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Monday, April 10, 2017

State and local officials eager to support infrastructure investments

posted by: Kirill Abbakumov

President Trump and congressional Democrats have proposed trillion-dollar infrastructure spending sprees, and among their most ardent allies are the nation’s governors who cite years of pent-up demand for fixing or expanding old assets and building new ones.

On February 13, the National Governors Association (NGA), in conjunction with 10 other state and local groups, has issued State and Local Fiscal Facts: 2017, a brief outlining the fiscal condition of state and local governments. In the past few years, the fiscal conditions of state and local governments have stabilized, but improvements have been uneven. Particular emphasis was placed on municipal bonds, which remain a critical tool for financing the construction or improvement of schools, streets, highways, hospitals, bridges, water and sewer systems, ports, airports, and other public works.

Between 2007 and 2016, states, countries, and other localities invested $3.8 trillion in infrastructure through tax-exempt municipal bonds, whereas the federal government provided nearly $1.5 trillion. The report emphasizes that it is now critically important that governors have many tools available in the toolbox to maintain and repair America’s infrastructure.

These efforts were joined on February 15 by National Association of Countries (NACo), as Central Region Representative Cindy Bobbitt emphasized counties' vast transportation infrastructure responsibilities. Counties own and maintain 45% of public road miles and nearly 40% of bridges, and are involved in a third of the nation's public transportation systems and airports. County infrastructure plays a critical role in moving freight and other goods to market, while modernizing industries, higher crop yields and new methods of energy extraction create immense stress on rural roads. Bobbitt underscored that the federal-state-local partnership on infrastructure, informed by county input, is crucial for economic competitiveness.

 “Governors look forward to working with the President to creating a 21st century infrastructure system that boosts the economy” stated NGA Executive Director and CEO Scott Pattison.

Friday, April 7, 2017

Budget request proposes cuts to essential Transportation programs and grants

posted by: Kirill Abbakumov

In the FY 2018 federal budget request released on March 16, the administration targets the reduction of discretionary spending for the Department of Transportation (DOT) by 12.7%, from $18.6 billion to $16.2 billion. It seeks to charter a private non-profit organization to take over air traffic control from the Federal Aviation Administration (FAA) and dismantle competitive grant programs meant to help transportation projects spur economic growth.

Trump’s proposal to spin off air traffic control (ATC) stalled last year, but as Congress begins work on reauthorizing the FAA which expires on September 30, there is now a push for establishing a private non-profit organization or a government corporation to operate the nation’s air traffic control system and separate it from the FAA. With President Trump embarking on loosening regulations and investing in infrastructure, removing the ATC system from federal control would insulate it from governmental “dysfunction.”

The budget also calls for eliminating the Essential Air Service (ESA), a subsidy program for airlines to provide passenger service to small and rural communities that would otherwise not be profitable. The EAS program assists airlines in serving small communities, and the elimination of funding would hurt rural counties where EAS services provide a crucial economic lifeline to communities with no airport in their region. The budget projected that eliminating the program would save $175 million over the annualized CR level.

The budget request also would eliminate the Transportation Investment Generating Economic Recovery (TIGER), a competitive grant program in which state and local governments request federal matching funds for projects with an economic impact. The request gives no details on the savings from the program. It was funded at $500 million in fiscal 2016 and has been proven popular, with the number of applications for TIGER grants exceeding the amount of funding.

The budget outline also would limit funding for the Federal Transit Administration’s New Starts program that provides grants for major rail-based public transportation projects. The White House called for those programs to be funded entirely at the local level. The outline asked Congress to fund only grants that have already been fully agreed to, indicating that no future grants would be approved.

The request would reduce federal funding for Amtrak, a long time target for GOP cuts. The White House called for eliminating federal support for long-distance service, saying it causes most of the organization’s operating losses. That approach would allow for a greater focus on more urgent priorities, like the Northeast Corridor lines and other state-supported passenger services. However, this could impact nearly 500 communities that are served by Amtrak.

The budget document stated the cuts would help the DOT focus on transportation needs of “vital national interests.” The budget request reflects a streamlined DOT that is focused on performing vital functions and reduces or eliminates programs that are either inefficient, duplicative of other Federal efforts, or that involve activities that are better delivered by States, localities, or the private sector.

Wednesday, April 5, 2017

EB-5 immigrant investor program under review

posted by: Kirill Abbakumov

The chairmen of the House and Senate Judiciary committees are urging President Donald Trump to keep intact Obama’s proposal aimed at tightening regulations on the Department of Homeland Security (DHS) EB-5 visa program that fast-tracks green card applications for foreign investors. Congressional lawmakers are urging the President to follow through on sweeping changes to the program that could begin to fix a program that’s strayed from congressional intent and become susceptible to foreign influence.

The EB-5 Program was enacted as part of the Immigration Act of 1990, and established the EB-5 immigrant visa classification to incentivize employment creation in the United States. Under the EB-5 program, lawful permanent resident status is available to foreign nationals who invest at least $1 million in a new commercial enterprise that will create at least 10 full-time jobs in the United States.

Congressional critics of the EB-5 program see it as flawed and as the investment requirements are too low and should be adjusted for inflation and to curb waste, fraud and abuse. The changes proposed by Obama would increase minimum investment amounts from $500,000 to $1.35 million for projects in state-designated Targeted Employment Areas, and from $1 million to $1.8 million for standard projects. Proposed regulations would change which neighborhoods states may be designated as Targeted Employment Areas (TEAs). The TEA designation would also be decided by the DHS, instead of state economic development agencies.

The changes to the program, beginning with the proposal by Obama’s DHS, could turn EB-5 investments into “a turbo-charged engine for economic growth” in struggling urban neighborhoods and depressed rural areas. Congressional support for overhauling or ending the EB-5 program is bipartisan, but so is resistance by party leaders who oppose major legislative change. Some lawmakers argue that less flexibility on TEA designations would kill job creation in urban areas by imposing a rural model on cities where workers travels across census districts to work in profitable downtown areas. Others oppose the program in its current state and have proposed to terminate it (S 232) if changes aren’t made soon.

DHS is set to unveil the final set of new regulations after a comment period ends in April. The EB-5 program has been reauthorized without change in recent years through omnibus spending bills and continuing resolutions.

Thursday, March 30, 2017

DOE releases national energy employment analysis

posted by: Kirill Abbakumov
In mid-January, the U.S. Department of Energy (DOE) released the agency’s second annual analysis of how changes in America’s energy profile are affecting national employment in key sectors of the economy. The report concentrates on the dynamic role of energy technologies and infrastructure in a 21st century American economy as energy innovation is proving itself as the important driver of economic growth in America and producing 14% of the new jobs in 2016. Some key findings of the report include: 4 million Americans are employed in Traditional Energy and Energy Efficiency ...
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Renewable energy investments not only benefit the environment, they are also essential for economic growth. Most renewable investments are done through tax credits, and in late 2015, a bill titled American Clean Energy Investment Act (S.2391) was introduced in the Senate in order to extend state tax credits through 2020, citing tremendous effect clean energy investments have on poor and rural communities. While the bill initially gained bipartisan support, it stalled as the attention of lawmakers quickly shifted elsewhere, highlighting once more the marginalization of clean energy as a vehicle for economic development.

