IEDC

FEDERALOUTLOOKJeffrey A. Finkle, CEcDPresident & CEOInternational Economic Development Council

California Association for Local Economic Development (CALED)

April 28, 2011

About IEDCThe International Economic Development Council

(IEDC) is a non-profit membership organization dedicated to helping economic developers do

their job more effectively and raising the profile of the profession. When we succeed, our

members create more high-quality jobs, develop more vibrant communities, and generally improve

the quality of life in their regions.

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IEDC Federal OutlookToday, we will discuss three key issues for the economic

development profession:

Fiscal Year (FY) 2011 Budget Review-Months of Uncertainty Finally Resolved

FY 2012 White House Budget Request-Innovate, Educate, Build

FY 2012 Request and its Impact on Major Federal Economic Development Programs

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FY 2011 Budget Review – Months of Uncertainty Finally Resolved

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FY 2011 Budget Review – Months of Uncertainty Finally Resolved

Congress could not pass the FY 2011 Federal Budget by the September 30, 2010 deadline

Instead, Congress passed seven continuing resolutions (CR)s to keep the government operating until April 15, 2011

Funding the government through CRs makes planning difficult for agencies such as the Economic Development Administration (EDA)

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FY 2011 Budget Review – Months of Uncertainty Finally Resolved

• Programs suffer in the midst of ongoing budget debates

• Agencies must divert time and resources to prepare for the event of a shutdown, diverting money and energy from their goals

• Economic development programs were hampered by the disruption in the delivery of federal assistance

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EDA FY 2011 CR Funding

For FY 2011, EDA will be funded at $246 million, down $9 million from FY 2010 levels

• This amount matches President Obama’s FY 2011 request

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• SBA FY 2011 CR Funding

SBA will be funded at the full level of President Obama’s FY 2011 Budget request of $994 million

• Carryover balances will allow the SBA Disaster Loan Program to operate at FY 2010 levels with slightly reduced budget authority

• The SBA lending programs have facilitated $12 billion in lending to small businesses

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• HUD FY 2011 CR Funding

The Energy Innovation Fund has been eliminated• Republicans estimate savings of $50 million

HOME Investment Partnerships suffered a $215 million reduction from FY 2010• HOME had been funded at $1.6 billion in FY 2010

HOPE VI will be funded at $100 million, reduced by $100 million from FY 2010

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Family Self Sufficiency program (FSS) will be funded at roughly the same level as FY 2010, $60 million

Native American Housing Block grants are funded at $650 million, down from $700 million

The final CR of FY 2011 prohibits CDBG funds from supporting the Economic Development Initiative, the Neighborhood Initiative, and the Rural Innovation Fund, and caps CDBG spending on Sustainable Communities at $100 million

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FY 2012 White House Budget Request - Innovate, Educate,

Build

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FY 2012 White House Budget Request-Innovate, Educate, Build

President Obama’s FY 2012 Budget request emphasized innovation and investments in infrastructure, education, and science, combined with budget tightening

Total discretionary budget request of $1.344 trillion for FY 2012

FY 2012 Budget deadline is September 30, 2011

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FY 2012 White House Budget Request-Innovate, Educate, Build

President Obama’s FY 2012 Budget request emphasized innovation and investments in infrastructure, education, and science, combined with budget tightening

Total discretionary budget request of $1.344 trillion for FY 2012

FY 2012 Budget deadline is September 30, 2011

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FY 2012 White House Budget Request-Innovate, Educate, Build

President Obama’s request emphasizes investment and innovation to keep America competitive

Republicans have already criticized the plan for overspending

With control of Congress divided and the 2012 election on the horizon, spending debates promise to be partisan and intense

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The FY 2012 Request and its Impact on Major Federal Economic

Development Programs

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FY 2012 Request and its Impact on Major Federal Economic Development Programs

Manufacturing Extension Partnership (MEP) FY 2012 Request: $142.6 million• FY 2011 Estimate: $124.7 million

Economic Development Administration (EDA) FY 2012 Request: $284 million• FY 2011 Estimate: $255 million

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USDA Rural Development FY 2012 Request: $2.4 billion• FY 2011 Estimate: $2.97 billion

Small Business Administration FY 2012 Request: $985 million• FY 2011 Estimate: $824 million (plus additional carryover

balances)

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• SBA FY 2012 Budget Request

• SBA hopes to strengthen lending with $165 million in subsidies to support $17.5 billion in 7(a) loan guarantees for small businesses

• Will include $16 billion in term loans and $1.5 billion in revolving lines of credit

• Under the request, Section 504 lending authority will remain at $7.5 billion-no change from FY 2010

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• SBA FY 2012 Budget Request

• Small Business Investment Company (SBIC) will play a major role in economic development

• SBIC debenture program will support $1 billion in investments over five years for investments from private funds in economically distressed regions, and in minority and women-owned businesses

• Funds may also go to other areas defined as national priorities

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• SBA FY 2012 Budget Request

• SBA will continue to use Small Business Development Centers (SBDCs) to reach out to the community

• Located in all 50 states, the District of Columbia, and Puerto Rico, and U.S. territories

• Services include assisting small businesses with financial, production, and marketing problems, and all are free

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• SBA FY 2012 Budget Request

