    [Budget of the U.S. Government]
    [V. Creating Opportunity, Demanding Responsibility, and Strengthening Community]
    [6. Restoring the American Community]
    [From the U.S. Government Publishing Office, www.gpo.gov]

                      6.  RESTORING THE AMERICAN COMMUNITY

      ----------------------------------------------------------------------

      We said in 1991 we would offer opportunity for all, demand responsibility from all, build a stronger American
    community. We said that this era requires a Government that neither attempts to solve problems for people, nor
    leaves them alone to fend for themselves. Instead, we envision a Government that gives people the tools to solve
    their own problems and make the most of their own lives . . . I intend to spend the next four years doing
    everything I can to help communities to help themselves, to educate all Americans about what is working, and to
    create, in the process, a national community of purpose.
                                          President Clinton
                                          December 11, 1996

      ----------------------------------------------------------------------
      Some American communities have grown disconnected from the opportunity
    and prosperity of their States, their regions, their Nation, and the
    global economy. The polarization of communities--isolating the poor from
    the well-off, the unemployed from those who work, and people of one race
    or ethnicity from others--frays the fabric of our civic culture and
    depletes the strength of our economy.
      The problem affects all Americans; we cannot and should not wall
    ourselves off from it. If we do not address the problem in our
    communities, connecting residents of distressed neighborhoods and rural
    areas to the jobs and opportunities of the regional marketplace, the
    Nation cannot compete and win in the global economy.
      While poverty overall is down in America, the concentration of urban
    poverty has risen in recent decades (see Chart 6-1). From 1970 to 1990,
    the number of people living in areas of concentrated poverty (where over
    40 percent of the residents are poor) grew from 3.8 million to 10.4
    million.\1\ The share of people living in our 100 largest cities who
    were concentrated in these extreme-poverty neighborhoods also rose--from
    five percent in 1970 to eight percent in 1980 to 11 percent in 1990. In
    such neighborhoods, social conditions are bleak.
    ---------------------------------------------------------------------------
      \1\ The President's Urban Policy Report, 1995.
    ---------------------------------------------------------------------------
       Over 60 percent of families with children are headed by
              single women, compared to under 20 percent in non-poverty
              neighborhoods.
       Over half of all adults have less than a high school
              education, compared to under 20 percent in non-poverty
              neighborhoods.
       Over 40 percent of working age men are not working, compared
              to just over 19 percent in non-poverty neighborhoods.

      Poverty also remains a persistent problem in rural America. Of the 765
    rural counties with poverty rates of at least 20 percent in 1990, 535
    had such poverty rates in 1980, 1970, and 1960. Because they often live
    in remote areas, and do not live near one another, rural residents often
    have a hard time receiving critical services or connecting themselves to
    urban and suburban centers of economic activity.
      On the other hand, the 1990s have brought signs of progress--in
    alleviating poverty and creating opportunity both across the Nation as
    well as in the isolated areas in which the obstacles are so imposing.
    Across the Nation, poverty, welfare, and inequality are all down, while
    incomes and homeownership are up. In the last four years, the economy
    has created over 11 million jobs and record numbers of small businesses,
    bringing new hope and opportunity to millions of Americans.
      The Administration recognizes, however, the barriers that still stand
    in the way of work and self-sufficiency for many poor Americans, and it
    proposes important steps to address them and to provide more
    opportunity.

    [[Page 96]]

      In particular, communities need help to attract the kind and amount of
    private investment that could spur their revitalization. Although
    Federal programs can provide support, solutions must come from the
    community. As a result, the budget proposes to create opportunities and
    offer incentives for individuals and businesses to participate directly
    in addressing local problems.