Yet renewable energy holds the greatest potential for economic growth for distressed rural communities. As many states across America gradually lose their manufacturing and agricultural jobs, rural areas in particular need to find different industries to develop. With cheap land available across many states and counties, North Carolina is a great showcase of how investment into solar industry continues to be a strategy for economic stability in the 21st century.

In 2007, North Carolina became the first state in the South to adopt a renewable energy and efficiency standard, which led to a strong commitment to renewable energy, especially solar energy, for the energy needs of the state. And the commitment has paid off big time. North Carolina spent $135 million on clean energy incentives between 2009 and 2013, which generated $2.67 billion in investments, and continued private investment is expected to generate an additional $8.1 billion over the next 10 years. Between 2012 and 2013, North Carolina’s also saw solar industry employment grow 10 times faster than the national average, and the industry now employs over 3,000 residents.

North Carolina’s rural counties saw the bulk of this investment, with Catawba, Davidson, Duplin, Person, Robeson, and Wayne Counties, getting more than $100 million each. The state now has 150 utility-scale solar facilities, with 60 of them in rural counties. These facilities provide jobs, local tax revenue, and generate income for farmers and landowners who lease some of their property to a solar farm. This kind of economic activity is essential for rural communities that have struggled to find their footing in the wake of the recession.

North Carolina’s strength in solar has also attracted companies with energy-intensive data centers, as they see the state and its rural communities as an environmentally friendly and progressive place to do business. American Express chose North Carolina for a $400 million data center because of the state’s robust clean energy policy, and Apple built the largest privately owned solar facility in the nation at its data center in Maiden.

While indicators predict that the sector will continue to generate an average of $523 million in annual revenue from 2017 to 2023, there is a serious concern that clean energy investments will slow down without sufficient federal tax credits under the Trump administration. By overlooking and marginalizing continued investments in renewable energy, success stories like North Carolina will become less common across the economic development landscape.

Friday, March 24, 2017

Trumpís budget seeks to eliminate fundamental CDBG program

posted by: Kirill Abbakumov

In its continued effort to reallocate $54 billion for defense spending in fiscal 2018, The Trump administration is proposing to eliminate the Community Development Block Grant (CDBG) program in a fiscal 2018 budget request that would cut more than 13% from the Department of Housing and Urban Development (HUD) discretionary spending of $38 billion. This would significantly impact every American, as massive corresponding cuts to domestic programs would reduce support for Americans living in urban rural communities.

The CDBG program is the most flexible stream of federal dollars allocated to American communities. Since the start of the program in 1974, CDBGs are one of the only federal funding sources that give community leaders some discretion in how the money is spent, with these grants being used to leverage private investment, create affordable housing, spur economic development, rebuild infrastructure and provide services that strengthen metro areas and rural communities. For every $1.00 of CDBG investment, another $3.65 in private and public dollars is leveraged. The elimination of these grants would represent $3 billion of the $6.2 billion in savings requested by the budget document

The reported $6.2 billion cut planned for HUD will put a tremendous strain on housing authorities across the country, which manage public housing and rely heavily on federal funding. A reduction of $6.2 billion would amount to a cut of about 13% from the housing agency’s $38 billion discretionary budget. Most of that money is used to provide rental assistance to 5.5 million U.S. households, which consumes 84% of HUD’s discretionary budget.

Additional local programs slated for elimination from HUD include the HOME Investment Partnerships Program, Choice Neighborhoods, the Self-help Homeownership Opportunity Program, as well cutting $35 million of funding from Section 4 Community Development and Affordable Housing, and would amount to $1.1 billion in savings.

The proposed cuts are particularly hard-hitting for the department that has been on course for a fiscal 2017 budget increase in Congress' appropriations work last year. The proposed cut of 13% from the HUD budget would be against the fiscal 2017 annualized continuing resolution figure provided by the administration. The budget request seeks $40.7 billion in fiscal 2018, down from the $46.9 billion that the White House described as the fiscal 2017 annualized continuing resolution, which is set to expire on April 28.

Wednesday, March 22, 2017

Trumpís budget would cut Pell Grants and other education grants

posted by: Kirill Abbakumov

With funding for education programs already being at historically low levels, President Donald Trump’s proposed budget seeks to add on to historic cuts and continue the erosion of funding for low-income college students and teacher training programs. In his slimmed-down fiscal 2018 budget request released March 16, Trump seeks to slash the Education Department‘s discretionary funding to $59 billion, or $9.2 billion below fiscal 2017 enacted levels.

Pell Grants are assisting an estimated 7.8 million low-income students attending college this year, would also see cuts from its reserves as Trump proposes slashing $3.9 billion from the program’s $7.8 billion surplus. This could end bipartisan bid to use extra funds to allow students a second Pell Grant for summer classes. Increased Pell Grant funding was a top priority for presidents of and advocates for historically black colleges and universities (HBCU) when they met lawmakers and White House officials in February. While funding for HBCUs would stay the same under Trump’s proposal, 75% of students who attend the institutions rely on the Pell Grants.

In addition to Pell Grants, another $732 million in grants for the neediest of students would be eliminated as it is not as effective in targeting students as Pell, according to Trump’s budget document. The funding for the program would not transfer to the Pell grant either. Programs helping low-income, first generation students prepare and apply for college will also be cut, as well as significantly reducing funding to help employers hire students with financial need for part-time work.

Much of Trump’s budget proposal for education focused on making school choice a central feature of his education policy, with $1.4 billion becoming available for public-private school choice program. The budget encourage states to use the additional $1 billion to Title I to adopt a system so federal funds can follow students to the school of their parents’ choosing. The budget would maintain the $13 billion in funding for educating student with disabilities.

Monday, March 20, 2017

National Association of Counties publishes new reports

posted by: Kirill Abbakumov

The National Association of Counties (NACo) has released two new reports and an online tool in February to assist economic developers in mitigating flooding disasters and leveraging economic development through friend-oriented transportation investments.

As disasters can have a profound impact on counties, Managing Disasters at the County Level: A Focus on Flooding report focuses on emergency management for flooding, the most common natural hazard. County best practices from across the nation are used to underscore and exemplify each resilience strategy. County leaders can use this report to better understand the emergency management cycle and the breadth of resilience strategies available as they work to make their counties more resilient, healthy and safe for residents.

As an addition, NACo collaborated with The Nature Conservancy, to release the Naturally Resilient Communities online guide. This tool is designed to promote the role that nature-based solutions can play in helping reduce flood risk for communities, while also providing other benefits such as improved water quality, enhanced recreational opportunities and wildlife habitat, and stronger, more resilient local economies.

