The 1995 session of Congress, the first session of the 104th Congress, which was elected in 1994, may well be called the session that never ended. In fact, it did not end in the 1995 calendar year. Officially, it ended just before noon on January 4, 1996, and the second session began immediately thereafter. At year's end, the 1995 session produced 88 bills that were enacted into law, reported to be the lowest output in enacted legislation in over 60 years.
The low productivity in new laws does not reflect the intense activity of the year under the new Republican leadership which took over with its highly publicized agenda, the "Contract With America." Efforts to draft an omnibus budget reconciliation bill with the goal of attaining a balanced federal budget in seven years -- the lead item of the Contact -- dominated the session. This led to impasses between the Congressional leadership and the Clinton Administration over the budget and the appropriations bills for the 1996 fiscal year. The result was the shutting down of the Federal government twice, once for six days and later for 21 days.
At this writing, five months into the FY96 fiscal year which began last October 1, five out of 13 appropriations bills are still not enacted. Departments involved in economic development and related programs--such as the Departments of Housing and Urban Development, Commerce and Labor and agencies such as the Small Business Administration and the Environmental Protection Agency--do not have approved FY96 budgets four months after the start of the 1996 fiscal year. Some departments such as Transportation, Defense, Treasury and Agriculture are free of all this having had their FY96 budgets approved last fall.
As this is written, Congress was about to reconvene with some hope of reaching an agreement with the White House on FY96 appropriations that would fund the government through the rest of the fiscal year ending next September 30. The politics of the 1996 Presidential election year are a factor as both sides want to have the matter resolved and some stability restored as soon as possible.
Stopgap Funding for Agencies
The federal departments and agencies without budgets are operating under a stopgap spending resolution covering the period from January 26 through March 15. The Departments of Housing and Urban Development and Commerce, including the Economic Development Administration, are being funded at the FY96 level agreed upon by House-Senate conferences on appropriations bills not yet signed into law by the President. Some other agencies, such as the Department of Labor and the Department of Health and Human Services, are being funded at the FY95 level departments because the Senate has not yet approved its version of a FY96 appropriations bill that could be agreed upon at a House-Senate conference.
Under the last compromise that was the basis for the temporary resolution, the Congressional leadership continued to make deep cuts in some domestic programs while the Administration sought to retain funding for new programs that the House leadership is trying to terminate. An example is the Labor Department's programs under the Job Training Partnership Act (JTPA) which begin their program year July 1. JTPA training for adults was cut by 17% and for retraining dislocated workers by 35%. No money has been approved for youth summer jobs as yet.
Two programs of interest to economic developers barely survived in the last agreement. Both were reported in The Washington Post to be "permanently terminated." But through negotiations, the Advanced Technology Program, administered by the Commerce Department's National Institute for Standards and Technology, and the Community Development Financial Institutions CDFI fund are still alive. Both are being funded at 75% of their FY95 level.
President Clinton stated his continuing support for the Advanced Technology Program and CDFI in his State of the Union Address in February.
The last temporary agreement was the second near termination for CDFI, a new, small program that provides financial and technical assistance to community development banks, multi-bank community development corporations, credit unions and other financial entities that target loans and investments on poor urban neighborhoods and rural areas. Early in 1995, Congress approved a $16.4 billion package of program recisions aimed at cutting back on a number of domestic programs that had been funded under the FY95 budget when the Democrats were still in control. The President vetoed the package and following extensive negotiations, a $16.3 billion package was finally enacted.
Though FY96 appropriations are not yet approved for a number of important departments and agencies, work has already begun on the appropriations for FY97, which begins next October 1. The Administration submitted a 25-page budget in February described as a "thematic overview of priorities." The detailed budget must be delivered before March 18.
The Administration set two basic objectives for the FY97 budget: a balanced budget in seven years, and commitments to economic growth and protection of vulnerable Americans, including senior citizens, working families and children.
The Administration's budget emphasizes a shift in resources to education and training, science and technology and other priorities to make businesses more competitive and provide skills needed to compete in the new economy. Among the efforts related to economic development are skill grants or job training vouchers for dislocated workers and low- income adults, and the Goals 2000 education program to help states and local school systems raise academic standards and improve teaching and learning.
The budget overview includes a proposal to establish a tax incentive program to be available over seven years for the redevelopment of environmentally contaminated sites called brownfields. The program is expected to be funded at $2 billion and be part of a $130 billion tax cut plan proposed by the President in the budget negotiations.
