Baseball, apple pie and a balanced budget. Congress and the White House labored hard in the first half of the first session of the 105th Congress to restore the country's faith in the federal government's ability to spend only what it collects . The last time the federal budget was in balance was 1969, and in recent years, the phrase "balanced budget" had become something of a mantra, bandied about in every election, used as a weapon in partisan wrangling. Although an overall national debt still exists, the budget deficit had been steadily declining since the passage of the Omnibus Budget Reconciliation Act of 1993. Now, thanks to a deal reached this summer by Congress and the White House, the federal government stands poised to have a balanced federal budget by 2002.
A budget deal forged in late May was eventually converted into law with the passage and president's approval of twin tax and budget reconciliation bills. The Balanced Budget Act of 1997 and the Taxpayer Relief Act of 1997 included many beneficial initiatives to economic development, such as welfare-to-work grant funding, a brownfields cleanup tax credit, 20 new Empowerment Zones (EZs) and a welfare-to-work tax credit.
Perhaps hoping to ride the momentum created by the balanced-budget package, Congress and the White House returned their attention to moving several economic development-related initiatives forward, such as the reauthorization of the Intermodal Surface Transportation Efficiency Act (ISTEA), Superfund reform, financial services modernization and fast track trade authority. By the end of the year, none of these issues were resolved, but plenty of debate and compromise have positioned them better for potential passage in 1998.
While the pace of moving important legislation forward may not have left a fiery trail, sparks flew often enough in Congress and at the White House. Partisan fighting was not the only impediment that kept legislation from moving forward. Internecine fighting within the GOP leadership threatened to negate the balanced-budget deal throughout the appropriations process. The president created difficulties with his own party in Congress when he did not include democratic members as active participants in the balanced-budget negotiations in the early spring. At the end of the session, he was not able to rally enough support within his own party to win passage of fast track authority, a key legislative goal for him.
Prolonged work on the supplemental spending bill in early spring and the balanced budget resolution in the summer pushed back work on the 13 appropriations bills. Keeping true to the target numbers in the balanced-budget agreement also made the appropriations path to passage rough. In the end, six continuing resolutions were needed to keep agencies and programs funded until the final appropriations bills were passed in mid-November.
Despite the desire to adjourn early to allow members to return to their districts, Congress saw their target adjournment date of October 31 come and go. With major legislation and spending bills still up in the air, adjournment was postponed several times until business was concluded on November 13. With the first session of the 105th Congress over, this federal review highlights the major issues relevant to economic development practices that Congress and the Administration considered in 1997.
Department of Commerce
Controversy surrounding the use of sampling in the 2000 Census created many anxious moments during this session of Congress. As a sticking point in the Commerce, Justice, State, the Judiciary & Related Agencies Appropriations bill that funds the Department of Commerce, the Census debate stalled passage of the bill until the very end of the session. In fact, it was the last major piece of legislation cleared before Congress adjourned November 13. Until the bill was signed by the president into law on November 26, Commerce operated under a continuing resolution, the sixth stopgap measure used to fund agencies following the end of fiscal year 1997 (FY97) on September 30.
Economic Development Administration
Staving off an attempt to have the agency's budget slashed, the EDA budget for FY98 was finalized at $361 million, an increase of $12.5 million over the previous year's mark (minus disaster relief funds) and $18 million more than the President's request.
The program breakdown, compared to last year's funding, is:
In the House, Rep. Joel Hefley (R-CO), Chair of the National Security Subcommittee on Military Installations and Facilities, introduced an amendment that would have reduced EDA funding by $90 million. The House voted, 305-107, against the amendment when it voted on the Commerce, Justice, State Appropriations bill in late September. The fate of EDA funding remained up in the air because the Senate version of the spending bill included a $78 million cut, mostly to the planning and public works programs. House and Senate conferees met and finally agreed to the $361 million level already passed by the House.
Late in the session, Sen. Spencer Abraham (R-MI) introduced a bill (S. 1316) that would eliminate EDA altogether and transfer its functions to the Office of Management and Budget (OMB). The bill would repeal the 1965 Public Works and Economic Development Act and transfer financial obligations owed to the EDA to the Treasury Department. The bill was referred to the Senate Government Affairs Committee but was not acted upon.