• President Obama’s request would reduce funding for SBDCs by $10 million

• The Small Business Jobs Act included extra funding for SBDCs

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Department of Housing and Urban Development (HUD)

• Major Program Change: Empowerment Zones• Encourage businesses to open, expand, and hire local residents

• Tax incentives worth $11 billion to businesses of all sizes in Empowerment Zones and Renewal Communities

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• Incentives include employment credits, 0% tax rate on capital gains, tax deductions on equipment, accelerated real property depreciation and other benefits

• Goals of Empowerment Zones will be carried on by new “Growth Zones”

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• Growth Zones

• Collaborative approach designed as a successor to Empowerment Zones

• Would focus on Regional Innovation Clusters based upon the assets and characteristics of local communities

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HUD FY 2012 Budget Request

President Obama’s FY 2012 Budget reduces funding for the Community Development Black Grants (CDBG) program to $3.4 billion, a cut of $650 million from the FY 2010 level of $4.1 billion

HUD will partner with the Department of Transportation (DOT) in the promotion of sustainable communities

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EDA FY 2012 Budget Request

President Obama’s deficit reduction task force, the National Commission on Fiscal Responsibility and Reform, targeted EDA

Economic developers reached out to lawmakers to help preserve EDA and minimize cuts to the program

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EDA FY 2012 Budget Request

University Center competition will promote regional growth Based on bottom-up economic development strategy

Universities will compete on plans to utilize their local “ecosystems” to maximize growth

EDA will award roughly $1.1 million in the Chicago region and $1.4 million in the Philadelphia region

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EDA FY 2012 Budget Request

21st Century Innovation Infrastructure Program to succeed Public Works FY 2012 request of $96 million, a decrease of $37,280 million from FY 2010

Technical Assistance to get a substantial boost FY 2012 request of $18.4 million, an increase 8.6 million from FY 2010

Economic Adjustment Assistance will play a larger role FY 2012 request $89.4 million, an increase of 46.3 million

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Economic Development Administration (EDA) Major Program Change: Grant Application Procedure

EDA changed its internal procedure for the Public Works, Regular Economic Adjustment, and Global Climate Change Mitigation Incentive Fund programs

Applicants may submit an application at any time during the quarter and will receive formal feedback on their application’s technical and competitive merits within 15 business days

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Applicants who submit complete packages prior to the quarterly deadline will be notified of EDA’s decision within 20 business days of the deadline

Changes began on October 1, 2010

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Department of Agriculture (USDA)

USDA’s FY 2012 request is $24 billion, $2 billion less than FY 2011 request

Rural Development will take a cut FY 2012 request of $2.4 billion, a decrease of roughly $500 million from FY

2010 enacted level of $2.9 billion

Research will also take a hit FY 2012 request of $2.8 billion, a decrease of $500 million from FY 2010

enacted level of $2.3 billion

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Employment and Training Administration (ETA)

The Obama Administration looks to emphasize community college training and partnerships with industry over traditional workforce training programs

The FY 2012 request of $2.9 billion is a huge reduction from the FY 2010 amount of $3.8 billion

The Community College and Career Training Initiative will receive $500 million

The Career Pathways Innovation Fund, allocated $125 million in FY 2010, will not receive funding in FY 2012

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Workforce Investment Act

First passed in President Clinton’s second term

Created Job Corps, a workforce training program to help at-risk youth find and retain long-term employment

Job Corps provides free education and training for low-income young people above 16 years of age

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The Workforce Investment Act (WIA) expires in August 2012

WIA has been up for reauthorization since 2003

Reauthorization attempts have stalled, but advocates remain optimistic reauthorization can happen with the support of economic developers

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The final continuing resolution of FY 2011 cut $3.15 million from Job Corps. This was considered a major victory for Job Corps supporters in a difficult fiscal period

President Obama’s FY 2012 request calls for the rescission of $25 million in Job Corps funds, leaving funding of roughly $1.5 billion

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Department of Transportation (DOT)

President Obama wants to invest over $50 billion over six years in high-speed rail development DOT plans to base future project decisions on economic development

impacts, as well as reductions in commute time and cost considerations

Obama has met strong opposition The final FY 2011 budget slashed high-speed rail funding This conflict is part of a looming battle over the Obama Administration’s

planned six-year, $556 billion transportation reauthorization bill

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Environmental Protection Agency (EPA)

The FY 2012 Budget request will continue to support the Brownfields Program for community revitalization with a request of $99 million

The Brownfields program is funded at approximately $100 million for FY 2011, the same as FY 2010

Under the FY 2012 request, EPA would partner with HUD and DOT in the promotion of sustainable communities

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Conclusions

Politics has usurped policy Weakness in the economy and low unemployment rates has not

been addressed by Congress There is a buy-in by the Administration that economic

development tools work and need to be part of the tool kit, that is not shared by many members of Congress, especially the huge new class in the House of Representatives

Investment in maintaining competitive research and tech transfer is being recommended by the Administration, but not bought into by the House

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2011 IEDC Annual Conference Connect Locally, Succeed Globally

September 18-21, 2011The Westin Charlotte

Charlotte, North CarolinaEarly Registration Deadline: July 15, 2011

Sign up at www.iedconline.org

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Please visit www.iedconline.org for more information

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