[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

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  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                                                         
                                                                                                                

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  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.
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  \1\ The President's Urban Policy Report, 1995.
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   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.

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  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 

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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 

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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 

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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-

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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).
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                           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. 

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  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-

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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.

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  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.