EDA Reauthorization Tried Again
Legislation to reauthorize EDA was introduced again in the House. The Economic Development Partnership Act of 1997 (H.R. 1430) is based on the Administration's proposal and was sponsored in the House by Transportation and Infrastructure Committee Chair Bud Shuster (R- PA). Commerce Secretary William Daley said of the proposed reauthorization proposal, "The Economic Development Partnership Act of 1997 represents the highest management objectives as EDA continues to focus on its mission Ñ to serve the Nation's economically distressed communities."
Efforts to reauthorize the agency, which has managed to remain funded even without enabling legislation since 1982, picked up speed in the summer when the House Transportation and Infrastructure Subcommittee on Public Buildings and Economic Development held two hearings, July 10 and 17, to examine the agency's case for reauthorization. Among those who testified was EDA chief Phillip Singerman, who urged passage of the five-year reauthorization plan.
One of the questions addressed by Singerman during the hearing was the high percentage of areas of the country that are eligible for EDA funding. Those unfamiliar with the EDA have argued that 85 percent of the country, an alarmingly high figure, is eligible through designation as economic districts. This designation has been eliminated from the reauthorization proposal so that communities would have to qualify based on their eligibility at the time that they applied for funding.
National Council for Urban Economic Development (CUED) President April Young testified on July 17. She pointed out the particular effectiveness of EDA and its programs in addressing cases of severe economic distress as she reiterated the need for reauthorization.
New subcommittee Chair Jay Kim (R-CA) felt that the bill was a good starting point, and the bill was reported out of committee but did not make it to a vote by the full House. Efforts to have the agency reauthorized will continue in 1998.
During the July 17 hearing, the EDA Public Works grant evaluation report was presented. The report, done primarily by Rutgers University, is being used as both a resource and a tool for promoting the assistance that EDA has brought to severely distressed communities. It catalogues all public works grant projects that received closeout payments by FY90 and offers useful information such as the federal share of funding and jobs created. A companion report on EDA's Defense Economic Adjustment program grants was released in mid-December.
Almost the same time as the Defense Economic Adjustment report was issued, President Clinton announced plans to create a new Office of Community Economic Adjustment, which would serve communities impacted by international trade. The office would focus on early intervention and community planning and would be staffed by personnel from the Department of Defense's Office of Economic Adjustment in addition to EDA personnel. President Clinton is expected to request FY99 funding of $50 million for this office, with total five-year funding of $250 million. This is part of a larger initiative to retrain dislocated workers.
National Institute of Standards and Technology
The National Institute of Standards and Technology (NIST), which funds the Advanced Technology Program (ATP) and the Manufacturing Extension Partnership (MEP) program, received total FY98 funding of $672.9 million. The president had requested $692.5 million, which would have been a $120.5 million increase from the FY97 level. NIST programs provide funding, expertise and information on research and development (R&D) projects that may not succeed without such assistance.
As a side note, total R&D spending for the Department of Commerce totaled $1.1 billion, representing a 14.8 percent increase, the largest increase of any agency.
Advanced Technology Program
The FY98 budget for ATP was passed at $192.5 million, with $82 million for grants. This program, mentioned by Commerce Secretary William Daley, as one of the agency's "most important," co-funds high-risk, economically important R&D projects that can accelerate progress in key technology areas, foster joint ventures and research partnerships and demonstrate the feasibility of technologies that may otherwise not have attracted private-sector venture capital investments.
In March, Secretary Daley announced that his department would study the policies and procedures of ATP based on issues raised by Congress. As a result of this study, Daley announced in July several changes that would strengthen the program, particularly its mission to work in concert with industry to foster the development and broad dissemination of high-risk technologies with the potential for broad economic benefits. Among the key changes are:
A formal definition of a "large company" as one of the 500 largest companies based on total revenues, analogous to the Fortune 500. A dollar value as the cutoff point for determining a large business will be published annually with ATP's regular notice of available funds. Previously, the program rules had only defined a small company;
A requirement that large companies, when applying as individual firms, must cover a minimum of 60 percent of the total project costs. Previously, companies applying as individual firms were not given a specific minimum level of cost-sharing; Modifications in project selection, placing greater emphasis on joint ventures and consortia with a broad range of participants. This provision is intended to encourage more collaboration between large and small companies; and A new, clearer method of valuing goods, such as computer software, and related services provided by one member of a joint venture to another when computing contributions to cost-shares.
