Second, I guarantee that we would not build a system that looks like today’s maze.

1. The current system disadvantages the very communities the Federal Government is targeting for assistance.

The current system of 18 separate programs presents a barrier in the form of a maze for smaller communities and communities with limited financial resources. The Federal Government has created a barrier for smaller and less affluent communities to access Federal assistance programs.

The administrative cost to understand and monitor – and to apply for and manage – 18 separate programs is an undue and unnecessary burden on communities.

Unless your community can afford to keep staff on-board that can monitor, apply for, administer, report on, and keep abreast of all the changes in 18 separate programs, you are not able to fully access all the Federal benefits that may be useful to your community.

2. The current Federal direct grant system is unfair to some of America’s more distressed communities.

For example, the current Federal Community Development Block Grant formula is over a generation old and does not direct resources in an equitable manner.

And, the Community Development Block Grant formula produces some very interesting and mysterious situations—Fresno, California, for instance, receives $16 million per year while Cleveland, Ohio, with almost the same population, unemployment and poverty levels, receives $53 million.

This is not to say that Fresno receives too little or Cleveland too much, but how can communities with virtually the same level of economic distress receive such disparate levels of Federal assistance:

Also, communities with very low poverty levels such as Westchester County, New York, Palo Alto, California and Naperville, Illinois continue to receive anti-poverty funds year after year as an entitlement—resources that could be going to much more distressed communities. The communities with real need deserve better.

3. The current Federal model has not demonstrated strong results at the macro level – we should expect more from our taxpayer dollars.

In some cases, there seems to be an inverse relationship between the amount of community development funds to a city and their long-term economic success. Some of the communities that have received the most community development assistance over the past generation continue to be the same places that are most economically disadvantaged.

Last year, the Federal Government spent $5.31 billion in these community development funds, and we cannot tell the taxpayers who footed the bill, how many jobs were created, or how many fewer people there are in poverty today than last year.

4. The current Federal approach bifurcates community, economic, urban and rural development programs over five cabinet departments.

The existing program bifurcation leads to similar interests competing over the same limited Federal resources – community development programs are bolstered (or reduced) and the expense (or benefit) of economic development programs. Same for urban and rural.

The SACI concept, for the first time, creates a single place in the Federal system where everyone concerned about community and economic development issues—rural and urban development issues—can come together and focus their attention.

No longer would we have to rob rural America to fund urban development projects, or sacrifice community development programs to fund economic development programs.

5. Most importantly, the current approach is fundamentally misaligned with the realities of the world-wide economy in which we all live.

The opportunity and challenge of the world-wide economy calls for a focus on economic regions. For economies to prosper, communities must work in a regional, collaborative fashion – building on regional competitive advantages.

The lines between community and economic development – and urban and rural development, always fuzzy, have become irrelevant in today’s “flatter” economic playing field. A holistic approach to development is needed, and the current system is fragmented and disjointed.

The new system will reward those regions engaged in collaborative, regional development practices that identify shared regional assets and build strategies for capitalizing on these assets to build regional competitive advantage.

In addition to these basic concepts provided by the President, we’ve had some high-powered advice to help shape our thinking. Earlier this year, Commerce Secretary Carlos Gutierrez commissioned a 17-member non-partisan Advisory Committee.

The Advisory Committee’s membership includes experts from diverse backgrounds and various geographic regions, and includes members from the private sector, state, and local and tribal governments, community-based organizations, academia and the research community.

We are delighted to have Wanetta Ayers, the Executive Director of the Southwest Alaska Municipal Conference, as a member of the Committee – she is a terrific addition to an all-star cast.

The role of the Committee was to take the long view and provide to the Administration their vision of the future of community and economic development and suggest how the Federal Government could best respond to the challenges of the 21st Century economy.

Following thoughtful and serious deliberations and the consideration of public input, the Advisory Committee submitted a report of its recommendations to the Secretary in July.

The report’s recommendations are grouped into three main themes:

• Bringing Federal policy into the 21st Century

• Targeting to need and responding to opportunity, and

• Assuring flexibility, accountability, and results.

The Committee’s specific recommendations for Bringing Federal Policy into the 21st Century are to:

- Make regional competitiveness the overriding goal of Federal development policy. Success in a world-wide economy requires this, as regional collaboration is a critical element of achieving a sustainable competitive advantage.

