59

Applicants made broad use of this invitation. Over 1100 requests for federal pro-
gram flexibility were made for 17 different federal agencies. The majority of re-

juests concerned programs administered by the Environmental Protection Agency,

Department of Labor, the Department of Health and Human Services, the De:
partment of Housing and Urban Development, and the Small Business Administra-
tion.

The Administration is committed to responding very seriously and creatively to
the requests received from EZ/EC applicants, The President created the Community
Empowerment Board (CEB) to coordinate federal programs in Empowerment Zones

Enterprise Communities, and to respond to requests for flexibility in program
administration. The Board consists of the heads of 17 agencies ard departments.
These agencies have detailed staff on a full time basis to an EZ/EC Task Force,
managed by HUD under the supervision of Assistant Secretary Cuomo, to process
waiver requests, provide technical assistance, and engage in true interagency col-
laborations to support Empowerment Zones and Enterprise Communities.

Results of the EZ/EC Waiver Process

‘The first phase of our analysis and response to requests for flexibility focused on
the twelve largest Empowerment Zones and Enterprise Communities. These twelve
cities accounted for almost 50% of the requests received from designated EZ’s and
EC’s. An analysis of these requests and the process utilized to respond to them
yields some information directly relevant to the Local Empowerment and Flexibility

ct:

Of the 271 requests made by these 12 cities, 115 were beyond the statutory au-
thority of the agencies responsible for program administration. In fact, some of the
most innovative and potentially most effective ideas are beyond the statutory reach
of the federal government. A comprehensive analysis of the statutory requesis is at-
tached as Exhibit 1.

* Of the remaining requests, the federal government is taking favorable action on
approximately 130 requests, with about 25 requests still under consideration. No re-
quest for flexibility which is within the statutory authority of the Executive Branch
has been denied, reflecting the sensible nature of the requests as well as the CEB’s
strong commitment to removing federal barriers wherever possible. A full summary
of the federal response to requests for flexibility is attached as Exhibit 2.

© Most of the requests received were framed by the applicants as “waiver re-
quests”. Howover, many of these were not true “waiver requests” but “help requests”
which could be resolved through dialogue between the appropriate federal, state and
local agencies. However they might be characterized, these requests have prompted
a productive—and staff intensive—discussion between local governments and the
agencies of the CEB on multitude of federal-local issues. Indeed, this ongoing dia
logue is one of the prime benefits of this effort.

‘ Another benefit of this effort is the data it has produced about the tools commu-
nities need for their development efforts. The waiver summary we have compiled
contains a wealth of ideas on the creative use of federal programs. We are circulat-
ing this document to communities around the country, and making it available on
our Internet homepage. The summaries also provide a valuable source of informa-
tion for policy-makers seeking to identify the sticking points in regulatory mecha-
nisms, and reduce regulatory and statutory barriers to local flexibility. Where sev-
eral communities identify similar program impediments, it makes sense to consider
whether statutory or regulatory changes are appropriate, rather than granting relief
on an ad-hoc basis to communities which request it, For example, in response to the
ideas contained in the EZ/EC waiver requests, the Department of Housing and
Urban Development completed a page-by-page review of all of the Department's reg-
ulations, eliminating 65 codes and 2800 pages of regulations. An additional 153
codes and regulations will be simplified and streamlined, As a result of these
changes, localities no longer need waivers from HUD to accomplish a number of
their objectives. The legislation under consideration by the Committee would facili-
tate this process by requiring reports similar to those produced by the EZ/EC Task
Force on the federal regulations most frequently waived.

Challenges to Federal Flexibility

While the effort to date has yielded positive results, we have also faced some sig-
nificant challenges to the implementation of our objective to provide maximum flexi-
bility to local communities in exchange for measurable outcomes. First, as noted
earlier, many of the requests for relief made by communities cannot be accomplished
without statutory changes, or the ability to waive statutory requirements. Second,
localities often lacked enough knowledge about federal programs to define the regu-
latory relief sought. For example, many of the requests submitted were relevant to



25

rector, center for public service at the University of Virginia, rep-
resenting the National Academy of Public Administration.

I am not going to be swearing you witnesses in today because
this is a hearing on legislation. I may be told by my full committee
that next time I have to do that, but we didn’t swear the Senator
in and we won't be Swearing you in as well. But we know that
what you will tell us will be the truth and as you see it.

And if I could now, Ms. England-Joseph, nice to have you here.
And we'll just kind of go right in the order that you're sitting. Wel-
come.