The Counties on Track: Strategies for Freight-Oriented Economic Development report describes how freight transportation investments can fuel local and regional economic development. By exploring how counties in diverse parts of America are partnering with public and private sector actors, the report reveals the county’s role in promoting “freight-oriented development” to create jobs and improve goods movement. Further, the cases described in the report illustrate how counties serve as key connectors to boost local businesses and attract new growth, based on connectivity and place-based assets.

Thursday, March 16, 2017

Bipartisan resistance mounts to Trumpís proposed budget cuts

posted by: Kirill Abbakumov

Democrats are rallying against plans by President Donald Trump to cut $54 billion from non-defense side of the discretionary budget in fiscal 2018 in order to offset a corresponding increase in military spending. The proposed cuts threaten major federal programs that are essential for economic developers across the United States, as Democrats and advocates expect export-oriented, manufacturing, business-focused, education, and workforce programs to be targeted by the conservative administration.

President Trump’s proposed reduction to the domestic budget comes as non-defense spending is already on track to reach historic lows before the end of Trump’s first term, unless Congress acts to raise budgetary caps put in place in 2011 (PL 112-25). Under that budget law, defense spending is limited to $549 billion and nondefense spending is capped at $515.4 billion for fiscal 2018, which begins on October 1. Congress would need to pass a new budget law – not just a fiscal 2018 budget resolution that could be adopted with only Republican votes – in order to raise the caps to accommodate Trump’s proposals. The law could pose yet another hurdle for the Trump administration's plans.

Democrats, whose votes will be needed to advance fiscal 2018 appropriations later this year, reiterated their opposition to Trump’s budget plans, indicating that they will oppose any effort to boost defense spending at the expense of domestic programs. Democratic lawmakers perceive Trump’s budget guidance as setting the stage for drastic cuts that will hurt American workers and weaken the national economy, and they are prepared to stall any proposals that shift more economic burdens onto American families, businesses, and communities.

Republicans were also lukewarm to Trump’s proposal for drastic cuts, suggesting that the first budget request to Congress could be a tough sell. Republican lawmakers and appropriators are also skeptical of the budget proposal, given that non-defense spending is already at historically low levels. Many Republicans also have a lot of vested interests in protecting services and investments that are critical to hardworking American families and communities across the country. Funding for programs that invest in American communities and provide opportunities for all Americans to get ahead are already under significant pressure, and cutting them even further is dangerous and short-sighted.

Thursday, March 16, 2017

Congress seeks Trumpís support for investment in distressed communities

posted by: Kirill Abbakumov

Congressional lawmakers in both chambers aim to obtain support from President Donald Trump for new incentives to help economically distressed communities. Since the beginning of 2017, a group of Republicans have been working to pitch tax incentives for financially troubles areas to President Trump and other administration officials.

They are echoing Trump’s calls to revitalize areas with economic woes while the president develops his legislative agenda, including a tax outline slated for release in several weeks. According to a 2016 Distressed Communities Report by the bipartisan think tank Economic Innovation Group, 50 million Americans live in economically distressed areas. The bipartisan bill entitled Investing in Opportunity Act (S.293) would allow investors to put money – with a deferral of capital gains – into new investments in opportunity zones to be chosen by governors based on criteria such as low median family incomes or poverty rates of 20% or higher. Republicans support the initiative and are proposing several ideas, including a plan to put 10% of rural development funds into areas with poverty rates of at least 20% over the last 30 years.

Other lawmakers are pushing a draft version of longstanding proposal to cut taxes for families and businesses in economic freedom zones, as well as a bipartisan proposal (H.R.1098) to permanently extend the popular New Markets tax credit for investment in low-income communities. That credit expired in 2019. Under the 17-year old New Markets program (PL 106-554) run by the Treasury Department, investors can claim a tax credit for 7 years that equals 39% of the investment in approved community development corporations.

While tax incentives were not emphasized in the anti-poverty plan contained in the House Republican’s “Better Way” agenda, which called for work incentives for welfare and other benefits, there is a chance that President Trump will revive themes he outlined last year. In an October 2016 speech in Charlotte, NC, Trump vowed to “propose tax holidays for inner-city investment and new tax incentives to get foreign companies to relocate in blighted American neighborhoods,” and suggested a “federal disaster designation for blighted communities” to spur redevelopment.

Yet while President Trump might be serious about doing something for economically distressed communities and reorienting government policy towards encouraging business development instead of government spending, proposals to aid distressed communities have a mixed record in terms of longevity and enactment on Capitol Hill. Trump must be aware that benefits provided by such programs have withered over time. A number of incentives for empowerment zones expired at the end of 2016, including tax-exempt bonds, an employment tax credit, and more generous business licensing.

Wednesday, March 15, 2017

President Trump orders review of contentious WOTUS rule

posted by: Kirill Abbakumov

On February 28, President Donald Trump signed an executive order directing the Environmental Protection Agency (EPA) and the U.S. Army Corps of Engineers to review and reconsider the Obama-era “Waters of the United States” rule that expanded federal jurisdiction over pollution in streams and wetlands under the Clean Water Act.

The order is a review, and not a repeal of the rule. On the White House website, under the “America First Energy Plan” webpage, Trump committed “to eliminating harmful and unnecessary policies such as the Climate Action Plan and the Waters of the U.S. rule.” By issuing the order, the EPA and the Corps are to restart and rewrite the rule to enable more common-sense local implementation. Since the rule was originally proposed, it received a lot of criticism for excluding state and local government concerns. Many states and agricultural interests claimed that the rule caused excessive economic harm and was an executive branch overreach. Newly installed EPA Administrator Scott Pruitt promised that the agency would work to reduce the “regulatory burden” on economic interests by the Obama administration.

The National Association of Counties has repeatedly called for collaborative engagement, greater certainty, and a pragmatic rule to advance clean water goals without hindering counties’ vast public safety and infrastructure responsibilities. Counties own and manage public safety infrastructure including 45% of the nation’s road miles and associated ditches, 40% of bridges, as well as flood control channels, drainage conveyances and culverts used to prevent flooding, all impacted by the rule.

Tuesday, March 14, 2017

Trump orders review of burdensome regulations

posted by: Kirill Abbakumov

On February 24, President Donald Trump signed an executive order directing that each federal agency create a task force to identify and recommend changes to unnecessary, burdensome, and harmful rules. The order is the latest in administration’s push to unwind regulations across the executive branch. The President also previously signed an executive order that would require agencies to eliminate two regulations for every new one they finalize.

According to the President, excessive regulations are eliminating jobs, and driving companies out of America like never before. The Presidential Executive Order on Enforcing the Regulatory Reform Agenda directs each agency to establish a regulatory reform task force, which will ensure that every agency has a team of dedicated people to research all regulations that are unnecessary, burdensome and harmful to the economy.

In the early days of the Trump administration, much of that regulatory repeal effort has focused on energy and environment issues, including the signing of a Congressional Review Act resolution to nullify the Obama-era Stream Protection Rule, which updates regulations for runoff from open pit mining operations. While these executive orders are welcomed by states, manufacturers and businesses, they are met with increasing criticism from environmental groups. However, review does not mean repeal, and President Trump claims that and environmental regulations on certain activities will likely remain in place, as his main objective is the revision of “repetitive regulations that hurt companies, hurt jobs, and make American producers uncompetitive overseas.”