New rules governing ATP will be in effect starting with the FY98 competitions. The first round of competitions includes one general competition, open to proposals from all areas of technology, and seven focused programs, with areas including: Catalysis and Biocatalysis Technology, Digital Video in Information Networks, Tools for DNA Diagnostics, Microelectronics Manufacturing Infrastructure, Selective-Membrane Platforms, Photonics Manufacturing, and Premium Power. The latter four are new categories. Available first-year funding for this round is set at roughly $82 million.
Manufacturing Extension Partnership
MEP was funded at $113.5 million for FY98. This represents an increase over the $95 million received the previous year, but is still less than the $123.4 million requested by the president. MEP helps fund manufacturing extension centers that provide smaller businesses with manufacturing and business assistance. Matching funds are required from state, local and private sources.
A provision to allow MEP centers to continue receiving federal funding beyond six years was included in the appropriations act. The centers can receive additional funding in one-year increments provided that this funding does not exceed one-third of the center's total annual costs and that the center has received a positive evaluation. This provision, popularly referred to as the "sunset clause," was first introduced as part of Science Subcommittee on Technology Chair Connie Morella's (R-MD) bill to authorize NIST.
In a related legislative development, a new Senate Commerce Subcommittee on Manufacturing and Competitiveness has been formed. Although current Senate legislation on ATP and MEP is covered by the Commerce Subcommittee on Science, Technology and Space, some issues may in the future fall into the new subcommittee's bailiwick. The subcommittee, led by Abraham, will look at workforce training, regulatory, tax and trade issues related to manufacturing and competitiveness.
International Trade Administration
The International Trade Administration (ITA) received funding of $283 million for FY98. Last year, the agency was funded at $270 million. ITA's goal is to increase the competitiveness of U.S. companies by promoting exports, negotiating and implementing trade agreements, and helping businesses overcome unfair trade barriers.
The Trade Development program, which counsels U.S. businesses and operates the Trade Information Center, was funded at slightly less than $59 million for FY98. This program funds the Advocacy Center which advocates on behalf of U.S. businesses in global competition for overseas contracts. The program also is responsible for negotiating and enforcing industry sector trade agreements such as those on autos, textiles and aircraft.
The Market Access and Compliance Program was funded for FY98 at $17.3 million. This program identifies barriers to market access and how to overcome them, assists with the development of bilateral and multilateral trade policies for greater market access, and provides counseling and assistance to U.S. businesses seeking market access in specific countries or regions.
The Import Administration's FY98 budget was set at $28.8 million. The agency administers U.S. antidumping laws and countervailing duty laws, and various industry-specific trade agreements, to protect American firms from unfair trade practices.
The U.S. and Foreign Commercial Service (US&FCS) FY98 budget was passed at $171 million. The US&FCS has a network of offices throughout the country and in 69 foreign countries and provides export counseling and export promotion services to U.S. firms.
Minority Business Development Agency
The Minority Business Development Agency (MBDA) coordinates all minority business programs and provides business assistance such as access to markets and resource opportunities. For FY98, the MBDA received $25 million, down from $28 million in FY97 and less than the president's request of $27.8 million.
Department of Housing and Urban Development
The Department of Housing and Urban Development (HUD) spending bill was signed October 27. Because of the costs involved in reauthorizing the Section 8 housing program, HUD's budget was significantly increased, from $23.7 billion, which is lower than the president's request of $24.8 billion, but higher than the FY97 level of $19.2 billion.
Community Development Block Grant and HOME programs
The Community Development Block Grant (CDBG) program received level funding of $4.675 billion. CDBG funds are used to rehabilitate homes, improve infrastructure, provide job training and finance other projects within the community. A provision in the HUD bill makes brownfields cleanup now an eligible CDBG activity.
The amount of setasides, or special appropriations earmarked for specific use, increased by 73 percent over last year's level of $289.6 million. This means that entitlement communities, urban counties, states and insular areas will see 11 percent less of the CDBG pot than in previous years. Among the $499.9 million in FY98 setasides are:
The new Brownfields Redevelopment competitive grant program did not receive a CDBG setaside. The $25 million in FY98 funding did, however, come from the CDBG program Ñ the president requested that the program fund be taken from the CDBG program, so this dropped the CDBG program down to the final $4.675 billion from $4.7 billion. The program funds brownfields cleanup activities.