Public attention early in 1995 was focused on the new Congressional majority's Contract with America, a list of ten major reforms targeted to be achieved by the 104th Congress. As yet, most of it has not been enacted into law. In addition to the balanced budget, some other items in the Contract were unfunded mandates, the line item veto, term limits, welfare reform and tougher anticrime laws, and a middle-class tax cut. Items enacted as law affect the Congress as a workplace, unfunded mandates, federal paperwork reduction, lawsuits against companies and sex crimes against children.
Unfunded mandates
Unfunded mandates, an issue of interest to cities across the country because of its effect on their strained budgets, was one of the legislative success stories of the 1995 Contact With America though the effect of the legislation is still open to question. Under the law which was enacted in March 1995, legislation that imposes unfunded mandates of more than $50 million on state and local jurisdictions is subject to a point of order in either house. This means any member can raise a point of order and a majority of members would have to vote to override it. The cost of bills that impose such mandates, including amendments, will be estimated by the Congressional Budget Office (CBO). The law also effects mandates imposed on the private sector. The CBO will estimate the cost of a private sector mandate of more than $100 million. Federal agencies are required to undertake cost benefit analyses of mandates and consult with state and local governments before imposing new regulations that result in costs. There may be efforts to tighten up the law in 1996 by requiring a three-fifths majority vote in both houses to approve a bill that imposes an unfunded mandate.
Line Item Veto
The line item veto, which would give a sitting President the power to cancel out appropriations for individual programs or targeted tax breaks rather than being limited to approving or disapproving an entire appropriations bill, had been long advocated by former President Reagan and was included in the Contact With America. Both Houses of Congress passed bills in 1995 but final action will not take place until sometime in 1996. The line item veto is of concern to many because it would make domestic programs, including economic development programs, more vulnerable to cuts or terminations.
A true line item veto would require a constitutional amendment. But the two bills proposed would give a President something of an equivalent without changing the Constitution. The House version, called "enhanced recisions," would allow a president to propose a package of recisions which would become law if both houses did not pass bills to overturn the package. The president could veto bills that attempted to overturn the recisions. This would give a president much more power over appropriations than is now the case. On the Senate side, Majority Leader Robert Dole (R-KS) proposed that each appropriations bill be separated into hundreds of smaller bills for submission to the president. But many Senate members felt it would be too rigid, making it difficult to shift money from one program to another. It is expected that the Senate may accept the House enhanced recisions approach, but require a sunset provision calling for expiration in the year 2000.
Term Limits
Term limits was a highly visible part of the Contract With America but it was derailed in May 1995 by a US Supreme Court decision which prohibited states from enacting laws that limit congressional terms. A number of states had taken this action over the previous several months. This left a constitutional amendment as the only way to limit terms. A resolution in the House calling for a consitutional amendment failed to get a two-thirds majority. In the Senate, Majority Leader Dole announced plans in November for a vote on a term limits resolution in April 1996. The resolution calls for limiting Senators to two six-year terms and House members to six two-year terms.
Welfare
Welfare reform, another item in the Contact, is tied to a balanced budget because it is a major federal mandate. Because of requirements that welfare recipents take training and transiton to the workforce, it is also a factor in workforce training and development. A central issue in reforming welfare has been to discourage welfare recipients -- particularly young single mothers -- from having more children and adding them to the welfare rolls. As agreed to by House-Senate conferees, a family cap provision would prohibit the states from providing welfare to cover children born to welfare recipients. States who do not want to comply with this provision would have to pass specific legislation to exempt themselves. The Clinton Administration opposes this family cap provision. The Senate bill was less stringent than the conference report. It permitted but did not require states to deny welfare coverage to children born to people already on welfare.
The bill would merge all federal child care programs, including Aid to Families with Dependent Children (AFDC) into the existing Child Care and Development Block Grant. This includes programs for welfare recipients and working poor. The block grant would be changed to give states the authority to run their own programs, in effect, ending a 60-year old federal guarantee of cash payments to all eligible welfare mothers and children. It would be funded at $18 billion over seven years, including $11 billion in mandatory funds. The Clinton Administration believes that more money is needed, particularly to help welfare recipients to transition to jobs.
The bill calls for a $26.2 billion reduction in funding for food stamps over seven years which the Administration says is too deep a cut. The Senate proposed a $20 billion reduction.
The report would end guaranteed eligibility of welfare recipients for Medicaid. This would be in effect while they are on welfare and for one year after they get off welfare. The Administration opposed to ending this guarantee. The Senate bill retained the guarantee.
