GENERAL STATEMENT Mr. SLACK. We would ask the Secretary at this time to make a statement with regard to this request if he would care to. Mr. BLUNT. Thank you very much. Mr. Chairman and members of the committee. I am pleased to appear before you today in support of the supplemental budget request for the programs of the Economic Development Administration. We are requesting an increase of $51,500,000 in program funds and $5,275,000 in administrative funds; the total revised estimate is $258,600,000, an increase of $56,775,000 above the $201,825,000 currently approved by both the House and the Senate. EXTENSION OF AUTHORIZATION As you know, both Houses have passed a 2-year extension of the Public Works and Economic Development Act which provides for a continuation of the programs of EDA and the title V regional commissions. The new legislation also provides for a number of new programs for which additional funding is required this fiscal year. These new program areas are: Title IX economic adjustment assistance, section 302 planning grants, section 304 grants to States, and expansion of title II business development assistance. TITLE IX We are requesting $30 million for Economic Adjustment assistance as authorized by the new title IX of the act. This assistance will be provided to States and localities to help them meet actual or threatened increases in unemployment and other economic adjustment problems resulting from severe changes in economic conditions, including actions of the Federal Government. Grants could be used in direct expenditures by the grantee or through redistribution to public and private groups through grants, loan guarantees or other assistance. Eligible recipients must submit plans to the Secretary in order to be awarded funding and must submit annual reports on their progress against those plans. GRANTS TO STATES We are requesting $13 million for grants to States as authorized by the new section 304. These funds may be used by the States to supplement approved EDA grants or to make new grants or loans under the authority of titles I, II and IV of the act. Funds approved under this new program will be distributed among the States based on the percentage of title I funds receeived by each State since the beginning of EDA. This new program will be carried out in consonance with the plans developed under section 302 of the Act. PLANNING GRANTS A total of $6,500,000 is requested for planning grants as authorized by section 302. Of this amount, $5,500,000 will be for grants to States: in addition to enhancing their ability to coordinate the planning efforts of intrastate political jurisdictions, the State planning grants will provide a sound base for the implementation of the new economic adjustment assistance program. The remaining $1 million would be made available to support the planning programs of other political subdivisions, including cities; and districts. BUSINESS DEVELOPMENT An increase of $2 million is requested for the business development program to finance new program tools authorized in the extension legislation. The new tools are direct working capital loans, a broader authority for working capital guarantees, guarantees of fixed asset loans made by private institutions, and guarantees of lease payments for buildings and equipment. We will work with SBA to assure that the lease guarantee programs of the two agencies are closely coordinated. ADMINISTRATION The additional $5,275,000 for administration would provide funding for support of 650 permanent employees [our current staffing level]. The original budget for fiscal 1975 proposed a yearend level of 487. Thank you, Mr. Chairman, this concludes my prepared statement; I will be glad to answer any questions the committee may have. FISCAL 1975 PROGRAM REQUEST Mr. SLACK. Do you consider this to be an emergency and that it should be in this supplemental? Mr. BLUNT. In view of the new authority which has been legislated for EDA and the consequent demands on the agency as well as other factors I would say yes. Mr. SLACK. The first of the two items is a request for $51,500,000 additional for economic development assistance programs. What was the comparable amount available for these programs in fiscal year 1974? Mr. BLUNT. $220.5 million. Mr. SLACK. How much is in the 1975 appropriation bill? Mr. BLUNT. $184,200,000. Mr. SLACK. So with this additional amount the 1975 funds would total how much? Mr. BLUNT. $235,700,000 in program funds. BUSINESS DEVELOPMENT Mr. SLACK. How is the $2 million additional for industrial development loans and guarantees to be used? Mr. BLUNT. We contemplate that the new tools authorized by the legislation would require some additional funding, and although there is no precise way of determining exactly what funding would be appropriate in proportion to the amount we had asked for the basic program, this seemed to be a logical response. Mr. SLACK. When you refer to "new tools" what do you mean? What sort of new tools? Mr. BLUNT. Our authority for making guarantees of loans has broadened so we can guarantee a fixed asset loan and also guarantee working capital loans which are not made in association with a fixed asset loan. Both of these give us more flexibility and offer somewhat broader authority. We also have a lease guarantee program authorized under the new legislation. PLANNING GRANTS Mr. SLACK. Referring to page 10 of the justifications you show $6.5 million for planning grants. Who will receive the additional funds? Mr. BLUNT. Of the $6.5 million of planning grants it is contemplated that $5.5 million wil be used to support planning at the State level. One million dollars would go to other jurisdictions. As you know, we have already, because of extensions in fiscal year 1974, funded the Economic Development Districts for this fiscal year, so I would contemplate that the bulk of that $1 million would go toward cities and other jurisdictions. GRANTS TO STATES Mr. SLACK. Give us an explanation of the request for grants to States which you set forth on pages 10 and 11 of the justifications. Mr. BLUNT. The new authority which we get in section 304 of the act contemplates that money would be made available to States for their use in supplementing other EDA grants, to take an example, if we were to make a grant to a county water district the State could use funds distributed under section 304 to supplement that grant in order to help make up the local share under the grant formula and otherwise to help make the project possible at the local level. Mr. SLACK. Does this mean projects can be fully funded with Federal moneys? Is that what you are saying? Mr. BLUNT. No, sir, because the State, under the