The Section 108 loan program, a component of the CDBG program, was authorized at $1.261 billion. This is a decrease from FY97 loan authority of $1.5 billion and is slightly less than the level requested by the president. Typically, entitlement communities will use Section 108 loans to finance infrastructure projects, large-scale economic development projects and housing rehabilitation initiatives.
The HOME Investment Partnerships program saw a $100 million increase in FY98 funding which brought its total budget to $1.5 billion. As with the CDBG program, setasides are on the rise within the HOME budget. Although no setasides were requested for HOME, three programs received special appropriations from HOME funds: Housing Counseling was funded at $20 million, an increase in its FY97 setaside amount of $15 million; $7 million went to a HUD management information system; and the Homeownership demonstration project received $10 million. The last program is designed to help expand the secondary market for non-conforming mortgage loans in economically distressed or underserved communities.
One change made to the HOME program in the appropriations bill is the raising of the minimum threshold level to $750,000 in order to receive a HOME entitlement. Communities qualifying before the threshold was increased are grandfathered by the bill.
Section 108 Guidelines
HUD developed underwriting/security guidelines for the Section 108 program in order to help communities sort out projects based on risk, provide guidance on the additional security expected by HUD for funds used on moderate and high risk projects, and develop a role for financial advisers to review these projects. The result of these new guidelines will likely be the determination that many more projects are financially infeasible or politically unacceptable. In effect, the guidelines could serve to cut funding of projects that are considered moderately or very risky, thus changing the operating policy of the 108 program.
HUD's motivation for requiring increased collateralization and securitization was due to the passage of the 1990 Credit Reform Act and pressure by the Office of Management and Budget (OMB) to uphold the Credit Reform Act and its requirement that federal agencies estimate the subsidy cost of loan guarantee programs. In FY96, concerns were raised over the expansion of the program and the potential uncertainty over availability of future CDBG funds by the Congressional Budget Office (CBO) and OMB. In FY96, OMB disallowed grantees from relying on future block grant funds to guarantee the 108 program. It also limited the allowable loss revenues on the program to a maximum of 2.3 percent of the total program allocation.
The major changes that these draft guidelines would make include:
Standards for underwriting real estate and business loans would be used when approving a Section 108 loan application. The end user's ability to repay or the presence of adequate collateral to use for repayment are the basis for the loan decision. Future CDBG allocations are no longer sufficient as a guarantee; New criteria for credit analysis of the business and collateral/security for the loan for determining funding. A credit pricing model would assign an interest rate based on the risk rate, i.e., the higher the risk, the higher the rate; and Financial advisers for projects or programs with a budget greater than $500,000. The financial adviser would prepare a loan review report, evaluate the loan regularly and report on loan performance.
Practitioners have voiced their concern over how these draft guidelines may change the nature of the Section 108 program. They commented that the program would no longer be the lender of last resort and would no longer fund the more substantive revitalization projects. HUD has not yet stated how these guidelines will govern the program.
Department of Agriculture
The Department of Agriculture (USDA) FY98 budget agreement provided more than $2 billion for rural economic and community development programs, representing an increase of $84.3 million over the previous year's appropriations. Total FY98 appropriations for the USDA are projected to increase to $88.4 billion, up from the FY97 level of $83.7 billion.
Since Congress authorized the reorganization of the USDA in 1994, the department has consolidated 43 agencies into 30 based on their missions. With a reduction of workforce projects, the department will save an estimated $8 billion by the year 2002, the target date for the federal budget to be balanced.
In November, Undersecretary for Rural Development Jill Long Thompson announced the major achievement for rural areas in 1997 that were featured in the department's "rural report card." The report stated that more than 150,000 jobs were created or preserved in 1997 as a result of rural development programs. Other major accomplishments included investments of:
More than $60 million in USDA funds in the three rural Empowerment Zones (EZs) and 30 Enterprise Communities (ECs), thus creating or saving some 7,000 jobs and providing additional services that now reach more than 700,000 rural residents; $226 million in loans, loan guarantees and grants to build new or improve community facilities such as day care centers, health care clinics, schools, fire stations and libraries in 568 rural communities; About $936 million in loans, loan guarantees and grants to finance the start-up or expansion of 1,183 businesses and cooperatives, creating or preserving 53,000 jobs; More than $824 million in loans and loan guarantees for construction of electric facilities serving rural areas, providing new service to 151,000 rural families and businesses and creating 19,000 new jobs; and $380 million in loans for rural telecommunications projects involving new digital switching technology and nearly 50,000 miles of fiber optic and copper cable, improving service to more than 211,000 rural households and businesses and creating 8,711 new jobs.