The Trump administration is preparing a series of executive orders that would direct the Environmental Protection Agency to rework two of its most controversial regulations — its Clean Power Plan and “Waters of the United States” rulemaking. The two regulations have been a target of Trump throughout his campaign, and under the “America First Energy Plan,” President Trump has committed to eliminating harmful and unnecessary policies such as the Climate Action Plan and the Waters of the U.S. rule.

Tuesday, March 7, 2017

National experts examine future of education and workforce funding

posted by: Kirill Abbakumov

2017 is shaping up as a profoundly challenging year for federal education and workforce funding, as Congress grapples with the return of strict budget caps and sequestration in FY 2018, while finalizing FY 2017 spending bills in a transformed political landscape. On February 23, the National Skills Coalition hosted a webinar to examine the impact of the federal budget and appropriations on the future of education and workforce funding.

The webinar highlighted that there is a high chance of a continuing resolution (CR) moving through this year and into 2018, with frozen funding for workforce and education program funding. Discretionary spending has decreased from $600 billion in 2010 to $503 billion in 2018, as additional cuts to these programs are adding on to historic cuts for continual erosion of funding for workforce and education programs.

Key Department of Labour and Education Department workforce programs continue to be funded at 2016 levels, with an expected cut, or at least a freeze, for 2017-2018 funding. The a possibility of CR that will continue funding at 2016 levels this year is a good sign for workforce programs, because Senate proposed a lower funding level for these programs for 2017.

Workforce, Perkings Vocational Training and Technical Education Grants, and adult education have all seen substantial cuts in the last 15 years, when adjusted for inflation. Since 2001:

  • WIA/WOIA formula grants have been cut by 40%, from $4.7 billion to $2.9 billion in FY 2016;
  • Perkins CTE has been cut by 30%, from $1.6 billion to $1.1 billion in FY 2016;
  • Adult Education has been cut by 20%, from $883 million to $581 million in FY 2016.

With a Republican majority in Congress and a large budgetary agenda before them, taxes will be the central priority going into 2018, with expected cuts across the board for discretionary spending. In addition, plans that involve the repeal of the Affordable Care Act, turning Medicaid into block grants, increasing defence spending, and balancing the budget likely means that discretionary spending will be sustaining continued cuts in the years ahead.

The slide deck and the recording of the webinar can be found here.

Friday, March 3, 2017

President Trump vows to upgrade airport infrastructure

posted by: Kirill Abbakumov

In a White House meeting on February 9, President Donald Trump told airline and airport leaders he would upgrade aviation infrastructure and reduce regulations in the industry, and offered supportive words for a proposal to spin off air traffic control from government direction.

Trump blasted the technology in use by the Federal Aviation Administration’s (FAA) air traffic control system and asked questions about the idea of spinning off the system from FAA’s control. But while the FAA’s so-called NextGen program to modernize air navigation has seen a number of unexpected costs and delays, President Trump he stopped short of endorsing a proposal to spin the air traffic operations into an independent entity. 

The measure is opposed by Democrats who attacked it as “privatization” that would undercut a unionized federal workforce, and by some rural Republicans who worried that small, non-commercial aviation would be steamrolled by an airline-dominated non-profit board. The House committee has already begun discussing the next FAA reauthorization bill, which must be enacted by Sept. 30 to avoid a lapse in authorization. The proposal to spin the air traffic operations into a separate entity will likely remain on the table.

Trump said he would find ways to fund airport infrastructure improvements, but was vague about how he would do so. The president also appeared unenthusiastic about raising the federal cap on passenger facilities charges — fees on air travel that are funneled back into airports where the ticketed flights take off — that airports support.

Still, the airport representatives said they were encouraged by the meeting. They noted that Trump referred to fees rather than taxes, a phrasing that airport representatives said shows the revenue is reinvested in the airports. The President asked staff to schedule a follow-up meeting within three months.

Friday, March 3, 2017

Countering potential proposed cuts to federal economic development programs

posted by: Kirill Abbakumov

The Trump administration plans to release an outline of its fiscal 2018 budget request on March 14, a late submission that is likely to delay the appropriations process. Trump intends to submit what is described as a "skinny budget" that offers a broad outline of his fiscal goals. No target date has been set for releasing a complete budget request.

Yet there are reports that the Trump administration is considering adopting a budget blueprint designed by the Heritage Foundation to slash trillions of dollars of federal spending. The Heritage Foundation is a conservative think tank that proposes to cut or eliminate many federal programs that support businesses and investments, in an effort to cut $10 trillion from the budget deficit over 10 years. In line with Trump administration’s desire to balance the budget deficit, the Foundation proposes to eliminate key federal programs such as Export-Import Bank, Manufacturing Extension Partnership, Small Business Innovation Research (SBIR) and Small Business Technology Transfer initiatives, which are essential in promoting state-level economic development programs that maximize the benefits of economic competition.

Information Technology and Innovation Foundation (ITIF) is one of the numerous bodies claiming that the Heritage plan has a potential to severely harm U.S. innovation, production, and competitiveness. It has concluded an analysis that the country has suffered for more than a decade from chronic underinvestment in foundational areas such as science, technology, education, and infrastructure. To foster an innovative and competitive economy in a turbulent and sometimes hostile world, the U.S. government must continue to improve and expand the programs available found in Departments of Labor, Commerce, Energy, Transportation, Economic Development, and Small Business Administration. Many of these federal programs compensate for serious market failures and play a pivotal role in ensuring that United States is succeeding in global economic competition.

The United States continues to suffer from underinvestment, and the combined failure of the public and private sectors to invest sufficiently is undermining the national economy. All sectors in American society need to work together to spur economic development and to revitalize research, technology, industry, education, and infrastructure. Crippling key functions of the federal government, which would be the consequence of adopting Heritage Foundation’s budget blueprint, will set America back even further.

Friday, March 3, 2017

Trump's first budget: What you need to know

posted by: Karen Garcia

The two-month anniversary of the Trump administration approaches, and the White House has yet to release the president’s budget proposal for fiscal year 2018. Currently, the deadline set by the White House for the submission of this budget proposal is March 16. 

Download the "Why Invest in Economic Development?" brochure here (PDF).

Also, please tell us how federal econ dev programs have supported your community by completing this assessment.

While the president’s proposal has not been released, numerous organizations have sought to influence the decision-making both in the executive and legislative branches of government through various publications. Among them, below are two budget blueprints that delineate what may be expected from the president:

While these sources are only providing recommendations and cannot be considered the definitive voice on federal budget development, they should be seen as strong influencers, and their recommendations should be taken seriously. Some of the contributors to these publications are now established in key positions throughout the Trump administration. For example, Mick Mulvaney, the Director of the Office of Management and Budget was a member of the Republican Study Committee. Additionally, Paul Winfree, director of budget policy and deputy director of the Domestic Policy Council for the White House, was most recently an economic policy director at the Heritage Foundation and was also a key contributor to its budget blueprint.  

