Grant Reform Will Strengthen Communities

by U.S. Department of Commerce Secretary Carlos Gutierrez

U.S. Department of Commerce Secretary Carlos Gutierrez

America is the most dynamic and fastest-growing major economy in the world and we have an obligation to ensure opportunity for every community in America. President Bush believes one of the most important steps we could take would be to make economic development programs less bureaucratic so that opportunity can transform distressed neighborhoods. His budget is aimed at directing federal funds to those programs that are serving people in need. The federal government must ensure that community and economic development programs adapt to our evolving economy.

Under a major reform of our community development programs, President Bush is promoting a healthy and vibrant economic future for America’s poorest communities. In his 2006 budget just submitted to the Congress, the President outlines a proposal that will help ensure that jobs are created in communities affected by changes in manufacturing, textile, and other industries.

President Bush took a number of steps during his first term to create economic growth in distressed communities. New job-training programs are helping displaced workers gain the skills for success. Communities are using tax incentives and other programs to redevelop abandoned industrial properties. The number of American homeowners has never been higher because people are using down-payment assistance and home construction incentives to achieve the American dream. The President’s No Child Left Behind reform is raising accountability and effectiveness in America’s schools by ensuring that children do not leave school without learning basic skills.

A changing world can present a great opportunity for all Americans to earn a better living, support their families and have rewarding careers. Government must take the side of hard-working Americans. Yet for many years, our community and economic development programs have been directed by old funding formulas and administrative rules that do not reflect the needs of struggling communities in a modern economy.

The $16 billion federal economic and community development effort is presently fragmented across seven cabinet agencies, overseeing 35 different grant, loan and tax incentive programs. Many programs overlap; some use inconsistent eligibility criteria and few programs track the way funds are spent. The unfortunate result is an absence of accountability; it is time for taxpayers to have an accurate means to measure results.

Detailed tracking information can help ensure that funds are allocated properly. One program at the Department of Housing and Urban Development, intended to help distressed communities, allocates less than two thirds of its budget to areas that are poorer than the average national poverty level. While prospering communities receive grants, many distressed areas are not receiving as much help as they need.

Making sure that the neediest areas are the focus of federal funds will require better management of existing programs. The President has announced a two-pronged effort to solve these deficiencies. Under the 2006 budget, we would create a new Strengthening America’s Communities Grant Program. It would standardize eligibility requirements. Programs that are duplicative would be consolidated and housed at a single agency. New accountability guidelines would ensure that communities receiving grants make progress toward specific goals, such as job creation, boosting homeownership among first-time and minority buyers, and promoting private sector investment. Communities in greatest need would receive $3.7 billion in assistance.

The second part of the President’s plan creates an incentive-based system called the Economic Development Challenge Account. This program would encourage local governments to revitalize their business climate. Local governments that make it easier to start a business, or communities that create the conditions for business success through achievements such as improved schools or lowered crime rates, will get a bonus.

President Bush has said, “We are entering a season of hope.” These reforms will give distressed communities hope and the tools to cope with economic change by streamlining and modernizing the federal response. The President’s goal is to ensure that all Americans have the skills and opportunity to provide for their families in our 21st century economy.