ADMINISTRATION, AGENCY PLANS COULD CUT ECONOMIC DEVELOPMENT MIS

CATEGORY: TVA Tennessee Valley Auth.

AUTHMARTY

ADMINISTRATION, AGENCY PLANS COULD CUT ECONOMIC DEVELOPMENT MISSIONS

By Marty Russell

Daily Journal

Federal programs serving Northeast Mississippi, particularly economic development programs, are beginning to feel the effects of congressional budget cutting and President Clinton’s proposed 1997 budget continues the trend.

While Clinton’s proposed budget, released last month, holds the Appalachian Regional Commission’s and the Tennessee Valley Authority’s appropriations at essentially their current levels, TVA is preparing to wean its economic development programs off federal funding completely.

That move could mean more applications for economic development assistance to ARC, which has not had a budget increase since Clinton took office.

In 1993, Clinton proposed freezing ARC’s funding for four years and doing away from federal support for TVA’s nonpower programs such as economic development and resource management. ARC survived an attempt last year to eliminate the agency completely but has seen its funding level fall from $190 million in 1993 to the current level of $170 million.

Clinton has proposed funding the agency at that same level next year.

While TVA’s nonpower budget would increase from about $109 million in fiscal year 1996 to $120 million under the president’s proposal, its economic development programs would be funded at the same level as the current year, about $16 million.

TVA is planning to reduce that level over the next three years to $6 million in 1999 and to do away with all federal funding for economic development altogether by 2000.

TVA provides electricity to a seven-state region through its power program, which is funded entirely by revenue generated from power sales. Its nonpower programs include management of the rivers, land and lakes under its jurisdiction, which accounts for $83 million of the proposed $120 million in 1997 funding.

The agency also operates the Environmental Research Center in Muscle Shoals, Ala., which would get $17 million next year under the budget proposal.

The economic development program has funded a variety of projects in Northeast Mississippi. Some recent examples include a $1.5 million loan to the Thomas and Betts Corp. in Byhalia that was matched with $18.5 million in other funds to create 120 jobs and a $500,000 grant to start a business incubator program in the region that aids new businesses in getting through the first few years of operation.

ARC serves a 13-state region providing economic development and technical assistance designed to improve the infrastructure of the region and create jobs. Its highway program also provides funds for road building, including work on four-laning Mississippi Highway 6 from Oxford to Tupelo.

Phasing out

While the Clinton budget maintains TVA’s economic development programs at the current level, the agency itself has decided to zero out all federal funding for economic development and the Environmental Resource Center over the next three years.

“The TVA board is sensitive to budget pressures facing the federal government,” TVA Chairman Craven Crowell said in a statement announcing the plan. “That is the reason we have taken steps to streamline our economic development operation and have begun a transition program that will allow us to phase out our economic development appropriations requests over the next three years.”

While an agency spokesman said TVA did not plan to do away with its economic development duties, the effect of the move away from federal funding still is not clear.

“That plan hasn’t been developed,” said TVA spokesman John Moulton. “That’s being worked on now. They’re looking at what will be priority projects and what won’t be and they’re looking for other funding sources both externally and internally.”

Moulton said, in the past, funding from the agency’s power program has been used to assist the economic development program.

“Economic development helps the power system, too, by creating more customers,” he explained.

Finding savings in the economic development program by cutting staffing hasn’t been ruled out, but Betsy Child, senior vice president for economic development, told employees in a recent memo that no cuts were planned for the remainder of the fiscal year that ends in October.

“We will begin an orderly transition to find other methods of funding TVA’s economic development efforts and we anticipate no staffing changes for the remainder of the fiscal year,” Childs said.

Pressure on ARC

If TVA does scale back its economic development efforts in order to cut the ties to Congress, it could impact ARC which has, in the past, partnered with TVA on some projects.

“They’ve been strong partners,” said Glenn McCullough, ARC director in Mississippi. “Any project TVA funds, ARC is an eligible matching partner.”

In other words, if TVA required a 50/50 match from the entity receiving a grant or loan, an ARC grant or loan could be considered part of the local matching funds.

If TVA cuts back on economic development funding, the burden could shift to ARC, which already receives more applications than it can fund.

“We’re going to have to find some creative ways to stretch our limited dollars,” McCullough said. “We’re getting about the same number of applications but we’re having to leverage every ARC dollar. A greater percentage of projects are having to be financed by state and local agencies.

“Numerically, we’re trying to do as many (projects) as we have in the past but they may be at a reduced amount. Gov. Fordice and (state economic director) Jimmy Heidel have made it clear that we’re to focus on projects that increase employment and increase the per capita income. The local communities and counties are having to bear a greater portion of the burden. … We just don’t have the funds like we had in years past.”

The impact on economic development could be lessened somewhat if Congress goes along with a proposal to change the way ARC’s appropriation is divided between highway projects and economic development.

“The president has asked that highway program funding be equal to area development funding,” McCullough said. “We think that would be great if Congress would agree.”

Currently about 60 to 70 percent of ARC’s annual appropriation is earmarked for highway construction. McCullough said he did not think a reduction in highway funds would be detrimental to work on Mississippi Highway 6, also known in the Appalachian highway system as Corridor V.

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