    National Service

      National service is rooted in the American tradition of neighbor
    helping neighbor to build communities, reward personal responsibility,
    and expand educational opportunity. The Corporation for National and
    Community Service, established in 1993, encourages Americans of all ages
    and backgrounds to engage in community-based service, addressing the
    Nation's educational, public safety, environmental, and other needs to
    achieve direct and demonstrable results. In doing so, the Corporation
    fosters civic responsibility, strengthens the ties that bind us together
    as a people, and provides educational opportunity for those who make a
    substantial commitment to service.
      The budget proposes $809 million for the Corporation, a 31-percent
    increase over 1997, with the increase targeted to the President's
    America Reads initiative--an effort through which volunteer tutors will
    help children read well and independently by the third grade. Along with
    support from the Departments of Education and Health and Human Services,
    the Corporation's funding will finance 11,000 AmeriCorps tutor
    coordinators and logistical support to help recruit, organize, and
    manage an army of a million volunteers who will tutor over three million
    children--from kindergarten through third grade--after school, on
    weekends, and during the summer. Every Corporation program will
    participate in this effort. America Reads builds on the demonstrated
    success of national service in helping to solve real problems.
      AmeriCorps, the Corporation's signature initiative that includes
    Volunteers in Service to America (VISTA) and the National Civilian

    [[Page 97]]

    Community Corps, has proven cost-effective. Investment in AmeriCorps
    members returns $1.60 to $3.90 for each dollar invested, according to
    independent evaluations. AmeriCorps enables young Americans of all
    backgrounds to serve in local communities full- or part-time, generally
    for at least a year. In return, they earn a minimum living allowance set
    at about the poverty level of a single individual and, when they
    complete their service, they earn an education award to help pay for
    postsecondary education or repay student loans. About 70,000 individuals
    will have participated in AmeriCorps in its first three years, and the
    budget supports an AmeriCorps program of about 35,000 members.
      Among other national service programs:
       Learn and Serve America grants help school districts and
              communities engage youth to serve their communities and learn
              citizenship. The budget proposes to fund opportunities for
              almost 900,000 school-age youth.
       The National Senior Service Corps engages senior citizens--an
              untapped resource with time, talent, and energy to meet
              community needs. The budget funds the Retired and Senior
              Volunteer Program, the Foster Grandparent Program, and the
              Senior Companion Program, enabling nearly 600,000 older
              Americans to serve.
      Corporation programs strengthen communities in several ways.
    AmeriCorps, for example, is run by national, State, and local
    organizations such as Habitat for Humanity, the Christian Children's
    Fund, the American Red Cross, the National Coalition of Homeless
    Veterans, the YMCA, and local United Ways across the country. These
    institutions select AmeriCorps members to work alongside the men and
    women already working to solve problems at the local level. AmeriCorps
    members provide a regular source of service that most volunteers, with
    their own time constraints, cannot offer. AmeriCorps members also
    recruit traditional, unpaid volunteers, then help organize and manage
    these volunteers as they perform direct service.
      The Corporation operates in a decentralized fashion, working with
    bipartisan commissions that the Nation's governors appoint to carry out
    service programs. The commissions run competitions to determine what
    programs will participate, and States manage and oversee them. In the
    Learn and Serve program, State education agencies set priorities and
    resource allocations for service learning programs. In the National
    Senior Service Corps, communities define the activities that Senior
    Corps members will conduct.
      Most important of all, national service participants are getting
    things done.
       In one Ohio project, nine AmeriCorps members conducted home
              visits with 1,449 students. As a result, school attendance
              increased, more students applied to college than were
              originally planning to, and more parents were involved in
              their children's education.
       In California, 12 AmeriCorps members tutored 230 students,
              and drop-out rates fell from 50 to 20 percent. Teachers also
              noted improved attention and behavior among students.
       In Olympia, Washington, three teams of retired volunteers
              tutored 400 students who were reading below grade levels and
              almost all were reading at their appropriate grade level by
              the end of the year.