The bill would make it more difficult for children who are considered to be disabled to qualify for Supplemental Security Income (SSI). SSI provides financial assistance to low-income elderly, blind and disabled people. The bill provides for two levels of benefits which depend on the child's disability. Children who not severely disabled would be eligible for 75 percent of full benefits.
Crime
The Contract promised a tougher approach to crime than the omnibus anti-crime bill that was enacted in 1994 under the Democratic majority. The Republican leadership proposed a block grant to states and localities rather than categorical grants to support police hiring, new prisons and socio/economic programs that were part of the anti-crime bill. When the House bill became stalled in the Senate, the House acted through the appropriations process by providing funds for block grants rather than for the individual grant programs enacted in 1994. The Senate version of the Justice Department appropriations bill retained the police hiring money but the conference approved the block grant. This appropriations bill, which also covers the Commerce and State Departments had not yet been signed into law. Support for increasing anti-crime efforts is seen as critical to economic revitalization of inner city areas as crime and violence are major obstacles to investment and business location.
Middle Class Tax Cut
The middle class tax cut continues to be an issue in the negotiations between Congress and the White House over the balanced budget package. The tax cut was a important part of the Contract with America because it was to soften the impact of spending reductions on programs that would reduce the deficit and move the country toward a balanced budget. A $500-per-child tax credit for families gross adjusted incomes of up to $110,000 per year is the major item. Other items involved an expansion of individual retirement accounts and increased individual and corporate capital gains rates. The White House has also proposed a $500-per-child tax credit and other tax reductions. Current reports of the economy slowing down may be factor in bringing about agreement on some level of tax cuts as part of a final balanced budget agreement.
What follows is a report on the status of a number of federal departments, agencies and programs involved in economic development and related programs:
Economic Development Administration
The struggle during the 1995 legislative year to save the Economic Development Administration was something of a saga beginning with a Forum on Economic Development supported by a coalition of several organizations that back continued funding of the agency.
Despite early threats by Republican leaders to terminate the Department of Commerce and many of its agencies, EDA managed to avoid being included in a $16.3 billion recision bill which was finally approved in July.
The major reform of EDA was proposed by the House Committee on Transportation and Infrastructure. It called for decentralizing EDA into a network of several -- the number has varied from six to eight -- regional multi-state commissions, which would be similar to the Appalachian Regional Commission. Each commission would be co-chaired by the governor of one of the states in the region and a federal representative. The bulk of EDA's funding programs -- infrastructure grants, economic adjustment, defense conversion, university centers and technical assistance -- would be carried out by the commissions. Ten percent of EDA's money would support a small staff in Washington, which would help with funding decisions and distribution of funds. In effect, the states would gain essential control of the program through the commissions.
CUED voiced strong opposition to this proposal because it would effectively end a strong federal presence in economic development and represent a significant shift of EDA resources from cities to rural areas. Proponents of the program said it was only way to save EDA given the opposition in Congress to the Commerce Department and its programs.
The House leadership, however, rejected the commission proposal because it would essentially create a group of new federal agencies. Minority leader Dick Armey (R-TX) and Budget Committee Chairman John Kasich (R-OH) advocated termination of EDA but were persuaded to allow the continued existence of a greatly reduced EDA within the Small Business Administration with a staff of approximately 25. With such a small staff, this would mean block granting EDA's limited resources to the states though this has not been spelled out in proposed legislation.
Another bill in the Senate (S 929) would abolish the Commerce Department, terminate EDA and place its public works infrastructure program in the Department of Agriculture. The defense conversion program at EDA would be transferred to the Economic Adjustment Office in the Department of Defense but without any funding authority. The remaining EDA programs, economic adjustment assistance (Title IX), planning and technical assistance would disappear with the termination.
EDA survived through 1995 but its future remains uncertain. EDA received strong support during the year when it came to funding. The House and Senate agreed to an amount of $348.5 million for FY96. This was down from $408 million last year but considerably more than the $100 million recommended by the Senate appropriators.
The $20 million for salaries and administration will require, however, that EDA eventually reduce its personnel by over 100 people unless other monies can be reprogrammed. EDA is being funded during the current period of operations at the level agreed to by House-Senate conferees on the Commerce, Justice, State Appropriations. The amount for full 1996 fiscal year is $348.5 million, including $20 million for salaries and administration. The money is apportioned to the agency for the temporary period as a percentage of the full year.
The House and Senate reached a conference agreement on an appropriations bill for the Department of Housing and Urban Development's programs. Midway through the 1995 session, the House and Senate budget committees agreed to an annual level of $4.6 billion for the Community Development Block Grant. This was a relief for mayors and urban interest groups who had been anticipating a major reduction in the program. The amount was frozen at the $4.6 billion level for five years, however, so that there would be no upward adjustments for inflation.