Below is an outline of the budget blueprints, as well as the potential changes to the federal budget that target federal programs that communities depend on to advance their economic development goals. There is also information on the resources readily available to help advocate and champion these federal economic development programs.

What is at stake?

The budget blueprints shown above propose the reduction of U.S. debt through cuts to federal spending that is non-defense focused. These proposed cuts aim to significantly reduce funding for or to completely eliminate numerous economic development programs. Below are several programs currently outlined for significant reduction in funding or for complete elimination:

  • Economic Development Administration ($227 million) – elimination

  • International Trade Administration ($503 million) – elimination

  • Rural Utilities Service ($522 million) – elimination 

  • Rural Business-Cooperative Service ($146 million) – elimination

  • Minority Business Development Agency ($33 million) – elimination

  • Manufacturing Extension Partnership ($133 million) – elimination

  • Office of Energy Efficiency and Renewable Energy ($1.99 billion) – elimination

  • Export-Import Bank ($200 million) – elimination

  • Workforce Innovation and Opportunity Act Job-Training Programs ($3.4 billion) – elimination

  • Appalachian Regional Commission ($149 million) – elimination

  • Transportation Investment Generating Economic Recovery Grant (TIGER) Program ($510 million) – elimination

  • Federal Emergency Management Agency’s (FEMA) Disaster Relief Fund ($7.3 billion) – reduced 

The possible elimination of these programs would roughly slash $15.1 billion in funds and initiatives and impede economic development work. These programs have had a tremendous role and impact in the promotion of growth and job creation. They have funded investments in highways, training programs for the U.S. workforce, loans for small businesses, export promotion of businesses’ goods, and the promotion of foreign direct investment into U.S. communities.

The potential repercussions for economic developers could be widespread – with the worst case scenario being the absence of federal economic development programs and funds. These are programs and funds that are readily available to complement state and local efforts that maximize opportunity for every American. There would no longer be funds to draw in private-sector investment in infrastructure improvements, workforce development, innovation and entrepreneurship, small business expansion, and ultimately job creation.

Again, the administration’s budget proposal has yet to be released, and there is no certainty if the recommendations from the Heritage Foundation or the Republican Study Committee will be pursued. Additionally, even if the proposed reduction of funds or complete elimination are included in the president’s budget proposal, it is important to note that this is not an exceptional occurrence. Previous administrations have unsuccessfully targeted some of these programs for elimination.

Call to action

Equally as important to note, the president’s budget submission will be a proposal. In order for it to go into effect, Congress must approve it, and this is where economic developers can have a real impact. 

IEDC has developed a brochure (PDF) that explains the important role federal economic development plays in U.S. communities. It contains easy-to-remember talking points about a handful of economic development programs and their impact. The brochure is meant to serve as an educational tool that can be shared widely with other economic development organizations at the state and local level. But more importantly, it is a tool that can be used in current and future conversations with members of Congress that can help emphasize quickly and succinctly the importance of federal economic development programs and why they must be preserved.

IEDC is also collecting examples of federal economic development investments from communities across the country. If you haven’t already added to our growing library, please consider doing so today. It will be critically important to have real-world examples of the impact of these programs.

 

Wednesday, March 1, 2017

Executives stress importance of ports in infrastructure plan

posted by: Kirill Abbakumov

With President Trump promising to spend $1 trillion on infrastructure over 10 years, the pledge is receiving significant attention by both Congress and the new administration. Given the focus on infrastructure this month, the time was ripe for a group of port executives to make a pitch to House staff members on February 9 to be part of any broad package of infrastructure spending that moves through Congress this year. 

Mark McAndrews, the chairman of the American Association of Port Authorities (AAPA), was joined by the heads of ports in California, New York, Texas and Indiana. The group told a room of staff members for lawmakers who are members of the Ports Opportunity, Renewal, Trade and Security Caucus in the House that investments in ports, harbors and waterways should be part of any infrastructure legislation that moves this year. Billions of dollars in backlogged projects threaten the economic benefits that ports bring to the national economy.

According to AAPA, cargo activity at ports supports over 23 million jobs and touches 25% of the national economy. Federal investment in ports infrastructure would spur other investment. A recent survey by the association projected that ports intend to invest more than $155 billion over the next five years. “For America to be internationally competitive, it’s critical that the federal government uphold its end of the partnership and invest in port-related infrastructure on both the landside and the waterside,” claimed AAPA representatives.

The ports advocates encouraged Congress to spend some of the roughly $9 billion surplus in the Harbor Maintenance Trust Fund that receives revenue from taxes collected on imports and exports. The issue is supported by Democrat Peter A. DeFazio of Oregon, who proposed a measure last year through a water resources bill that would have allowed the trust fund surplus to be spent without a specific appropriation. The measure was stripped from the final law (PL 114-322).

DeFazio has proposed the measure again, saying the measure would allow up to $27 billion in harbor maintenance over the next decade, with the federal government focusing on projects like harbor and channel dredging, rehabilitation and replacement of locks, jetties and breakwaters without raising taxes.

Wednesday, March 1, 2017

Trump administration considers slashing federal funding in new budget

posted by: Kirill Abbakumov

The Trump administration plans to release an outline of its fiscal 2018 budget request on March 14, a late submission that is likely to delay the appropriations process. Trump intends to submit what is described as a "skinny budget" that offers a broad outline of his fiscal goals. No target date has been set for releasing a complete budget request.

Yet there are reports that the Trump administration is considering adopting a budget blueprint designed by the Heritage Foundation to slash trillions of dollars of federal spending. The Heritage Foundation is a conservative think tank that proposes to cut or eliminate many federal programs that support businesses and investments, in an effort to cut $10 trillion from the budget deficit over 10 years. In line with Trump administration’s desire to balance the budget deficit, the Foundation proposes to eliminate key federal programs such as Export-Import Bank, Manufacturing Extension Partnership, Small Business Innovation Research (SBIR) and Small Business Technology Transfer initiatives, which are essential in promoting state-level economic development programs that maximize the benefits of economic competition.

Information Technology and Innovation Foundation (ITIF) is one of the numerous bodies claiming that the Heritage plan has a potential to severely harm U.S. innovation, production, and competitiveness. ITIF President Rob Atkinson -- a keynote speaker at the upcoming 2017 FED Forum -- has concluded an analysis that the country has suffered for more than a decade from chronic underinvestment in foundational areas such as science, technology, education, and infrastructure. To foster an innovative and competitive economy in a turbulent and sometimes hostile world, the U.S. government must continue to improve and expand the programs available found in Departments of Labor, Commerce, Energy, Transportation, Economic Development, and Small Business Administration. Many of these federal programs compensate for serious market failures and play a pivotal role in ensuring that United States is succeeding in global economic competition.