STATEMENTS OF JUDY A. ENGLANDJOSEPH, DIRECTOR,
HOUSING AND COMMUNITY DEVELOPMENT ISSUES, GEN-
ERAL ACCOUNTING OFFICE; CHARLES GRIFFITHS, DIREC-
TOR, INTERGOVERNMENTAL LIAISON, ADVISORY COMMIS-
SION ON INTERGOVERNMENTAL RELATIONS; AND CARL W.
STENBERG, DIRECTOR, CENTER FOR PUBLIC SERVICE AT
THE UNIVERSITY OF VIRGINIA, REPRESENTING THE NA-
TIONAL ACADEMY OF PUBLIC ADMINISTRATION

Ms. ENGLAND-JOSEPH. Terrific, thank you. And I would like to
submit my entire statement for the record and simply summarize
my remarks. Good morning, and thank you very much for allowing
us to testify on your piece of legislation and to discuss a little bit
the work that we have done that we hope in some way will contrib-
ute to the discussion or debate.

Now having listened to Senator Hatfield, it was interesting be-
cause the Perspective that we bring of the work that we can talk
about today takes on a slightly different focus even though, ulti-
mately, it’s an issue of streamlining, of flexibility, issues associated
with ultimate Federal cost and maybe perhaps saving of some
money, maybe a lot of money.

But the perspective that I am bringing today, the work that we
did for Congressman Towns and you, Chairman Shays, a report
that was issued in February of this year where we looked at com-
munities from the perspective of the Bottom up.

Typically, GAO has been asked to look at programs from the top
down, how well are Federal programs working outside the beltway.
We thought that it would be appropriate and necessary to go out
to selected communities and try to understand from a community’s
perspective how they are addressing complex problems.

And to the extent that they are attempting to address them in
what we are characterizing as a comprehensive approach, how ef-
fective are they in addressing these complex problems and what
type of Federal assistance and support is necessary, what type of
obstacles or barriers may exist in helping communities actually
meet that intent.

Now, when I say comprehensive, I am talking about not just one
focus or one approach to solving a complex urban or social issue.
Typically, Federal programs and typically lots of foundations and
private non-profits Fave focused on local community problems from
a certain perspective, like housing or social services or education or
employment or economic development.

And what I think we have learned over the years, when you look
at it from the problem’s perspective rather than from the program


COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT
WILLIAM F. CLINGER, JR., Pennsylvania, Chairman

BENJAMIN A. GILMAN, New York

DAN BURTON, Indiana

CONSTANCE A. MORELLA, Maryland

CHRISTOPHER SHAYS, Connecticut

STEVEN SCHIFF, New Mexico

ILEANA ROS-LEHTINEN, Florida

WILLIAM H. ZELIFF, Jr, New Hampshire

JOHN M. MCHUGH, New York

STEPHEN HORN, California

SOHN L. MICA, Florida

PETER BLUTE, Massachusetts

THOMAS M. DAVIS, Virginia

DAVID M. MCINTOSH, Indiana

JON D. FOX, Pennsylvania

RANDY TATE, Washington

DICK CHRYSLER, Michigan

GIL GUTKNECHT, Minnesota

MARK E. SOUDER, Indiana

WILLIAM J. MARTINI, New Jersey

JOE SCARBOROUGH, Florida

JOHN B. SHADEGG, Arizona

MICHAEL PATRICK’ FLANAGAN, Illinois

CHARLES F. BASS, New Hampshire

STEVEN C. LATOURETTE, Ohio

MARSHALL “MARK” SANFORD, South
Carolina

ROBERT L, EHRLICH, JR, Maryland

CARDISS COLLINS, 1
HENRY A. WAXMAN,
TOM LANTOS, California
ROBERT E. WISE, JR., West Virginia
MAJOR R. OWENS, New York
EDOLPHUS TOWNS, New York
JOHN M. SPRATT, Jk., South Carolina
LOUISE McINTOSH SLAUGHTER, New
York

PAUL E. KANJORSKI, Pennsylvania

GARY A. CONDIT, California

COLLIN C. PETERSON, Minnesota

KAREN L. THURMAN, Florida

CAROLYN B. MALONEY, New York

THOMAS M. BARRETT, Wisconsin

GENE TAYLOR, Mississippi

BARBARA-ROSE COLLINS, Michigan

ELEANOR HOLMES NORTON, District of
Columbia

JAMES P. MORAN, Virginia

GENE GREEN, Texas

CARRIE P. MEEK, Florida

FRANK MASCARA, Pennsylvania

CHAKA FATTAH, Pennsylvania

BERNARD SANDERS, Vermont
(Independent)

JAMES L. CLARKE, Staff Director
KEVIN SABO, General Counsel
Jupiny McCoy, Chief Clerk
Bup MyEns, Minority Staff Director

