U.S. Department of Commerce
Economic Development Administration
Statement for the Record Submitted by Phillip A. Singerman
Assistant Secretary for Economic Development

Subcommittee on Transportation and Infrastructure
Committee on Environment and Public Works
United States Senate

Tuesday, July 14, 1998
9:30 am
406 Dirksen Senate Building

Chairman Chafee, Senators Warner and Baucus, and distinguished Members of the Subcommittee, thank you for convening this important hearing. I appreciate the opportunity to testify before this subcommittee. Know of my sincere appreciation for the many courtesies and considerations that you and Members and staff of the Committee have extended to me and my staff. In particular, we acknowledge Senators Max Baucus and Olympia Snowe for introducing the Administration's legislation by request. We are grateful for the opportunity of working with you to reauthorize the Economic Development Administration (EDA).

Allow me to next thank Secretary of Commerce William M. Daley for his testimony today on behalf of EDA reauthorization and for his exemplary leadership at the Department of Commerce. Leadership that has resulted in a comprehensive management review of the operations of the Department, implementation of improved communications throughout the Department, focus on a Department-wide strategic planning effort, and guidance that set forth Departmental themes, goals and objectives that integrate bureau missions.

The Secretary and I are accompanied today by the EDA Executive Management Team and I take this opportunity to introduce them to you: Chester Straub, Jr., Deputy Assistant Secretary, Office of Program Operations; Ella M. Rusinko, Acting Deputy Assistant Secretary for Program, Research and Evaluation and Director, Office of Communications and Congressional Liaison; Mitchell L. Laine, Chief Financial Officer, Edward M. Levin, Chief Counsel, and, Kimberly Cain, my Special Assistant.

A CASE FOR EDA

Mr. Chairman, the first time I appeared before you and Members of the Committee was at a confirmation hearing in late 1996. Since then, I am proud and pleased to report to you today that we have accomplished a great deal at EDA. We have aggressively focused on:

the management and operations of the agency,

implementing a strategic planning process that complements the Department's plan,

ensuring that our mission combines with Departmental themes, developing and implementing program performance measures in compliance with the Government Performance and Results Act of 1993 with validated results; and,

partnerships in economic development.

Our outcomes are tangible and EDA is an administratively reformed and reinvented federal agency.

Distressed communities across America face tremendous economic development challenges as we approach the year 2000 and a new age of technology. As Secretary of Commerce William M. Daley has stated, "We continue to make trade and the development of our economy the most important piece of the Department." The EDA mission fully supports that objective as EDA remains focused on assisting rural and urban distressed communities in developing a sustainable economic base which will be both competitive in tomorrow's world marketplace and productive in the creation of local jobs and in the leveraging of private sector investment. EDA continues to operate under the fundamental principle that economic development is a local process. EDA provides strategic assistance with which local communities in a public/private process build the capacity to understand their economic challenges, develop the consensus strategies necessary to create positive economic change and implement their plans with specific actions or milestones for economic growth. EDA cooperates with and fosters partnerships with state and local governments, regional economic development districts, public and private nonprofit organizations, and Indian tribes to sustain and promote economic development across the country. EDA programs continue to be needed to assist local, state and regional efforts to improve economic conditions.

THE REFORM AND TRANSFORMATION OF EDA

EDA is doing more with less and is a leaner, streamlined Agency having:

to reduced regulations by over 60 percent;

over a two-year period reduced Agency staff by 30 percent and the number of non-career positions from 14 to 5, or by 60 percent;

reduced Washington staff by 25 percent in Fiscal year 1996;

simplified the grants application process, including its pre-application and application forms to better serve EDA customers; and,

implemented an agency reorganization approved by the Administration and the Congress.