section, must itself supply some matching funds in making those supplemental grants. Mr. SLACK. When you say "some matching funds" what do you mean? Mr. BLUNT. Twenty-five percent of the amount. Mr. SLACK. Reading on page 11 of the justifications, it is stated. "Grant supplements by States can be used to reduce or waive the nonFederal share of project funding." Mr. BLUNT. Further on it does state, "subject to the special matching requirements of the supplemental program"; in other words, funds must be matched on a 25-75 percent basis by the State. ECONOMIC ADJUSTMENT ASSISTANCE Mr. SLACK. How much are you requesting for the new Economic Adjustment Assistance Program? Mr. BLUNT. $30 million. Mr. SLACK. How will these funds be distributed? Mr. BLUNT. The legislative authority is new, and therefore I do not have regulations I can show you at this time for administration of the funds. We contemplate that they will be made available in response to plans from States and other jurisdictions, including districts, counties and cities, to be spent under those plans with more discretion at the State or local level in the actual use of the funds as long as they are used in accordance with the submitted plan. The grants would be made directly to that jurisdiction which in the particular instance demonstrates the need for the funds as contained in these plans. It is an effort to get away from a project-byproject decision at the Federal level, and also-and this is perhaps more important it is an effort to enable States and localities to try to identify incipient problems. If you notice, this title does not have any specific designation formula as to where the funds can be used. The reason for that--although we will be applying our own need formula-the reason for that is that it is felt the States and localities will be able to determine in advance of the economic dislocation this actually happening, where funds can be used to offset these problems. A simple example might be if a State is told, or a locality is told, that there will be a defense base closing, or some other dislocation caused by Federal action. Various measures might be taken in response to that. This money would be available for that kind of use. The designation of the base area or the community directly surrounding it might inhibit the most flexible use of those funds. Under this authority the money could be put by the State or the county into facilities which might be nearby which would use the same labor force but not be subject to the designation criteria. ELIGIBILITY CRITERIA Mr. SLACK. Can you tell the committee how eligibility is determined? Mr. BLUNT. Again, we have not developed detailed regulations. i What we would include, in general terms, would be a need criteria and a planning review criteria. In other words, we would have to be convinced in seeing the plans and the representations behind the plans that there is sufficient need to command a high priority and that the I funds will be used in an effective way to meet that need. We do not contemplate a formula type of designation at this time. COOPERATION WITH DOD Mr. WYATT. Mr. Secretary, how does your program and the use of these funds mesh with and coordinate with the program the Defense Department has for adjustments in communities where defense bases are terminated? Mr. BLUNT. As you may know, we have under our existing authority worked quite closely with the Defense Department effort. In fact, the Secretary of Commerce is part of the group which oversees the work of the Defense Adjustment Committee. EDA has, under that program, provided planning grants and technical assistance grants to the areas to help give them administrative support to plan for actions to be taken. In addition to that, EDA has been able, on the basis of specific designations, most of them under our sudden rise designation criteria, to locate projects in some of these areas. Our coordination, and our work under the guidance of this Committee as we have done in the past, would not be changed. If we are concerned, or if concern is expressed to us by a community or State regarding the impact of the defense base closing, part of the review process we would require to set up the plan in the first place would be clearing with, checking with, and coordinating with the President's Committee which is staffed from the Defense Department. Mr. WYATT. This is not duplicatory with the Defense Department efforts? Mr. BLUNT. No. In fact, they have called on us for assistance to be able to provide assistance to these communities. As you know, they work directly with the communities as well. They also have representatives in the different Federal regions. This will enable the communities, with their assistance and our planning assistance, to have a more flexible response. In terms of money available for similar types of things, they do not have a program as we do for public works facilities and that type of thing. We have supplemented their efforts in that area. This would give even more flexibility to our ability to respond in the future. ADMINISTRATION OF ECONOMIC DEVELOPMENT ASSISTANCE PROGRAMS Mr. SLACK. The second of the two items is a request for $5,275,000 additional for administration of economic development assistance programs. How much is in the regular 1975 bill for this item? Mr. BLUNT. $17,625,000. Mr. SLACK. How many permanent positions are provided for in the regular bill? Mr. BLUNT. 537. Mr. SLACK. How many more positions will this request fund? STATUS OF AUTHORIZING BILL Mr. SLACK. Is the EDA program authorized at this time for fiscal 1975? Mr. BLUNT. We are as close to being authorized as technically possible. As I understand it, after the House and Senate passed identical bills, technical errors were found in the wording of the bills which necessitated a resolution by both Houses. The House, in fact, has enacted a correcting resolution. The Senate in on the verge of it. At that point it will be ready for the President's signature. Mr. SLACK. Are there any other questions? PERSONNEL Mr. SMITH. Why do you need 185 more personnel? Mr. BLUNT. At the time the budget was submitted in fiscal 1974, looking toward fiscal 1975, the future of the agency, whether it would exist for a year and exactly what its responsibilities would be, were still unsettled. At the time that budget came out, if you remember, there was a request for a year-end figure of 420 people, with the idea that the agency was phasing out. Since then, Congress has, with the support and in the spirit of compromise with the administration, enacted a 2-year extension. Mr. SMITH. How many people did you have in the year before that? Mr. BLUNT. Yearend 1973, 671 people. |