- Review all Federal policies for their impacts on regional economies. There are many Federal actions that impact regional economies. One example is the location of Federal research laboratories – we can see how they can anchor new industry clusters – just look at how the National Institute of Health (NIH) has influenced Montgomery County, Maryland, or how Oak Ridge is becoming a generator of innovation in the Tennessee Valley region.

- The Committee recommends that we provide funds for innovation-based regional strategies, and make these strategies a prerequisite for follow-on Federal assistance. It is critical that communities within a region collaborate on the regional strategy.

- Coordinate and consolidate workforce, economic and community development efforts. These elements too often exist in silos, and can no longer be dealt with separately.

- Direct Federal resources to encourage communities to plan and act through regional partnerships.

- And, finally, promote public/private partnering for regional growth. The Advisory Committee provides examples in their report called “Leadership in Action” that highlight efforts underway that involve public/private partnerships – as well as cross-border regional collaborations.

The Committee was strongly supportive of targeting Federal resources on those parts of America in most economic distress. They recommended that the Federal Government:

- Target Federal funding to communities and regions of greatest need. This has been the intent of Federal efforts throughout the last century, but targeting has somehow become diluted.

- Develop new criteria for eligibility and allocation to better gauge community distress and relative need. The Committee suggested that such measures could include capital investment, new business formation, homeownership, underemployment, unemployment, and others.

A group of recommendations in this area deal with a recommended new approach to grant-making to distressed communities, which the Committee believes is important to achieve performance and results. And those are to:

- Develop a new competitive challenge grant program for distressed communities

And to

- Provide capacity-building assistance to help distressed communities access competitive grants.

In the third area of Assuring Flexibility, Accountability and Results, the Advisory Committee’s recommendations are to:

- Establish a cabinet-level inter-agency counsel to coordinate Federal economic and community development activities.

- Consolidate Federal economic and community development programs: Through independent reports and testimony, the Committee became aware of the overlap of programs, the multiple delivery channels and the differing regulations and guidelines.

They also heard how this lack of consolidation made disaster recovery in Florida more cumbersome after the 2004 hurricanes. They believe that navigating the current Federal system places an added burden on distressed communities that may not be as skilled in dealing with the world of Federal grants.

- Next, develop better analytic tools for regions and communities to formulate strategies and measure progress.

- Require and reward non-Federal co-investments, but allow exceptions in circumstances of high distress.

- And, finally, allow sub-regional organizations to receive Federal assistance directly, providing that such requests are consistent with regional strategy.

The Committee’s report is an excellent piece of work -- the Secretary was very pleased – and it has significantly impacted the way we think about the Initiative. It’s an easy and excellent read and urge you to pick it up and give it the attention it deserves, which I certainly can’t do in just this presentation.

Using the recommendations in the Advisory Committee’s report as a guiding framework, the Administration is proposing an extreme makeover in the Federal delivery system for critical economic and community development resources.

Compared with the slide that you saw in the beginning of my presentation, you can see in this slide that the process will be greatly simplified, with administrative costs at the local level considerably reduced, and represents administrative savings at the Federal level as well.

SACI will reduce the burden on communities to access critical resources, no longer requiring them to navigate a maze of 18 programs.

There will be a “one-stop-shop” at the Department of Commerce with two programs—the Direct Grant Program and the competitive Challenge Fund Program, with four primary streams of funding, which are:

1. Direct grants to “places” such as cities and communities that meet the distress criteria;

2. Grants to states, which they will sub-grant to smaller eligible communities primarily in rural areas;

3. Competitive grants to communities that are taking pro-active steps to become “development-ready” and are demonstrating progress;

4. Bonus or incentive funding to groups of communities and counties that collaborate in a regional partnership—a mechanism to support regional partnerships.

President Bush believes the Federal Government has a useful role in economic and community development – to help those communities that have not fully experienced the American Dream to be in a better position to reach that goal.

Our job as members of this Administration is to make the case for change—to ask the tough questions and realize that we can and should do better.

This can’t be done without resources, and since we are spending taxpayer dollars, stewards of the public trust like me and my colleagues, owe it to the communities we serve and the taxpayers who foot the bill to be innovative in finding ways to make a positive difference.

With that, let me say that I appreciate the opportunity to be with you this afternoon, and I look forward to your questions and your ideas.