EDA has implemented sound management and administrative practices that include:

continued delegation of authority to Regional Offices for the approval of grants;

instituted a team-based approach to program delivery in the field with remaining Economic Development Representatives in individual states receiving greater support from Regional offices;

moved toward an automated on-line application process;

focused Headquarters staff on policy direction and program evaluation;

developed a Strategic Plan that reflects Administration Initiatives and Department of Commerce themes and sets forth goals and objectives for EDA's economic development program;

implemented program performance measures to comply with the Government Performance and Results Act of 1993 (GPRA);

accelerated resolution of outstanding Inspector General audit issues;

hired a Chief Financial Officer to oversee the agency's financial management

responsibilities; and,

utilized resources in an optimum manner to reduce its contingent liability for past program activity as well as to manage increasing workloads, many the result of recent supplemental appropriations. The agency currently manages close to a $1 billion portfolio of approved construction projects that require monitoring, servicing and accounting before closeout.

EDA EVALUATIONS AND PROGRAM PERFORMANCE MEASURES

EDA has validated, robust results of the public works and defense economic adjustment programs. In the public works evaluation, researchers found that:

99 percent of the projects were completed as planned;

91 percent were completed on time;

52 percent were completed under budget;

327 jobs were created or retained for every $ 1 million in EDA investment (an EDA job cost of $3,058);

every $1 million in EDA funding leveraged $10.08 million in private-sector investment;

every $1 million in EDA funding increased the local tax base by $10.13 million;

the number of local jobs doubled in the six years after project completion; and, at project locations the unemployment rate was 30 percent higher than the state average unemployment and 40 percent higher than the national average unemployment, per capita income was 40 percent less than the state and national averages, and 40 percent more were below the poverty level than in the state or nation.

We plan to continue evaluating the balance of our programs. Thus far, completed studies include:

Post-Disaster Assistance: Hurricane Andrew conducted by Aguirre International;

The Impact of Incubator Investments conducted by the University of Michigan, National Business Incubator Association, Ohio University and the Southern Technology Council; Public Works Program: Performance Evaluation conducted by Rutgers University, the New Jersey Institute of Technology, Columbia University, Princeton University, the National Association of Regional Councils and the University of Cincinnati; Defense Adjustment Program: Performance Evaluation conducted by the Rutgers University-led consortia of research entities; and Public Works Program: Multiplier and Employment - Generating Effects conducted by the Rutgers University-led consortia of research entities.

Studies Underway or for which a Request for Proposal has been announced include:

Evaluation of the Midwest Flood Program Implementation by Aguirre International;

Evaluation of the Overall Economic Development Program by the Corporation for Enterprise Development;

Evaluation of the Trade Adjustment Assistance Program by the Urban Institute; and, Evaluation of EDA Revolving Loan Fund Program.

EDA plans to apply research information to our continued, evolving analyses of program performance. We continue to focus on refining reporting requirements established under the Government Performance and Results Act of 1993 (GPRA).

The Department of Commerce Inspector General's March 1998 Semiannual Report to Congress states,

"In examining the overview of EDA's financial statements, we found that it appropriately (1) links EDA's programs with the Department's strategic plan, (2) identifies management actions taken to address internal control deficiencies, and (3) reflects EDA's progress in meeting GPRA requirements."

The report also cites areas where EDA can improve reporting results and presentation of performance data, and we are committed to implementing changes that comply with the Inspector General's observations.

WHY REAUTHORIZE EDA

As EDA looks to the future, we continue to focus on our mission and how to better serve the Nation's distressed communities in an expanding global economy that is more technology oriented. Many of America's communities are leaders in global competitiveness, but for every community in this category, antitheses exist. Lagging areas of the country may lack the technical prowess and expertise yet possess untapped, unique and marketable resources. American communities need to reap the benefits that local resources offer, and to do so requires viable strategies for economic sustenance, growth and prosperity that creates jobs. Community strategies for economically needy areas will require thoughtful investments in infrastructure and technology capacity in order to effectively keep pace with the rapidly changing environments of a world economy. And, EDA is facing the economic challenges of today for a better tomorrow.

To maintain and continue the EDA momentum in helping the Nation's distressed communities, to complete the agency's reform process, and for national public policy purposes, the agency needs reauthorization. EDA has not been reauthorized since 1982 and the Public Works and Economic Development Act, as amended, needs to be updated, streamlined and brought into the fast-approaching 21st Century.

