Statement of Jesse L. White Jr., Federal Co-Chairman, Appalachian Regional Commission, Before the House Subcommittee on Energy and Water Development Appropriations

March 26, 1999
Washington, D.C.

Mr. Chairman and Members of the Subcommittee:

I am pleased to present to the Subcommittee President Clinton's budget request for the Appalachian Regional Commission for FY 2000. The Administration remains strongly committed to ARC's work in moving the 13-state Region into the mainstream of the American economy and proposes no major changes in the scope of the Commission's activities.

The Administration is requesting $66.4 million for the Commission's nonhighway activities, funding the Commission at a level equal to that of FY 1999. Of this amount, $56.1 million is for area development programs, $6.3 million is for local development district support and technical assistance, and $4.0 million is for salaries and expenses.

After six years of the Clinton Administration, the American economy continues to break records for job creation. But despite robust economic growth nationally, some communities have yet to share fully in this unprecedented prosperity. Too many rural areas still remain isolated from the broad economic currents that are raising American standards of living. Many of those communities are found in Appalachia, cut off by terrain and by history from the broad sweep of national prosperity. Almost a fourth of the Region's 406 counties can be classified as economically distressed, suffering the debilitating effects of persistently high unemployment, low per capita income, and widespread poverty.

Through a flexible approach that embraces basic infrastructure, job skills training, local leadership development, and small business assistance, the Appalachian Regional Commission offers these communities the tools to seize control of their economic future and create self-sustaining local economies. The Administration continues to believe that the ARC is a proven economic development model than can create jobs and expand opportunity throughout the Region.

For the first time since 1980, Congress, on a bipartisan basis, last year fully reauthorized ARC's programs. This legislation reflects the Commission's prior policy of targeting resources to the Region's most distressed counties and restricting assistance to counties that are performing at or near national economic norms. The three-year reauthorization builds on internal reforms, such as streamlining grant procedures and eliminating outdated regulations, that were first outlined in ARC's 1996 strategic plan; it repeals superfluous or unused program authorities; and it mandates outcome measurements for ARC projects.

The legislation contains authorization levels of $68 million in FY 1999, $69 million in FY 2000, and $70 million in FY 2000. The Administration's FY 2000 budget request for ARC is within these authorized levels, and it assumes full implementation of the legislation's programmatic provisions.

Other legislation (TEA-21) added seven new counties to the Appalachian Region, bringing the total number of counties served by the Commission to 406.

Last year Congress and the President achieved a major milestone in the Commission's history by shifting funding for the Appalachian Development Highway System (ADHS) to the highway trust fund. TEA-21 authorized a total of $2.25 billion ($450 million per year) for construction of our highway system. This renewed commitment to the ADHS will enable us to complete roughly a third of the remaining 20 percent of the system. The obligational ceiling proposed for FY 2000 is $405 million.

From the very beginning of ARC, the highway system has been central to the economic development of Appalachia. A region unconnected to the transportation grid of the nation cannot possibly participate fully in its economy. Funding out of the trust fund now provides a steady, predictable, and reliable source of money to make significant progress toward finishing our highway system. While the source of funding has been shifted, under TEA-21 ARC retains the administrative responsibility for the construction of the ADHS. Highways will continue to be a major component of the Commission's work.

Because of the TEA-21 legislation, no separate appropriation for our highways is requested from your subcommittee, but I thought you would be interested in knowing the substantial impact that your previous support of our highway system has had on Appalachia's economy. Last year we commissioned a study of the economic impact of the ADHS—the first full-scale, rigorous assessment of the effectiveness of the system in contributing to economic growth. Conducted by Wilbur Smith Associates, a leading transportation consulting firm, the study examined 12 of our 26 corridors, focusing on those corridors that are largely complete and therefore should be contributing to job creation in the Region.