    Empowerment Zones (EZs) and Enterprise Communities (ECs)

      As part of his 1993 economic program, the President proposed, and
    Congress enacted, the Empowerment Zones and Enterprise Communities
    program. Under it, communities develop a strategic plan to help spur
    economic development and expand opportunities for their residents, and
    in return they receive Federal tax benefits, social service grants, and
    more flexibility in how they use Federal funds.
      EZs and ECs are parts of urban or rural areas with high unemployment
    and high poverty rates. For EZs, the Federal Government provides tax
    benefits for businesses that set up shop, and grants to community groups
    for job training, day care, and other purposes. For ECs, the Government
    provides grants to community groups for the same array of purposes. Both
    EZs and ECs can

    [[Page 98]]

    apply for waivers from Federal regulations, enabling them to better address their local needs.
      The 1994 competition for the first round of EZ and EC designations
    generated over 500 applications and created new local partnerships for
    community revitalization--even in communities that were not chosen. The
    105 selected communities made well over $8 billion in private-public
    commitments (aside from the promised Federal resources). In the six
    urban EZs, the private sector has made or committed over $2 billion in
    new investment, bringing greater economic opportunity to those cities.
    One of the six, Detroit, has announced over 21 private developments in
    its zone, with one linen and supply manufacturer announcing a $5.5
    million expansion over the next two years that will create over 100 jobs
    for zone residents.
      But many communities that were not designated as EZs or ECs lack the
    seed capital to begin their revitalization efforts. Thus, in last year's
    budget, the President proposed a second round of EZs/ECs to stimulate
    further private investment and economic opportunity in distressed urban
    and rural communities and to connect residents to available local jobs.
    Because Congress did not act on the proposal, this budget again proposes
    a second round of EZs/ECs.
      The second round would again challenge communities to develop their
    own comprehensive, strategic plans for revitalization, with input from
    residents and a wide array of community partners. The Administration
    would invest in communities that develop the most innovative plans and
    secure significant local commitments. The second round would build on
    the President's ``brownfields'' tax incentive, which would encourage
    businesses to clean up abandoned, contaminated industrial properties in
    distressed communities. This round would also offer a competitive
    application process that would stimulate the public-private partnerships
    needed for large-scale job creation, business opportunities, and job
    connections for families in distressed communities. (For more
    information on the brownfields program, see Chapter 3.)
      The Administration proposes to seek 100 new designations, with
    communities receiving a combination of tax incentives, direct grants,
    and priority consideration for funds from Federal economic development
    programs and for waivers of Federal requirements from the President's
    Community Empowerment Board, chaired by Vice President Gore.

    Community Development Financial Institutions (CDFIs)

      Proposed by the President in 1993 and created a year later, the CDFI
    Fund is designed to expand the availability of credit, investment
    capital, financial services, and other development services in
    distressed urban and rural communities. By stimulating the creation and
    expansion of a diverse set of CDFIs, the Fund will help develop new
    private markets, create healthy local economies, promote
    entrepreneurship, restore neighborhoods, generate tax revenues, and
    empower residents.
      CDFIs provide a wide range of financial products and services, such as
    mortgage financing to first-time home buyers, commercial loans and
    investments to start or expand small businesses, loans to rehabilitate
    rental housing, and basic financial services. CDFIs also include a broad
    range of institutions--e.g., community development banks, community
    development credit unions, community development loan funds, community
    development venture capital funds, and microenterprise loan funds. These
    institutions, not the CDFI Fund, decide which individual projects to
    finance.
      The budget proposes $125 million for the CDFI Fund, $75 million more
    than in 1997, and gradual increases each year to bring the five-year
    total to $1 billion by 2002. Private sector interest in the program has
    dramatically exceeded expectations. In 1996, the CDFI Fund received
    requests for $300 million in assistance--about 10 times what was
    available for the first round--from 270 new and existing CDFIs. Of these
    applicants, the CDFI Fund selected 32 institutions, serving 46 states
    and the District of Columbia, to receive $37.2 million in financial and
    technical assistance. In addition, the Fund awarded $13 million to 38
    traditional banks and thrifts for increasing their activities in