Rural Economic and Community Development
USDA's rural development programs received a boost in FY98 funding, totaling $2.2 billion, representing a $178 million increase over the previous year's level. Rural development programs provide direct loans, loan guarantees, grants and technical assistance to help rural areas take advantage of economic growth opportunities. The three USDA agencies that support rural economic and community development are: the Rural Housing Service (RHS), the Rural Utility Service (RUS) and the Rural Business-Cooperative Service (RBS).
RUS received $664 million in FY98 budget authority for loans and grants, for a total of $734 million with administrative expenses. This agency funds such initiatives as electric and telecommunications upgrades and facility expansions, the Distance Learning and Medical Link program which provides rural residents with greater access to educational and medical services, and Water 2000, an initiative designed to help rural communities conform to federal drinking water and other health standards.
RHS was budgeted for FY98 at $921 million for loans and grants and $1.3 billion in total budget authority. It provides loans, loan guarantees, rental assistance payments and grants to low- income families and also offer community facility loans and grants.
RBS received $70 million for loans and grants, with a total $101 million with administrative expenses. The loan and grant level is roughly the same as what the agency received in FY97. Programs under RBS provide clients with technical assistance, development, and research services. Of the loan programs, the Business and Industry (B&I) loan guarantee program provides protection against loss to the client so that private lenders will extend the necessary credit. The intermediary relending and the rural economic development programs, on the other hand, make loans to "sponsors" who in turn loan to businesses and other organizations for development purposes.
B&I loan guarantees also are provided through the Community Adjustment and Investment Program (CAIP). This program offers assistance to communities experiencing severe economic changes due to new and fluctuating world trade patterns. To date, 47 communities have been identified as having suffered from job losses due to the implementation of the North American Free Trade Agreement (NAFTA).
Loans are available to rural businesses that are located in an eligible community, meet conventional B&I loan standards and can show that at least one job will be created or retained for every $35,000 of the total loan amount. In addition to the USDA, the Small Business Administration (SBA) also makes loan guarantees available through its 7(a) program. Loans are available through the North American Development Bank (NADBank), an international financial institution jointly capitalized and governed by the United States and Mexico.
Rural Community Advancement Program
The Rural Community Advancement Program (RCAP) was created to manage a portion of the USDA's current programs through a single, integrated initiative. It does so by:
Increasing flexibility so that investments meet local needs; Improving program implementation and increasing usage of performance measures; and Encouraging participation by state and local officials, nonprofits and the private sector, state rural development councils, and others in the development of state strategic plans for rural development.
Three programs under the RCAP umbrella received FY98 funding: the Rural Housing Assistance Program (RHAP) with $27.1 million, the Rural Business-Cooperative Assistance Program (RB- CAP) with $47.9 million, and the Rural Utilities Assistance Program (RUAP) with $577.2 million.
Foreign Agricultural Service
The Foreign Agricultural Service (FAS) received $7.7 billion for FY98. FAS administers a variety of export promotion and food assistance programs that help increase sales of U.S. agricultural products in overseas markets and develop long-term trade relationships with other countries. Changes in domestic farm programs as a result of the 1996 Farm Bill have made local farmers and ranchers more dependent upon exports and thus more vulnerable to shifts in overseas markets.
Included among the FAS's programs are the export credit guarantee programs, which were given $5.7 billion, a $200 million increase over FY97 funding. These programs provide guarantees, through the Commodity Credit Corporation (CCC), for repayment of commercial credit extended to finance U.S. agricultural export sales. These credit guarantees are generally made to developing and middle-income countries with foreign exchange restraints to help them to buy U.S. agricultural commodities. The increase in funding will enable the program to reach emerging overseas markets. Export credit guarantees for short-term repayment (up to three years) will be able to use $5.3 billion of the total allocation for the program, and the remaining $400 million will be used for intermediate-term credit guarantees (three- to ten-year repayment terms).