• Creating jobs. The report estimated that the 12 corridors had produced a net increase of 16,000 jobs by 1995 and projected a net increase of 42,000 new jobs by 2015. These jobs would not have been created without the ADHS. Only a small portion of these were construction jobs attributable to the actual building of the corridors.
  
• Generating economic benefits. The report estimated the total economic impact of the completed work on the 12 ADHS corridors at $5.48 billion from 1965 to 2025, without considering direct construction benefits. When construction benefits are included, the total impact rises to $6.9 billion over the same period.
  
• Making travel easier, safer, and more cost-effective. The ADHS highway corridors are expected to produce travel efficiencies nationwide valued at $4.89 billion over the 1965–2025 period.

It is important to note that these impressive results are attributable to less than half of our corridors. Obviously, as more of the system gets completed, the economic benefits will be even greater. In short, Mr. Chairman, I am pleased to report that this study demonstrates conclusively that the ADHS system is working. It is doing precisely what Congress, and your committee in particular, envisioned: it is creating jobs and economic opportunity all across Appalachia.

The Administration is requesting $62.4 million for ARC's nonhighway programs. This includes $56.1 for area development activities and $6.3 million for support of our local development districts and technical assistance. These figures represent level funding with the FY 1999 appropriation.

The Administration's budget assumes no major changes in the operation of ARC's nonhighway program. It would continue to target resources to the Region's most economically distressed areas—setting aside at least 30 percent of our area development dollars exclusively for work in the 108 distressed counties. It recognizes the key role of our local development districts and continues the FY 1999 level of support that they are receiving. Finally, it continues the Commission's three-year commitment to a special focus on strengthening entrepreneurship throughout the Region. Roughly two-thirds of ARC's area development funds are expected to go to basic infrastructure—equipping industrial parks with water and sewer service, providing water to families that have never before been served by a municipal water supply, and helping communities treat water supplies that have been contaminated by acid mine drainage.

All ARC projects must be linked directly to at least one of the five goals identified in ARC's strategic plan—education and workforce training; basic infrastructure improvements; civic capacity and leadership development; business development; and health care. Projects must include plans for measuring performance. ARC made significant achievements in each of the Commission's goal areas during FY 1998 through projects that are expected to provide direct benefits to more than 190,000 people. Those projects are projected to have the following impacts across the Region:

• Creation or retention of 35,094 jobs
  
• Education programs to benefit 57,729 students and trainees
  
• Improved water and sewer systems to serve 41,468 households
  
• Leadership development activities involving 7,453 participants
  
• Health care projects estimated to benefit 46,000 people

The Region's most economically distressed communities have always been a major focus of the Commission's programs. In FY 1999, under the leadership of West Virginia Governor Cecil Underwood, the states' co-chairman, the Commission has placed an additional emphasis on the needs of these communities, devoting special efforts to identifying common problems and working to strengthen local leadership capacity. In FY 2000 this special focus will continue, with a regional conference this fall examining a variety of effective strategies that distressed communities are using to move their economies forward.

Appalachia's future economic vitality depends, in large measure, on nurturing homegrown firms, encouraging innovation and risk taking, and enhancing investment in new businesses. In 1998 the Commission unanimously launched an ambitious three-year, $15 million regional initiative to build entrepreneurial communities across Appalachia. The goal of this initiative is to ensure that Appalachian communities will have the commitment and resources to assist entrepreneurs in starting and expanding local businesses, thus creating jobs, increasing local wealth, and strengthening local economies.

The Commission allocated $5 million to this initiative in FY 1998 and FY 1999, and the President's budget request calls for a similar allocation in FY 2000. The entrepreneurship initiative addresses identified gaps in, and builds the institutional capacity within, the five key elements of an entrepreneurial economy: access to capital and financial assistance; technical and managerial assistance; technology transfer; entrepreneurial education and training; and entrepreneurial networks.