The United States continues to suffer from underinvestment, and the combined failure of the public and private sectors to invest sufficiently is undermining the national economy. All sectors in American society need to work together to spur economic development and to revitalize research, technology, industry, education, and infrastructure. Crippling key functions of the federal government, which would be the consequence of adopting Heritage Foundation’s budget blueprint, will set America back even further.

Monday, February 27, 2017

DOT announced new funding opportunity for South Atlantic Region

posted by: Kirill Abbakumov

On February 9, the Department of Transportation’s Office of Small and Disadvantaged Business Utilization (OSDBU) announced a funding opportunity for business centered community-based organizations, transportation-related trade associations, colleges and universities, community colleges, or chambers of commerce to compete for participation in OSDBU's Small Business Transportation Resource Center (SBTRC) program in the South Atlantic Region (Virginia, West Virginia, North Carolina and Kentucky).

OSDBU will enter into Cooperative Agreements with these organizations to provide outreach to the small business community in their designated region and provide financial and technical assistance, business training programs, business assessment, management training, counseling, marketing and outreach, and the dissemination of information, to encourage and assist small businesses to become better prepared to compete for, obtain, and manage DOT funded transportation-related contracts and subcontracts at the federal, state and local levels.

The Cooperative Agreement Grant has an award ceiling of $135,000 and an award floor of $150,000.

Complete Proposals must be received on or before March 3, 2017, 6:00 p.m. Eastern Standard Time (EST). Proposals received after the deadline will be considered non-responsive and will not be reviewed.

Monday, February 27, 2017

Republicans advocate for rural areas in Trumpís infrastructure plan

posted by: Kirill Abbakumov

The Trump campaign had advocated using tax credits to lure private investment that would leverage an estimated $1 trillion worth of projects. But President Trump’s plan to pump $1 trillion into infrastructure projects over 10 years through mostly private investment isn’t sitting well with Republicans from rural states who control the purse strings. Transportation leaders in sparsely populated states told the Senate Environment and Public Works Committee that direct federal funding – and not toll-driven public-private partnerships – is critical to addressing their surface transportation needs

Rural lawmakers are concerned that relying on private financing will steer money toward urban areas where investors think they are best able to make a profit from heavy use of new roads and bridges. In thinly populated states, they say, such profitable projects may be few and far between. Funding solutions that involve public-private partnerships, as have been discussed by administration officials, may be innovative solutions for crumbling inner cities, but do not work for rural areas.

Democrats and rural Republicans worry that would shift the focus to projects like toll roads that can deliver a revenue stream and a profit source for private investors — and would cut out direct federal spending that must be spent on non-profitable projects like road maintenance. Republicans emphasize that direct federal spending will be critical to surface transportation projects, as long as any new spending does not increase the deficit, or as long as it's offset elsewhere in the budget.

The president has been silent on details since he took office. His campaign said last year that virtually all of the $1 trillion could come from the private sector. Using tax credits, the government could attract investors by giving them an incentive to put equity into a project and then to borrow to fully fund it.  

Friday, February 17, 2017

Congress divided over private vs federal spending on infrastructure

posted by: Kirill Abbakumov

In his inaugural speech, President Trump said infrastructure had "fallen into disrepair and decay," and vowed to "build new roads and highways and bridges and airports and tunnels and railways” all across the nation. In a nod to creating more jobs by boosting infrastructure, Trump emphasized that people needed to “get off of welfare and back to work rebuilding” the country with American labor. Trump’s promise became approximately $180 billion in federal spending and tax credits to leverage private capital that would total $1 trillion over 10 years.

In one approach to accomplish this goal, President Trump called for levying an immediate 10% tax rate on U.S. profits held overseas in what is known as a "deemed repatriation."  As the tax committees try to write overhaul legislation, Republicans are split on how to use President Donald Trump's proposed repatriation of $2.6 trillion in corporate cash held overseas. Some argue in favor of using repatriated funds to finance Trump’s call for infrastructure improvement, while others say any new tax revenue should be put toward a sweeping tax code rewrite and are opposed to using it on other spending. There could be efforts to revive a stymied tax repatriation plan that was negotiated in 2015 as a potential add-on to the surface transportation reauthorization FAST Act (PL 114-94).

Trump hasn’t provided spending details of his plan, but its reliance on the private sector has encouraged the view that most of the money would go to projects where profits are easiest to project. A Republican infrastructure package would touch areas under Energy and Commerce jurisdiction, like the electric grid and telecommunications. Measures in those areas would be unlikely to include direct federal dollars, but would instead focus on reducing regulations that would allow the private sector to more easily upgrade its own infrastructure, he said. Republican Main Street’s legislative goals also include modernizing the air traffic control system, though the group didn’t explicitly endorse the proposal to spin off the system’s responsibilities to a private non-profit organization.

Meanwhile, Democrats propose that the $1 trillion plan to stimulate infrastructure be accomplished through direct federal funding to jump-start the economy, an alternative to Trump's plan to rely largely on the private sector for the same amount of money. Ranking Democrats of several Senate committees announced at a news conference they would distribute $1 trillion over 16 categories of infrastructure, including $200 billion for a “critical infrastructure program,” $130 billion for transit, $110 billion for water and sewer programs, and $100 billion each for roads and bridges, to “revitalize Main Street” and for energy infrastructure. The plan also calls for funding for “innovative financing tools,” expanding the Department of Transportation’s Transportation Investment Generating Economic Recovery (TIGER) grant program, and expanding rural broadband. Ambitiously, the Democrats also called for a “Buy America” provision requiring that materials used in federal infrastructure projects be made in the United States. The senators said the legislation would create 15 million jobs.

In a Gallup Poll released on January 20, 69% of respondents said it is “very important” to enact a major spending program to strengthen infrastructure, while 54% hold the same view about Trump’s promise to reduce income taxes for all Americans.

Thursday, February 16, 2017

US Energy Plan omits renewables and promising solar jobs growth

posted by: Kirill Abbakumov

On January 20, the White House has released its An America First Energy Plan which emphasizes on the potential of untapped shale, oil, and natural gas reserves of the United States as the future of American economy. Yet the Energy Plan did not take into consideration the potential of the clean energy revolution that continues to annually create many new jobs in the renewable energy.

With electricity in the country cheaper today than it was 25 years ago, solar and wind power has become cost-competitive with oil and natural gas, helping to maximize the use of American resources. Today, more than 2.5 million Americans work in clean energy, with 414,000 people in the renewable technology sector such as wind and solar.

The U.S. solar industry is leading the way, as it continues to post dramatic job growth numbers each year. The non-profit Solar Foundation’s new annual report highlights that more than 260,000 Americans now work in the solar industry, with 51,000 solar industry jobs created in 2016 alone, which is a 24.5% increase since 2015. The report also emphasizes that solar jobs have tripled since 2010, and this is the 4th consecutive year that the solar industry increased its jobs number by 20% or more.