The Market Access Program (MAP) budget remained level at $90 million. Formerly the Market Promotion Program, MAP supports the development, maintenance and expansion of commercial export markets for U.S. agricultural commodities and products. CCC funds are used to reimburse part of a participating organization's costs for undertaking foreign market development and export promotion activities in specific countries. Eligible participants include nonprofit agricultural trade organizations, state regional trade groups and private companies.
Small Business Administration
As one of the last spending bills signed by the president, the Small Business Administration's (SBA) FY98 budget gave the agency $716 million in new budget authority, down from the previous year's $852.4 million. The figure includes $135 million in emergency supplemental appropriations for the disaster relief loan program which is not included in the regular appropriations. The president's request for the agency, in comparison, was $701.6 million.
The FY98 budget will allow SBA to approve total loan guarantees of up to $10 billion as part of its 7(a) loan guarantee program. The 7(a) program helps small businesses with loans for working capital, startup costs, expansions and other purposes by guaranteeing the long-term loans made by private lenders. Last year, the 7(a) program approved a record $9.5 billion in loans, approving 45,288 loan guarantees. This represented a 23 percent increase over the volume of loan guarantees approved in FY96. As a result of the Small Business Programs Improvement Act of 1996, SBA will spend $8 million on portfolio management, including monitoring and oversight activities.
The Section 504 Certified Development Company loan program was authorized at $3 billion, up from the president's requested level of $2.3 billion. Qualified small businesses can use 504 financing to purchase real estate, equipment and machinery, and other fixed assets.
The Small Business Investment Companies (SBIC) program received a record $1.3 billion in lending authority to provide small businesses, through debt and equity financing, with risk capital for growth, modernization and expansion. SBICs are privately owned and managed, for- profit investment firms. There are 300 SBA-licensed SBICs, and for FY97 they produced equity and debt capital investments totaling $2.4 billion.
Surety bonds, required of prime contractors to the federal government and on many state, county, municipal and private-sector projects, can be obtained through SBA's Surety Bond Guarantee program. The activity level for this program for FY98 will remain basically level at $1.7 billion. SBA can guarantee bid, performance and payment bonds for contract up to $1.25 million for eligible small businesses. Businesses apply through a surety bonding agent.
Other SBA program budget items include:
The SBA's flagship 7(a) loan guarantee program received an unexpected boost in June when a General Accounting Office (GAO) review found a technical error in FY97 subsidy calculations. SBA announced it would have an additional $2.5 billion available for loan guarantees for FY97. SBA had placed a $500,000 per loan cap on the size of loans and an $80 million weekly limit on the program earlier in the year when projections for loan demand looked as if it would exceed available resources. These restrictions were promptly removed following the discovery of the error.
With an eye toward improving the 8(a) program, SBA announced proposed changes to the program that resulted from a comprehensive review and discussion among representatives of the Clinton Administration, Congress, trade groups and program participants. The goals of the restructuring are:
As part of the SBA Authorization bill signed into law in December, the Historically Underutilized Business Zone (HUBZones) program will create zones in distressed areas and offer incentives to businesses that operate there. The program, introduced in S. 208 by Small Business Chair Christopher "Kit" Bond (R-MO) in January, will offer federal contracting assistance and price evaluation preferences to qualified small businesses. To be eligible, a business must be small, located within a HUBZone and must have a workforce of which not less than 35 percent are HUBZone residents.
504 Loans Reviewed
A Woodstock Institute study of the 504 loan program released this summer found that the program benefits in the Chicago area were going mainly to higher income neighborhoods. The study evaluated 504 lending data from 1992-1996 for the entire nation and the Chicago metropolitan region specifically to determine whether the program was addressing the employment needs of distressed neighborhoods.
The focus on Chicago was due to the fact that its six-county metropolitan region offered a microcosm of other U.S. cities. While examining the data for the Chicago area, researchers learned that only 17 percent of 504 loans to manufacturers were made to low- and moderate- income areas, although those same areas contained 27-30 percent of the manufacturers in the region. The same trend was found in the services, wholesale and retail sectors. Those four sectors together comprise 91 percent of the loans. The conclusion was that 504 loans were not being made to low-income neighborhoods at substantial rates.