In his State of the Union message, President Clinton unveiled a New Markets Initiative to encourage private investment in inner-city areas and distressed rural areas like parts of Appalachia, in essence challenging Wall Street to take the lead in investing in America's own new markets. This New Markets Initiative complements ARC's entrepreneurship initiative, and the Commission is participating in a White House working group that will craft and implement the provisions of the New Markets Initiative.

From its creation, ARC's unique federal-state partnership has had a mandate to be an advocate for the Region. It has offered a platform for galvanizing other federal, state, and private sector efforts to move the Region into the nation's economic mainstream. ARC works closely with other federal agencies to avoid duplication while helping ensure that these other federal programs respond effectively to the particular challenges that Appalachian communities face. It also seeks to leverage investment in the Region by nonprofit organizations and the private sector. Some recent activities suggest the scope of this work.

• EZ/EC. In FY 1998 ARC provided small technical assistance grants to 29 Appalachian communities to help them develop strategic plans and compete for the second round of EZ/EC designation. As a result, two Appalachian communities won full EZ designation from HUD, and three were selected as rural enterprise communities by USDA.
• Transportation Summit. Building on their traditional highway partnership, ARC and the Department of Transportation are jointly sponsoring a regional summit on intermodal transportation, emphasizing how regional, integrated approaches to transportation planning can foster economic growth across Appalachia.
• New Investment Opportunities. Appalachia's future prosperity must rely in part on greater private sector investment in the Region. Through a partnership with the Small Business Administration and its New Markets Initiative, as well as other venture capital activities, ARC is helping to encourage greater private investment in Appalachian small businesses.
• EPA Brownfields. Because Appalachian communities have been underrepresented in EPA's brownfields grant program, ARC and EPA are collaborating to ensure that more Appalachian communities qualify for these grants, which provide technical and financial assistance for the identification, cleanup, and redevelopment of these abandoned sites.
• Kellogg Foundation. ARC and the W.K. Kellogg Foundation have teamed up for an unprecedented collaboration to harness technology in promoting community and economic development. This jointly funded project seeks to develop networks of local leaders across Appalachia that can share the latest technologies to foster economic growth in the Region.

The Administration's budget requests $5.4 million for support of our 71 local development districts (LDDs), the same as the FY 1999 funding level. Serving all portions of Appalachia, these multi-county economic development planning agencies work with local governments, nonprofit organizations, and the private sector to determine local needs and priorities, craft regional development plans, and, increasingly, deliver a rich menu of local services on a regional basis. Quite simply, they are the keys to ARC's effectiveness. For many communities, these LDDs are the principal source of professional guidance in crafting and implementing local economic development strategies. They are literally the first stop on a community's path to economic self-sufficiency.

To increase LDD productivity, the Commission will continue to provide training to the LDDs in strengthening their operations and effectively implementing ARC's strategic plan and performance measurement requirements. Recent training programs include a financial management workshop that was broadcast via satellite to over 30 sites in the Region; three regional workshops on building skills and partnerships for rural community development; and a two-day workshop on the use of computers for information and networking.

The FY 2000 request for salaries and expenses is $4.0 million, the same as the FY 1999 appropriated level. This includes $1.3 million for the federal co-chairman's staff and the office of the inspector general, and $2.7 million for the federal share of the Commission's administrative budget. The budget as proposed will support a total staff (federal office and Commission) of 58 positions, the same as the current fiscal year and the smallest in the history of the agency.

Increased operating efficiencies will enable the Commission to maintain current services while containing cost increases at less than the rate of inflation. The budget also assumes that the position of the alternate federal co-chairman will remain vacant.

In conclusion, Mr. Chairman, we believe that the Administration's request for ARC enables us to build on the vision articulated by our strategic plan, renew our focus on the needs of the Region's most distressed communities, and foster an entrepreneurial climate across Appalachia. At the same time, it preserves the state flexibility, local decision making, and low administrative costs that have historically been hallmarks of the Commission. We look forward to working with you to give Appalachia's communities a full seat at the table of American prosperity.