Federal Resources for State and Local Economic Development

Congress has authorized over 130 economic development programs, which are administered by over 20 departments and agencies. Federal resources for economic development are often delivered to state and local stakeholders through technical assistance and financial assistance programs. This In Focus provides an overview of major federal financial assistance programs; primarily administered through grants, credit assistance, and tax policies.

What Is Economic Development?

The term "economic development" lacks a common definition and can refer both to a policy objective as well as a set of tools to achieve that objective. The Department of Commerce's Economic Development Administration (EDA), describes economic development as creating

the conditions for economic growth and improved quality of life by expanding the capacity of individuals, firms, and communities to maximize the use of their talents and skills to support innovation, lower transaction costs, and responsibly produce and trade valuable goods and services.

Economic development is also described as a long-term process designed to create jobs and economic activity, and as efforts to address equity and create wealth.

State and Local Project Examples

State and local stakeholders may seek assistance for a wide array of economic development activities, including initial planning or implementation projects, as well as support for:

• entrepreneurial assistance and business expansion, acceleration, and incubation strategies;
• infrastructure, including water and sewer systems improvements, industrial parks, skill-training facilities, and downtown and brownfields redevelopment;
• workforce development and training;
• disaster economic recovery and resiliency efforts; and
• feasibility studies and capacity-building.

How Are Federal Economic Development Resources Distributed?

In recognition that economic development needs vary, from place to place and from sector to sector, most federal economic development programs assist with projects developed from state and local plans, priorities, and input. Programs may offer flexibility to state and local stakeholders so that they may address a range of challenges and opportunities—including strategies designed to respond to structural changes in the U.S. and regional economies.

Economic development may be an agency's primary mission or it may be more indirectly related. The EDA is the only federal agency with economic development as its exclusive mission. See Table 1 for selected agencies that administer programs that are often considered integral to economic development.

Congress has authorized other agencies to administer programs that create conditions to support economic development as well. Such agencies include the Departments of Defense (DOD), Education (ED), Energy (DOE), Health and Human Services (HHS), Homeland Security (DHS), the Interior (DOI), and Transportation (DOT), as well as the U.S. Environmental Protection Agency (EPA) and other agencies. Programs administered by these agencies are primarily authorized to address other purposes such as land use, transportation, education, health, livability, and other amenities, conditions, or events. In terms of economic development, these programs may incentivize private investment; contribute to a community's quality of place; improve individuals' wellbeing, income, or job prospects; or advance other related outcomes.

Types of Assistance and Eligibility Criteria

Federal programs vary by purpose, eligibility criteria, and the types of activities supported. Some federal assistance is targeted to specific scenarios or disruptions (e.g., assistance in response to economic dislocations or shocks, or assistance for ongoing conditions of economic distress). Federal programs often target a specific geographic area. Some programs direct assistance to individuals, or specific stakeholder groups or regions (e.g., low- and moderate-income areas, rural areas, workers, students, small businesses, regions with specific industries). Such programs include HUD's Community Development Block Grant, grant programs administered by federal regional commissions, and others. With some exceptions, federal economic development programs generally assist businesses through credit assistance, technical assistance (e.g., business coaching, mentoring), or tax policies, rather than through direct grants to businesses.

Considerations for Congress

Continued interest in economic development may warrant more analysis of the role of the federal government, the level of assistance, and program coordination across agencies, as well as the accessibility and impact of programs. Congress may seek to evaluate the criteria, priorities, and allocation methodology for the overall portfolio of federal programs as well as for individual programs. Congress may consider options for addressing economic disparities, assisting lagging regions, and providing economic relief to individuals and businesses adversely affected by disaster events and the COVID-19 pandemic through existing or new programs.