Another key finding of the report was that the funding of minority-owned businesses was low. In 1996, more than 80 percent of 504 loans went to non-minority firms, although the percentage of loans to minority-owned firms did increase between 1992 and 1996. The rate of increase over this period was from 8.8 percent to 15 percent. Particularly low was the amount of loans going to African-American-owned small business, 1.6 percent of the total in 1996.
Among the recommendations included in the report are that:
Environmental Protection Agency
For FY98, the Environmental Protection Agency (EPA) budget was enacted at $7.4 billion, an increase of $564 million over FY97 appropriations. The Superfund program received a boost of more than $100 million over FY97 funding, totaling almost $1.5 billion for FY98. An additional $650 million for Superfund is provided pending enactment of an authorization bill in FY99.
Superfund, the program name for the Comprehensive Environmental Response, Compensation and Liability Act of 1980, allows the EPA to pursue potentially responsible parties (PRPs) to ensure that they contribute their fair share of the cleanup costs of contaminated sites. As of September 30, 1997, cleanup construction had been completed at 498 sites listed on the National Priorities List (NPL), with more than 500 sites in construction. The NPL contains the names of those sites considered to be the most contaminated. Additionally, the average duration of the long-term cleanup process had been reduced by more than one year. It was found that approximately 70 percent of Superfund long-term cleanups are preformed or funded by responsible parties, saving the government more than $12 billion.
Reform of Superfund has been an ongoing battle, and although many bills were introduced in the House and Senate to overhaul the program, none were enacted. Here is a recapitulation of the key Senate and House bills that addressed reform of the Superfund program:
S. 8, or the Superfund Cleanup Acceleration Act: Co-sponsored by Environment and Public Works Chair John Chafee (R-RI) and Environment and Public Works Subcommittee on Superfund, Waste Control and Risk Assessment Chair Bob Smith (R- NH), this bill would amend and reauthorize Superfund. It seeks to exempt co-disposal landfill generators, arrangers and transporters, reinstate Superfund corporate and excise taxes, place caps on the number of sites that can be added to the NPL, and eliminate non- use damages and lost-use damages for pre-1980 activities. Additionally, it would create a small business exemption for those businesses with 30 employees or fewer, or with less than $3 million in annual gross revenues; and H.R. 2727, or Superfund Acceleration, Fairness, and Efficiency Act (SAFE): Sponsored by Transportation and Infrastructure Subcommittee on Water Resources and Environment Chair Sherwood Boehlert (R-NY), this bill would reform Superfund's liability structure, fund a brownfields assessment grant program at $20 million a year, fund a brownfields remediation grant program at $65 million a year, send $25 million to state voluntary cleanup programs, transfer Superfund responsibilities to qualified states, and provide for public participation in the Superfund process.
Administration's Viewpoint
During testimony in October before the House Transportation and Infrastructure Subcommittee on Water Resources and Environment, EPA Administrator Carol Browner called for "responsible Superfund legislative reform" and said that legislation must evaluate the reform "from the perspective of the Superfund program of today, not on the basis of out of date problems that are now resolved."
The president had previously announced on May 7 the administration's "Superfund Legislative Reform Principles." The principles that the administration supported as guidelines for creating reform legislation included: liability and enforcement; remedy; state and tribal issues, such as partnership agreements; natural resources damages; community health and community involvement; brownfields and voluntary cleanup programs; enhancing protection of communities from toxics; and other issues, such as reinstatement of the Superfund taxes, a tax incentive to promote cleanup and redevelopment of brownfields and no restriction on the EPA's authority to list sites on the NPL.
The goals that the administration would like to have included in Superfund reauthorization include: protection of human health and the environment; maximum participation by responsible parties in cleanup activities; effective state, tribal and community involvement in decision- making; and promotion of economic redevelopment or other beneficial reuses of the sites.
Brownfields Action Agenda
As a component of Superfund, one of the EPA's main economic development concerns has been how to assist in the cleanup and redevelopment of brownfields. A brownfields is an abandoned, developed site with real or perceived contamination. The EPA outlined specific actions that the agency is taking in an initial Brownfields Action Agenda. The four key areas of action to redevelop brownfields sites are: awarding Brownfields Assessment Demonstration Pilots; building partnerships to all brownfields stakeholders; clarifying liability and cleanup issues; and fostering local workforce development and job training initiatives.