THE ECONOMIC DEVELOPMENT PARTNERSHIP ACT

The Administration's proposal (S. 1647), the Economic Development Partnership Act (EDPA) of 1997 was transmitted to Congress on March 31, 1997 and seeks a five-reauthorization of EDA. The legislative proposal was drafted over the course of more than a year and thoughtfully weighed and considered reauthorization legislation previously considered by the 103rd and 104th Congresses. EDPA adheres to the reform principles developed in legislation considered during the 104th Congress. EDPA constitutes an entire rewrite of the agency's current authorizing legislation, the Public Works and Economic Development Act of 1965, as amended. It encourages cooperation among Federal agencies and complements EDA management initiatives focused on the efficiency and effectiveness of the EDA mission.

EDPA facilitates program management and oversight by allowing transfers of funds from other Departments and Agencies; requiring grant recipients to maintain records that adhere to sound financial record keeping practices that are available for audit; adding the Inspector General for the Department of Commerce to the list of authorized individuals with access to records for examination and audit; and, permitting self-certification by applicants, as appropriate. Also, the proposed legislation eliminates duplication through the establishment of an overall economic development strategy for economic adjustment and public works projects.

EDPA provides for long-needed improvements that strengthen EDA economic development tools through changes that lessen burdens on applicants, facilitate program delivery and enhance program flexibility to address the needs of the Nation's most distressed communities. The proposed legislation eliminates the designation system which under current law means once an area is designated as "distressed" it retains that designation regardless of improving economic conditions. S. 1647 replaces the process with one that requires eligibility for EDA assistance at time of application based on clearly defined economic distress criteria that includes high unemployment riotously per capita income levels, or out-migration.

Other improvements include:

updating the requirement for the preparation and adoption of a comprehensive economic development strategy as a basis for EDA development assistance;

allowing minor changes to the purpose and scope of projects which allow recipients to enhance the economic development area;

permitting recipients of EDA approved grants to use project underrun funds for same project enhancements as a recognition of grantees' prudent management of federal dollars;

enabling assistance for projects on military or energy installations without requiring that the recipient have title or a leasehold interest in the property for a specified term which solves a current legal obstacle to the implementation of projects in affected areas; and,

affirmation of the EDA role in other long-standing activities or programs, such as in defense conversion, post-disaster economic recovery and support of University Centers.

EDPA makes many Improvements, but it carefully preserves safeguards and protective provisions, such as prohibiting EDA assistance that would ( 1 ) promote or extend unfair competition or tend to create excess capacity in a given industry or (2) relocate firms from one part of the country to another.

CONCLUSION

Mr. Chairman, in conclusion, EDA has transformed itself and instituted a system for on-going self-analyses. As such, EDA has a tremendous opportunity to actively utilize public policies and public investments to promote American ingenuity that culminates in economic growth and job creation. EDA has validation of program performance as evidenced by recent studies. The management reforms that EDA has implemented are yielding more efficiency and effectiveness in program management and delivery. EDA is focused on its financial management operations and is working closely with the Inspector General for the Department of Commerce to achieve an unqualified financial statement, which we were just shy of obtaining for 1998.

EDA has an established record of expertise and experience in economic development and has been a pioneer helping distressed communities create economic development best practices, such as revolving loan funds and small business incubators. EDA works. EDA programs work.

The next millennium will host a different set of economic challenges for American communities: How to maintain and improve global competitiveness in an increasingly information-dominated, technology-oriented society where distance is becoming obsolete. EDA needs to be there, helping America's distressed communities implement their own targeted strategies and programs for economic recovery and growth. In so doing, we continue to strengthen the Nation's economy which is a product of innovation rooted in American creativity and spirited by the American Dream.

Mr. Chairman, I reiterate my appreciation for this hearing and take the opportunity to express our willingness to work with you on behalf of America's rural and urban distressed communities. I would be glad to respond to any questions which you and Members of the Subcommittee may have on EDA. Thank you.