    [[Page 99]]

    economically distressed communities and investing in CDFIs.
      Additional resources would enable the Fund to implement a new
    initiative to support private institutions that provide secondary
    markets for CDFIs, leveraging public resources with private capital.
    This initiative would increase the resources to provide incentives,
    through the Bank Enterprise Award program, for traditional banks to
    expand their community development lending and support local CDFIs. The
    funds also would substantially enhance the CDFIs' capacity to take
    advantage of coordinated, multi-faceted community development efforts,
    such as EZs and ECs.
      A similar program at the Department of Housing and Urban Development
    (HUD), the Community Empowerment Banking Initiative, also helps
    economically distressed neighborhoods establish financial institutions.
    Through a competitive process, the cities of Washington and Baltimore,
    and a six-county area in rural Mississippi, received funding for
    empowerment banks in 1997. These recipients will use $20 million as seed
    money and try to leverage much larger investments from conventional
    banks, foundations, non-profit groups, investors, and residents. Area
    residents and businesses will have controlling interest in the banks by
    purchasing affordably priced stock.
      Finally, the budget proposed $100 million in non-refundable tax
    credits that the CDFI Fund would allocate among equity investors in
    community development banks and venture capital funds. Investors could
    take the credit--up to 25 percent of their investments--in the year they
    invest. This initiative should help leverage over $1 billion of private
    investment in distressed urban and rural communities.

    Federal Relationship With Communities

      The Administration has worked to give communities the flexible tools
    they need to develop affordable housing and revitalize their economies.
      Hoping to reverse a decline in the rate of homeownership, for
    instance, the Administration in 1994 entered into an unprecedented
    partnership with 58 key public and private sector organizations to form
    a National Homeownership Strategy.
      The partners are reducing the barriers to homeownership by lowering
    mortgage closing costs and down payment requirements; by simplifying the
    process of financing home purchases and repairs; and by opening markets
    for women, minorities, central-city homebuyers, and others traditionally
    locked out of the conventional lending markets. Coupled with a stable
    economy and low interest rates, this initiative has helped the Nation
    reach an all-time high national homeownership rate. The rate is now 65.6
    percent--its highest level in nearly 16 years--and 4.4 million Americans
    have become homeowners in the last four years, including record numbers
    of minorities.
      For housing programs in general, HUD has focused on initiatives that
    ``build from the ground up''--giving communities the power and
    responsibility to assess their housing and economic development needs,
    and to tailor their responses accordingly. HUD has paid particular
    attention to streamlining and simplifying Federal requirements in
    exchange for demanding a higher level of performance.
      In addition, the Administration has worked closely with Congress to
    advance the most profound changes to public housing in over a
    generation. This effort reflects HUD's four-part transformation agenda:
       Replace the most dilapidated, distressed developments with
              smaller-scale, affordable housing and portable housing
              vouchers;
       Restore management excellence to housing agencies that are
              systematically troubled;
       Provide incentives for tenants to become self sufficient by
              rewarding work, and connecting them to educational and
              employment opportunities; and
       Place conditions on public housing residency through tougher
              occupancy and eviction rules.
      The budget builds on the progress to date by supporting efforts to
    demolish 54,000 of the worst public housing units in the next three
    years and, rather than operate or modernize those units, provide
    portable sub-

    [[Page 100]]

    sidies to residents and construct a limited amount of mixed-
    income housing. Portable subsidies, now held by nearly 1.5 million
    households, give recipients a greater range of housing and neighborhood
    choices, reducing the isolation of poor families and the concentration
    of poverty (see Chart 6-2).

      But, because their needs can be so different, no single approach will
    help both urban and rural communities. Nor, in fact, will any single
    approach help all rural areas. The Administration had proposed giving
    States, localities, and Tribes more flexibility in how they use the
    community and economic development assistance they receive from the
    Agriculture Department (USDA). In last year's Farm Bill, Congress
    adopted the proposal as part of the new Rural Community Advancement
    Program (RCAP), thus combining 12 separate USDA programs into
    Performance Partnerships in which the Federal Government provides more
    flexibility in exchange for requiring more accountability for how the
    money is spent. The budget proposes $689 million for the RCAP, which
    also would give States block grants for rural community and economic
    development.