The Brownfields Assessment Pilots are a major component of the action agenda. To date, the agency has funded 121 assessment pilots at up to $200,000 each over a two-year period. These grants are used to archive and assess brownfields sites and fund activities such as testing redevelopment models, directing efforts to remove regulatory barriers and facilitating coordinated environmental assessments and cleanup efforts at all levels. These projects then serve as models for other communities.
A second round of competition for brownfields pilots was announced in May. The Brownfields Revolving Loan Fund (BRLF) pilots are used by states, cities, towns, counties, territories and Indian tribes to capitalize revolving loan funds for cleanup and sustainable reuse of brownfields. The program awarded 24 sites a total of $10 million in loans to capitalize BRLFs. Those communities eligible to apply were the 29 that were awarded National or Regional Brownfields Assessment Demonstration Pilots before September 30, 1995. The remaining 76 communities may be able within two years of receiving their first brownfields redevelopment grants.
The EPA and 15 other federal agencies are sponsoring the Brownfields Showcase Communities project, another element of the action agenda. The communities selected receive special technical, financial and targeted federal assistance to address issues of contaminated urban and rural properties. Ten communities will be selected this year.
As the result of the Taxpayer Relief Act of 1997, the EPA also has a new $800 million brownfields tax incentive to use to encourage redevelopment. The three-year tax incentive plan is expected to generate $4 billion in new capital investments to help cleanup and redevelop approximately 14,000 brownfields sites.
Clean Air Rule
The EPA released its new, more stringent clean air rule on emissions standards for ozone and particulate matter on July 16. The regulations outline the limits for acceptable ozone levels and the size of particulate matter that will be measured.
The new ozone standard will be tightened to 0.08 parts per million from 0.12 parts per million, and will be measured over eight hours instead of one hour. Particulate matter, very small particles produced by coal-fired plants, oil refineries and diesel vehicles, will be regulated at a measurement of 2.5 microns in diameter, as opposed to 10 microns.
These pollution controls will not go into affect until 2004 for the ozone standard and 2005 for particulate matter. Non-compliance citations, however, will not be issued to regions until 2007 for ozone and 2008 for particulate matter. Non-attainment designation for the new particulate matter standard will be delayed until another full scientific review can be conducted on the health effects of particulate matter.
Controversy surrounded the rule even before it was released. Questions regarding the scientific evidence on the health effects from ozone and particulate matter and the potential for severe economic hardship as a result of enforcement of this rule were raised by numerous critics of the rule when it was originally published for public comment. Critics have also pointed out that the cost-benefit evaluation of the new standards indicates that the costs would outweigh the benefits. Browner pointed out that under the Clean Air Act, cost is not to be taken into consideration in the standard-setting phase of the process.
As to the costs of the new standards, the EPA estimates that it will cost $9.7 billion annually. The breakdown for that figure is $1.1 billion for ozone and $8.6 billion for particulate matter. Others have argued that this is a gross understatement and that costs could be anywhere from $90 billion to $150 billion. Additionally, the National League of Cities, the National Association of Counties and the National Conference of State Legislators are concerned that many counties will fall out of compliance with these new standards and the costs for attainment may result in severe economic hardship. The number of counties that may fall out of compliance ranges depending on who is giving the estimate. EPA initially estimated that 335 counties would fail to meet the new standards, while an American Petroleum Institute study indicated that the number could exceed 800.
Senate Environment and Public Works Subcommittee on Clean Air, Wetlands, Private Property and Nuclear Safety Chair James Inhofe (R-OK) urged caution about the new rule, saying "let's reserve a decision on new standards Ñ which will impose heavy burdens on our people Ñ until they can be properly justified." He introduced a bill, S. 1084, that would "open up" the Clean Air Act in order to consider a language change, perhaps allowing for the consideration of cost as well as public health. However, it may be very difficult to gather enough support in either chamber to insert cost consideration language.
In the House, Commerce Subcommittee on Oversight and Investigation Ranking Minority Member Ron Klink (D-PA) introduced legislation in June that would impose a four-year moratorium on the new standards and calls for additional scientific study. The bill, H.R. 1984, which has strong bipartisan support, was referred to the Commerce Committee.
Included in the spending bill for the EPA was a line item for $49.6 million to fund a comprehensive, peer-reviewed, near- and long-term particulate matter research program with the National Academy of Sciences. Basically, the purpose of the study would be to determine what impact the new standards would have over time on the economy.