Over half of the American solar jobs are in the installation of solar panels, especially for residential uses and larger solar arrays, as more and more American families and businesses are turning to solar. About 10-30% of jobs are also in the manufacturing of solar panels. The Solar Foundation’s report calculates that for total jobs, solar is now the second largest U.S. energy industry, second only to oil and petroleum, while considerably larger than coal.

Majority of solar jobs have been in the states along the east and the west coast of the country. The solar leader in the country is California, with 100,000 jobs, but solar jobs generally grew in states across the country. In Indiana, they nearly doubled from 1,567 to 2,700 in one year. Other states seeing big growth included Louisiana, Michigan, Texas, and Utah.

Yet with the new administration in the White House, the industry’s growth is not expected to be as fast in 2017, with an estimated 10% overall growth. This might partly be because the industry will be losing some of its Obama-era exuberance and trying to figure out how to shift into the Trump years. With dwindling federal support, there is a risk of the industry losing numerous initiatives, grants, and subsidies in the near future.

Thursday, February 9, 2017

Annual Congressional report on state of US manufacturing released

posted by: Kirill Abbakumov

The health of the U.S. manufacturing sector has long been of great concern to Congress. The decline in manufacturing employment since the start of the 21st century has stimulated particular congressional interest. The Obama Administration has undertaken a variety of related initiatives, and Members have introduced hundreds of bills intended to support domestic manufacturing activity in various ways. The proponents of such measures frequently contend that the United States is by various measures falling behind other countries in manufacturing, but are often relying on data that is over 5 years old or more, and are not accounting for improvements stimulated with federal policy and initiatives in recent years.

In order to present a more accurate picture of the contemporary U.S. manufacturing sector, the Congressional Research Service released its annual report titled U.S. Manufacturing in International Perspective on January 18. It is designed to inform the debate over the health of U.S. manufacturing through a series of charts and tables that depict the position of the United States relative to other countries according to various metrics. Understanding which trends in manufacturing reflect factors that may be unique to the United States and which are related to broader changes in technology or consumer preferences may be helpful in formulating policies intended to aid firms or workers engaged in manufacturing activity. This report does not describe or discuss specific policy options.

Key takeaways from the 2017 report:

  • S. manufacturers use relatively fewer imported inputs and more domestically produced inputs, compared to manufacturers in other countries, with the notable exception of Japan;
  • Capital investment in manufacturing is on par with other Western countries (a little below Canada and Germany), but lower than Korea and China;
  • Manufacturing employment is down, as measured by both employees and hours worked. This it's true of all the developed countries;
  • Productivity growth has been 49% between 2002 and 2014 and is higher than most of the other Western countries, except for Japan (53%), Korea (94%), and Taiwan (97%);
  • Average 2015 compensation in manufacturing was $37.71 per hour, being higher than 26 of 34 other countries and is partly due to the strong dollar;
  • S. Manufacturers spend more on R&D than anyone except China, followed by Japan, Germany, and Korea. As a share of value add, U.S. is number 2, behind Japan. China is very low by this measure.
Monday, February 6, 2017

SBA nominee outlines key agency priorities for 2017

posted by: Kirill Abbakumov

On January 24, Linda McMahon, the nominee to lead the Small Business Administration (SBA) met with the Senate Small Business Committee at her confirmation meeting to outline the objectives and priorities she proposes for the agency. Her most significant argument was not to merge SBA into another agency, but rather have it continuing operating independently, as dialogue arose previously about the management of the agency as an independent body.

In her statement, McMahon stressed the need for the economy to encourage businesses taking risk. In particular, she claimed that small businesses need to be reassured on the risks they take when they plan to expand or hire new workers without fearing onerous new regulations, or unexpected taxes, fees and fines that will make such growth unaffordable.

McMahon also said one of her priorities at the SBA would be taking a close look at its disaster relief program, noting that the agency was slow to respond in the wake of Superstorm Sandy in 2012. The agency and its resources must be readily mobilized and effectively implemented for disaster relief.

Despite inquiry by the Senate Committee about Waters of the United States (WOTUS) Act, McMahon declined to say that she would write the EPA to ask for it to withdraw the WOTUS rule expanding federal authority under the Clean Water Act.

Thursday, February 2, 2017

President of EXIM Bank steps down

posted by: Kirill Abbakumov

On January 19, 2017 the Export-Import Bank of the United States (EXIM) bid farewell to its longest sitting Chairman and President, Fred Hochberg. He was at the helm of the agency for 8 years. Hochberg’s departure adds to an already long list of banking and financial services-related appointments awaiting President Donald Trump.

The last two years of Hochberg’s tenure were marred by political fighting over the Bank and its mission. With some members of Congress complaining that the EXIM’s loan and credit programs amounted to corporate welfare, its authorization was allowed to lapse for 6 months until the end of 2015. After reauthorization by Congress, Alabama Sen. Richard C. Shelby, who was chairman of the Senate Banking Committee in the 114th Congress, continued to hold up nominations to the EXIM Bank’s board. Since early 2015, the board does not have a quorum, which prevents the Bank from making any deals of $10 million or more.

In the Bank's annual report issued January 4, Hochberg blamed the slow reauthorization and lack of a board quorum for a decline in the Bank’s business to a 40-year low. Business at EXIM, which helps finance exports by American businesses, was down 60 percent in fiscal 2016 and down 75 percent from a high in 2014, the final full year in which the Bank was both authorized and had a quorum on its five-member board, according to the report. 

Besides the positions at the EXIM Bank, Trump will have two picks to make for the five-member Securities and Exchange Commission — where he's chosen Jay Clayton as chairman—as well as two picks to the seven-member Federal Reserve Board of Governors and three picks to the five-member Commodity Futures Trading Commission.

Tuesday, January 31, 2017

House Small Business Panels get new chairmen

posted by: Kirill Abbakumov

House Small Business Chairman Steve Chabot, R-Ohio, announced four new subcommittee chairmen Tuesday, including those replacing departed Reps. Tim Huelskamp of Kansas, Richard Hanna of New York and Cresent Hardy of Nevada.

Rep. Dave Brat of Virginia takes over as chairman of the Subcommittee on Economic Growth, Tax and Capital Access, replacing Huelskamp, who was defeated in his district’s party primary and has left Congress.

Rep. Steve Knight of California assumes the chair of the Subcommittee on Contracting and Workforce, replacing Hanna, who retired.

Rep. Trent Kelly of Mississippi was named chairman of the Subcommittee on Investigations, Oversight and Regulations, replacing Hardy, who was not re-elected.

Also, Rep. Rod Blum of Iowa becomes chairman of the Subcommittee on Agriculture, Energy and Trade, which in the 114th Congress was chaired by Rep. Carlos Curbelo of Florida, who has now moved to the House Ways and Means Committee.

Rep. Aumua Amata Coleman Radewagen of American Samoa is the only panel member to keep her subcommittee gavel in the current Congress. She's chairwoman of the Subcommittee on Health and Technology.