The conference on the HUD appropriations bill attached setasides to the CDBG program increasing the amount of setasides by $65 million. One setaside was to be $80 million for the Economic Development Initiative, a HUD program that provides grants to cities for use with Sec. 108 loan guarantees for economic development generating projects and activities. EDI had not been funded out of the CDBG pot previously but had run out of funds it had been appropriated in the fall of 1994. The EDI setaside, supported by the Senate, was stricken from the report, however. This leaves Sec. 108 and local efforts using CDBG funds as the only HUD resources for urban economic development.
The appropriations bill established a loan limitation of $1.5 billion for the Sec. 108 loan guarantee program. This ceiling is lower than the one established in FY95, $2.2 billion, and higher than $1 billion proposed by the Senate. To support administrative services for Sec. 108, $675,000 was approved, a much higher amount than the $225,000 proposed by the House.
The agreed upon CDBG setasides are for public and assisted housing program services ($53 million), the Tenant Opportunity Program ($15 million), Youthbuild training ($20 million), historically black colleges and universities ($6.5 million), Community Outreach Partnerships by academic institutions ($7.5 million) and the Housing Assistance Council's work in rural areas ($2 million).
The conferees urged HUD to focus funding for Community Outreach Partnerships on universities located in and around urban areas with substantial minority populations, lower living standards and concentrations of empty and abandoned residential structures. HUD was also to give priority to proposals that seek to address community problems comprehensively and in partnerships with local government.
A reauthorization of HUD programs will be taken up again this year. In keeping with the "reinvention" efforts of the Administrations, HUD has proposed to consolidate its programs and allow communities to shift funds among the CDBG, HOME and Homeless programs. Republicans in Congress have their own ideas about restructuring HUD. Rep. Rick Lazio, Chairman of the House Banking and Financial Services Subcommittee wants to rename HUD the Department of Communities. He would replace HUD's 25 current activities with five new program areas: economic development, community development, infrastructure development, public services and housing. CDBG, of course, would be the source for the economic development, community development and infrastructure activities.
Empowerment Zones/Enterprise Communities
A number of bills were introduced during the session to increase the tax benefits in EZs, ECs and other economically distressed areas. Senator Christopher Bond (R-MO), Chairman of the Senate Committee on Small Business, has proposed legislation to give a special preference or set aside in bidding on government contracts to small businesses that locate or expand in "Historically Underutilized Business Zones," to be called HUBZones. Senator Bond's intent is to give an incentive for small firms to locate in economically distressed areas and employ people who live in such areas. To be eligible for a preference or set aside, a business would have to hire a substantial portion of its workers from zone residents.
A bipartisan bill, introduced by Senators Spencer Abraham (R-MI) and Joseph Lieberman (D-CT), would significantly increase existing EZs and ECs and offer the same benefits to a number of areas that failed to be designated at EZs or ECs in the 1994 competition. The proposed "Enhanced Enterprise Zone Act" (S1252) would provide the following:
Senator Abraham proposed to include a Federal Renaissance Zone Act that would establish a pilot program for up to ten states willing to forego tax revenues from economically distressed areas. States that establish zero tax zones could qualify for federal no-tax zones as well. The idea is based on state legislation introduced in Michigan by Governor Robert Engler to create "Renaissance Zones" in which there would be total relief from state and local income, business, property and utility taxes. Senator Abraham's intent is to give the federal zones complete market-based incentives to generate economic revitalization and growth.
Senator Kay Bailey Hutchison (R-TX) introduced legislation (S743) to create a Commercial Revitalization Tax Credit that would be similar to existing tax credits for historic preservation and low income housing. The tax credits would be available to businesses to use against the cost of construction, expansion and renovation in economically distressed areas, including EZs and ECs. A business would have a choice of taking a one-time 20% credit or four years of credits at 5% annually. The bill calls for the setting of a national ceiling of $100 million in available credit in 1996, $200 million in 1997 and $400 million in the years thereafter.
Development Banks
Despite the attempts to terminate it, the Community Development Financial Institutions (CDFI) fund is operating and has solicited applications for funds. Though it has only $31 million to award for CDFIs and $15.5 million to support Bank Enterprise Awards, the agency received 620 applications requesting over $300 million in funding. The awards go to qualified community development lending organizations that have a primary mission of providing loans and financial services to targeted distressed urban and rural areas. The BEA program assists community lending efforts of commercial banks by helping to replenish their federal deposit insurance funds.