    Government-to-Government Commitment to Native Americans

      The Administration continues to strengthen the Government-to-
    government relationship with Native Americans.
      In the past year, the Administration proposed steps to advance and
    protect Tribal interests; negotiated an historic settlement to the
    century-old land dispute between Navajos and Hopis; and fought attempts
    to cut Tribal funding and undermine Tribal sovereignty. For 1998, the
    budget proposes $6.5 billion, six percent more than in 1997, for
    Government-wide programs that address basic Tribal needs and encourage
    self-determination (see Table 6-1).
      ----------------------------------------------------------------------

                               Table 6-1.  GOVERNMENT-WIDE NATIVE AMERICAN PROGRAM FUNDING
                                     (Budget authority, dollar amounts in millions)
    ----------------------------------------------------------------------------------------------------------------
                                                                                                   Percent   Percent
                                                                      1993      1997      1998     Change:   Change:
                                                                     Actual   Estimate  Proposed   1993 to   1997 to
                                                                                                    1997      1998
    ----------------------------------------------------------------------------------------------------------------
    BIA...........................................................     1,647     1,607     1,732       -2%       +8%
    IHS \1\.......................................................     2,022     2,342     2,412      +16%       +3%
                                                                   -------------------------------------------------
      Subtotal, BIA/IHS...........................................     3,669     3,949     4,144       +8%       +5%

    All other.....................................................     1,833     2,138     2,309      +17%       +8%
                                                                   -------------------------------------------------
      Total.......................................................     5,502     6,087     6,453      +11%       +6%

    ----------------------------------------------------------------------------------------------------------------
    \1\ IHS program level includes both budget authority and Medicaid, Medicare, and private insurance collections.

      ----------------------------------------------------------------------

    [[Page 101]]

      The Interior Department's (DOI) Bureau of Indian Affairs (BIA) and the
    Health and Human Services Department's Indian Health Service (IHS)
    comprise two-thirds of Federal funding for Native American programs. For
    the BIA, the budget proposes $1.7 billion, eight percent more than in
    1997, to help improve the living conditions on reservations, promote
    Tribal self-sufficiency, and continue to meet the Federal trust
    responsibility to Native Americans. Over 90 percent of BIA operations
    funding goes for basic, high-priority reservation-level programs such as
    education, social services, law enforcement, housing improvement, and
    natural resource management.
      The budget also would enable DOI's Office of Special Trustee to
    continue to improve the management of Indian trust funds. In December
    1996, DOI sent a report to Congress that outlined legislative settlement
    options for resolving disputed balances in Tribal trust accounts. For
    any settlement, the Administration is determined to achieve fairness and
    justice with respect to these accounts. DOI will continue consulting
    with Tribes on settlement options and submit a follow-up report to
    Congress this Spring.
      For the IHS--whose clinical services are often the only source of
    medical care available on remote reservation lands--the budget proposes
    $2.4 billion, three percent more than in 1997. Along with higher
    funding, IHS and the Health Care Financing Administration have worked
    together to enhance IHS' ability to receive Medicare and Medicaid
    reimbursements, thus helping to ensure that IHS facilities provide
    quality medical care. The budget also allows Tribes to continue taking
    greater responsibility for managing their own hospitals. And the budget
    invests in construction to replace two antiquated IHS facilities--Ft.
    Defiance on the Navajo reservation and Keams Canyon on the Hopi
    reservation--thereby helping IHS provide high-quality medical services
    to Native Americans.
      BIA and IHS will continue to promote Tribal self-determination through
    local decision-making. Tribal contracting and self-governance compacting
    now represent half of the BIA operations budget, and over a third of the
    IHS budget. Self-governance compact agreements, which give Tribes
    greater flexibility to administer Federal programs on reservations, will
    likely grow in number to over 70 in BIA in 1998, a 40-percent increase
    from 1997, and to over 35 in IHS.
      Finally, the Administration continues to stress the spirit of
    consultation and recognition of the unique status of Native Americans.
    In August 1996, Tribal leaders attended the second annual White House
    meeting--marking the anniversary of President Clinton's historic April
    1994 meeting with over 300 Tribal leaders. At last year's meeting, the
    First Lady and three Cabinet officials highlighted progress on improving
    Government-to-govern-

    [[Page 102]]

    ment relations with Tribes and assisting the Native American community. In addition, the Administration unveiled a number of initiatives to improve Federal programs for Tribes.