Friday, January 27, 2017

New president faces new fiscal challenges

posted by: Kirill Abbakumov

On January 20, 2017, Donald J. Trump became the 45th President of the United States. On January 19, the Senate adopted the budget resolution 51-48 passed by the House earlier in the week. The 2017 budget resolution (S Con Res 3) is primarily aimed at repealing the 2010 health care law. The concurrent resolution does not require a signature from the president and does not become law. For economic development, in his campaign President Trump vowed to launch a $1 trillion infrastructure program and slash taxes for all income levels.

The Government Accountability Office, the investigative arm of Congress, has released a new report on January 16 titled GAO Report to Congress: The Nation’s Fiscal Health. The report claims that even before any new spending programs or tax cuts get adopted, the country is on the verge of fiscal ruin. Soaring costs of entitlement programs, from an aging population and rising health care costs, will combine with increasing interest payments to push the federal debt to record levels. While such projections have been made previously, the new report underscores the fiscal stakes awaiting the Trump administration as it tries to translate vague campaign promises into legislative action.

The annual deficit in 2016 was $587 billion, up from $439 billion in fiscal 2015 and the first increase after six consecutive years of decline. While revenue increased by $18 billion last year, spending increased by $166.5 billion, thereby widening the deficit. The main drivers of the spending surge were Social Security, Medicare, Medicaid and interest on the debt.

In preparing to draft its first budget request to Congress, the Trump administration is getting advice from the Heritage Foundation and the Republican Study Committee, the largest bloc of conservative House members. Both groups have offered budget blueprints that call for deep reductions in planned spending on entitlements such as Social Security and Medicare. President Trump is expected to submit an outline of his fiscal 2018 budget request in late February, followed by a more detailed spending plan by May, according to congressional Republicans. Members of his transition team have met with both groups to review their budget plans, which would draw sharp protests from Democrats and signal a dramatic shift in fiscal policy if adopted.

Thursday, January 26, 2017

US Chamber of Commerce publishes 2017 economic outlook

posted by: Kirill Abbakumov

On January 18, 2017, the United States Chamber of Commerce released its economic outlook for the current year. The publication emphasized a positive business outlook and improved business investment based on the outcomes of the 2016 Presidential Election, in which President Trump promised more support for American manufacturers, producers, and small businesses.

The US Chamber speculates that economic growth in 2017 will settle in the range of 2-2.5%, slower than 2015’s still modest 2.6% but a bit better than the expected 1.6% growth of 2016. These predictions are in line with those released by the Congressional Accountability Budget in their The Nation’s Fiscal Health report the same week.

Other highlights of the publication include:

  • The labor market added 2.2 million net new jobs in 2016 compared with 2.7 million in 2015 and 3.0 million in 2014. The unemployment rate closed 2016 at 4.7% and is expected to remain near this level for the next few years.
  • Personal consumption expenditures, which slowed in Q3 to 3.0% from 4.3% in Q2, are expected to improve modestly in Q4 largely driven by steady job and wage growth.
  • Real business fixed investment declined in three out of the last four quarters, and through Q3 it was down 1.1% year over year. The causes of weak business investment had been operation capacity of businesses, which stood at 80% throughout 2016.

Business confidence has improved markedly as businesses anticipate a more growth-friendly Trump administration. The US Chamber hopes that the administration and Congress can make some changes quickly to improve the business environment, by reversing certain Obama administration executive orders, halting some regulations, or by overturning recently finalized regulations through the Congressional Review Act.

Tuesday, January 24, 2017

DHS seeking public feedback on improving the EB-5 program

posted by: Kirill Abbakumov

On January 11, 2017, the Department of Homeland Security (DHS) announced that it is seeking public feedback on potential regulatory changes to the EB-5 Immigrant Investor Regional Center Program. DHS has determined that program changes are needed to better reflect business realities for regional centers and EB-5 immigrant investors, to increase predictability and transparency in the adjudication process for stakeholders, to improve operational efficiency for the agency, and to enhance program integrity.

The EB-5 Program was enacted as part of the Immigration Act of 1990, and established the EB-5 immigrant visa classification to incentivize employment creation in the United States. Under the EB-5 program, lawful permanent resident status is available to foreign nationals who invest at least $1 million in a new commercial enterprise that will create at least 10 full-time jobs in the United States.

This notice provides an opportunity for DHS to hear and consider the views of the public on potential changes to improve and modify the EB-5 Program. DHS invites feedback from all interested parties, including regional centers, investors, advocacy groups, nongovernmental organizations, community-based organizations, and legal representatives who specialize in immigration law, as well as corporate and securities law. DHS welcomes comments on any and all aspects of proposed changes, and the feedback is expected to help shape the outcome of this possible rulemaking.

DHS is seeking comments from stakeholders on specific topics such as:

  • The process for initially designating entities as regional centers;
  • A potential requirement for regional centers to utilize an exemplary filing process;
  • “Continued participation” requirements for maintaining regional center designation;
  • The process for terminating regional center designation.

More information is available through the Federal Register. The deadline to submit comments and feedback is on or before April 11, 2017.

Thursday, January 19, 2017

SBA to modify the SBIC Program

posted by: Kirill Abbakumov

In December 2016, the Small Business Administration announced a number of proposed changes to its Small Business Investment Company (SBIC) Program. SBIC is an SBA financing program created to stimulate and supplement the flow of private equity capital and long-term loan funds, which small-business concerns need for the sound financing of their business operations and for their growth, expansion, and which are not available in adequate supply. Through the SBIC Program, SBA licenses and provides debenture leverage to privately-owned and professionally managed for-profit SBIC investment funds that invest in small businesses.

On December 16, 2016 SBA proposed to increase the SBIC licensing and examination fees. Presently, the SBA is allowed to collect licensing and examination fees to offset SBA’s costs associated with the administration of these two activities. SBA last increased fees for SBICs in 1996 and current fees offset less than 40% of SBA's administrative expenses related to these activities. The proposed rule would revise existing regulations to increase, over a 5-year period, SBIC licensing and examination fees in order to annually recoup an estimated 70% of SBA administrative expenses related to these activities. After the 5 year period, the rule proposes annual increases of these fees based on inflation. To encourage investment into underserved areas, the proposed rule would establish certain examination fee discounts for SBICs that make significant low and moderate income investments. SBA invites stakeholders and the public to submit comments on the proposed rule on or before February 14, 2017.

In addition, on December 28, 2016, SBA announced that it is revising regulations for the SBIC program to expand permitted investments in passive businesses and provide further clarification with regard to investments in such businesses. SBICs are generally prohibited from investing in passive businesses under the Small Business Investment Act of 1958, but the new regulations will provide for two exceptions that allow an SBIC to structure an investment utilizing a passive small business as a pass-through:

  • The first exception will provide conditions under which an SBIC may structure an investment through up to two levels of passive entities to make an investment in a non-passive business that is a subsidiary of the passive business directly financed by the SBIC.
  • The second exception will enable a partnership SBIC to provide financing to a small business through a passive, wholly-owned C corporation (blocker corporation), without the need for prior SBA approval.

The rule will become effective on January 27, 2017.