Tax Credits for CDC Contributions Repealed
Among some small programs that were ended as a result of temporary budget agreements, was a special tax credit established in 1994 for making contributions to any one of 20 Community-based Development Corporations that were designated by HUD following a national competition. The tax credit was seen as a way of generating support for community-based activities. Some groups had considerable success in using the tax credit for raise private contributions. The South Dallas Development Corporation, for instance, received a contribution of $2 million from Texas Instruments.
The Defense Base Closure and Realignment Commission (BRAC) announced a new round of major base closings that was later adjusted and approved by Congress and the President. The new round affects 28 major military installations (10 Army, 8 Navy, 6 Air Force, and 4 Defense Logistics Agency). The latest round adds to the existing list of bases to be closed. Approximately 70 major facilities were marked for closure in 1988, 1991 and 1993, yet only nine have actually been transferred to total civilian control.
Funding for the Office of Economic Adjustment in the Defense Department, which provides assistance to communities in developing reuse strategies for former military base sites, was incresaed to $49.9 million in the FY96 budget. The agency had been appropriated $39 million the previous two years.
Congress made some headway during 1995 toward a reauthorization of the 1980 Superfund law to provide relief from liability for contaminated sites, which would encourage investment in them for redevelopment. In the House, Rep. Michael Oxley (R-OH), Chairman of the Commerce Committee's Subcommittee on Commerce, Trade and Hazardous Materials, introduced legislation providing for limited repeal of retroactive liability for a select class of small businesses. In the Senate, Rep. Robert Smith (R-NH), Chairman of the Environment and Public Works Subcommittee on Superfund, Waste Control and Risk Assessment, proposed a tax credit of 50% of the cost companies have to pay to clean up waste dumped prior to 1981.
The major problem with repealing retroactive liability as of 1980 is the cost, estimated by the Congressional Budget Office to be up to $1.3 billion.
Under its Brownfields Redevelopment Initiative, EPA has committed to funding a total of 50 brownfield pilots before the end of 1996. Commitments to 40 of these pilots have been made.
In the appropriations bill, however, Senate language was deleted which directed that funding for the Initiative be sufficient to complete the award of 50 cumulative brownfield pilot projects by the end of the 1996 fiscal year and to carry out other elements of EPA's Brownfields Action Agenda. The conferees stated support for the brownfields program but the House would not commit itself to enough money to fund all 50 projects by the end of FY96. The Brownfield pilot program was funded at $5 million in FY95. The conferees agreed upon $7 million for FY96. EPA funding is part of the appropriations bill for HUD and independent agencies, which has not yet been approved by the White House.
The conference report directed that EPA expedite the assessment of brownfield sites to ensure early remediation of these properties in conjunction with local economic development goals. Conferees agreed on the importance of brownfields programs and directed EPA to expedite the assessment of brownfields sites to ensure early remediation of these properties in conjunction with local economic development goals. Brownfields initiatives are to be funded at no less than the current level.
At each brownfield site, city officials, community residents, organizations, financial institutions, developers and others work together to assess contamination at abandoned inner-city sites; leverage funds to attract economic activity; resolve liability issues; involve community residents in assessment, cleanup and redevelopment; review future land use options; and serve as models for other communities seeking to redevelop brownfield sites.
Eight cities and three states were selected in November to receive up to $200,000 each over two years for brownfield pilot projects. The 11 recipients of these project funds are: Buffalo, NY; Dallas, TX; the Duwanish Coalition, Seattle, WA; Philadelphia, PA; Pittsburgh, PA; Sand Creek Corridor, CO; West Jordan, UT; and the states of Illinois, Indiana and Minnesota. Another 11 projects were announced in January. These were in: Emeryville, CA; Houston, TX; Lawrenceville, MA; New York City; three adjoining cities in Indiana - Gary, East Chicago and Hammond; Phoenixville, PA; Portland, OR; Stockton, CA; Tacoma, WA; Worcester, MA; and the State of Rhode Island.
Based on a survey of 36 cities, the U.S. Conference of Mayors estimates an annual loss of $121 million in local tax revenues because of the obstacles to redeveloping these sites. The 36 cities have a total of 43,000 brownfield acres.
The appropriations bill provided $1,163 billion for the Superfund program. The conference report directed EPA to prioritize its resources to the greatest extent possible. The report said the funding level was more than sufficient to continue all the scheduled work on the sites that are on the National Priorities List and to deal with emergency response needs.