    The District of Columbia

      The Nation's capital, which should serve as a symbol of pride to all
    Americans, has fallen on hard times. It faces not only serious budget
    problems, but even serious obstacles to providing the most basic
    services to its residents.
      But no simple solution will do. For as the President said recently,
    the District of Columbia suffers from the ``not quite'' syndrome--``not
    quite a State, not quite a city, not quite independent, not quite
    dependent.'' In managing its resources and performing public functions,
    the District is not like other cities, which receive assistance from
    their States. In fact, the District has broad responsibilities for what
    are, elsewhere in the Nation, separate State, county, and local
    functions. And while Congress has voted to give the city a lump sum
    annual payment in recent years, it has kept the payment basically flat
    while imposing strict limits on the District's budget and taxing powers.
      Clearly, the current structure does not work. The Administration
    proposes to significantly re-order the relationship between the Federal
    and city governments in order to revitalize the Nation's capital and to
    improve self-government within the District. Specifically, the
    Administration proposes a three-part strategy to improve the city's
    financial, managerial, and economic resources.
      First, the Federal Government would directly assume certain public
    functions in which it has a clear interest:
      Pensions: The Federal Government would take over the
              District's pension plans for law enforcement officers and
              firefighters, teachers, and judges, thus resuming
              responsibility for the unfunded pension liability that it
              transferred to the District in 1979. The District would
              transfer to the Federal Government (or its designee) $3.3
              billion in associated pension assets, leaving the Federal
              Government to assume the $4.3 billion unfunded liability. The
              District would establish new plans for its current and future
              employees.
       Criminal justice: The Federal Government would provide full
              funding for the District's Court System (which would remain
              self-managed), take over the District's Lorton prison facility
              and its currently sentenced felons, and assume responsibility
              for incarcerating District felons in the future who are
              sentenced in accordance with Federal standards.
       Medicaid: The Federal Government would assume the roles
              normally played by the Federal and State governments under
              this Federal-State program, paying 70 percent of Medicaid
              spending in the District (compared to the current 50 percent
              share).
      In exchange, the Federal Government would end the Federal payment to
    the District, which most recently was $712 million. The Federal
    Government, however, would agree to this exchange of responsibilities
    only if the District took specific steps to improve its management and
    performance. The Administration, the Mayor, the City Council, and the
    District of Columbia Financial Assistance Authority would enter a
    Memorandum of Understanding, setting forth the District's obligations to
    meet specific criteria.
      Second, the Federal Government would establish the National Capital
    Infrastructure Fund (NCIF), and would provide seed money from the
    Federal Highway Trust Fund to fund it. The NCIF would fund
    transportation infrastructure projects in the District to benefit
    residents and commuters alike--including the construction of local
    roads, bridges, and transit facilities.
      Third, the Federal Government would create an economic development
    corporation (EDC) to provide grants and tax incentives for economic
    development. The EDC would craft a strategic economic development plan
    for the District, and recommend how to use various financial incentives
    that the Federal Government would provide. It would build local economic
    markets, develop strategies to link District residents to newly-created
    jobs, and help the District foster regional economic strategies.

    [[Page 103]]

      And fourth, Federal departments and agencies would give the District
    more intensive technical assistance in education and training, housing,
    transportation, health care, and procurement, in order to contribute
    more to the District's success. For instance, the Internal Revenue
    Service would assume responsibility to collect the District's individual
    income and payroll taxes. This fourth step would build on the
    Administration's activities through the President's inter-agency Task
    Force on the District of Columbia.
      The President's plan for the District of Columbia reflects his overall
    goals for the Nation. It would increase opportunity for District
    residents, demand responsibility from the District government, and build
    a strong community in the Nation's capital that all Americans can look
    to with pride.