SUBCOMMITTEE ON HUMAN RESOURCES AND INTERGOVERNMENTAL RELATIONS
CHRISTOPHER SHAYS, Connecticut, Chairman

MARK E. SHOUDER, Indiana

STEVEN SCHIFF, New Mexico

CONSTANCE A. MORELLA, Maryland

THOMAS M. DAVIS, Virginia

DICK CHRYSLER, Michigan

WILLIAM J. MARTINI, New Jersey

JOE SCARBOROUGH, Florida

MARSHALL “MARK” SANFORD, South
Carolina

EDOLPHUS TOWNS, New York
TOM LANTOS, California

BERNARD SANDERS, Vermont (Ind.)
THOMAS M. BARRETT, Wisconsin
GENE GREEN, Texas

CHAKA FATTAH, Pennsylvania
HENRY A. WAXMAN, California

Ex OFFicio

WILLIAM F. CLINGER, JR., Pennsylvania

CARDISS COLLINS, Illinois

LAWRENCE HALLORAN, Sta/f Director
KATE HICKEY, Professional Staff Member
‘Tuomas Costa, Clerk
CHERYL PHELPS, Minority Professional Staff

a)


68

across the board and different program standards. They wanted to
see some standardization between them so you could make the pro-
grams work together; that is pretty common.

I will give you an example of one. It is a pet peeve for some peo-
ple; it is a Davis-Bacon issue, as a matter of fact There is an exclu-
sion from Davis-Bacon for very small projects. The idea there is
that you want to—for small housing projects you don’t want to
make them too expensive or they won’t get done, plus you want to
be able to use them as a training ground for training workers, and

ou can’t pay those workers prevailing wage because they don’t

ave the skills yet. CDBG and HOME are the two main funding
sources for those types of projects, and they both have two different
thresholds at which Davis-Bacon kicks in, one for lower than eight
units, the other one for lower than 12 units. If you want to build
12 single-family units or a small density project with 10 apart-
ments in it, you can’t use those two programs together under
Davis-Bacon. And it is a small thing, it is the kind of thing that
drives communities crazy because they say you are not—the left
hand isn’t talking to the right hand within the same agency. That
is a statutory bar.

That is repeated time and time again with different programs
that came in at different times and now just don’t work together
to enable local communities to do what they want to do.

Mr. Souber. I kind of took you off from my original question
which was, can you give me a couple of general categories?

Mr. GLasER. I would say five general categories: one, providin,
more flexibility in the use of funds; second, waiving some or al
matching grant requirements; third, reconciling conflicting eligi-
bility requirements; fourth, streamlining processes, application re-

juirements and reporting and documentation requirements; and
ifth, eliminating economic disincentives to participating in job
training programs. So those are the five major areas; within them
JTPA, bavis Bacon, AFDC, SSBG, Title , Medicare, Medicaid,
site cleanup and permitting at EPA, food stamps and student nu-
trition at USDA, Section 8 homes, CDBG and Public housing at
HUD. Those are broad categories; we would have to go into that
part of that booklet to look at each one and analyze it further.

Mr. KOSKINEN. It is a very good question. One of the concerns
expressed by a number of people about the statute that you are
proposing in its present form is it is without limitation. Therefore,
you sweep in a lot of issues like environmental regulations and tax
policy that are not intended. One way to look at this would be to
treat the empowerment zones as a pilot program, to see what is-
sues at the community level are most difficult. Rather than work
from the general back, we might start with the specific problems
and work out and really solve a lot of the problems that people
have, who otherwise would be supportive I think of this legislation.

Mr. SoupERr. I want to make a brief comment to Mr. Glaser. It
is not directly on this bill, although it is a related thing that I
would like to talk to you about at a separate point.

We have a problem in—it first came up in Kendallville in my dis-
trict, and then now in Angola, where whenever you have a group
home go in, there is a battle, all residents usually do not want the
group home next to them. I have now run into it in two cities that


79

projects such as an integrated, community based management information system
and other steps necessary to move toward a true collaborative at the State-level.
The collaborative is “one stop shopping” for community federations.

Assisting the Task Force the Senior Policy Council (generally deputy level depart-
mental representation) would meet regularly and work with the Assistant to the
Governor to respond to the cross-departmental operational decisions that will arise
in the course of supporting the local federations, starting with the five pilot pro-
grams The Task Force and Senior Policy Council has been expanded to include rep-
resentatives from Project Success and the Illinois State Board of Education. Addi-
tionally, the Assistant to the Governor would work cooperatively with staff from
other agencies to coordinate planning and action where such coordination would be
necessary to meet community priorities,

D. Conclusion

This Administration—the Governor and human services executive staff has made
a strong commitment to far-reaching system change, and believes it is crucial to
build on this momentum. This proposal outlines major systems reform through a se-
quence of steps that builds upon our progress to date and permits experimentation,
learning, and adaptation over time.

Over time, as the number of local federations grow, (assuming successful pilots)
the department directors would spend increasing proportions of time supporting and
expanding state collaborative activities.

The process of evolving from categorized, top down decision making to
collaborative/ integrated support of local federations is difficult and time consuming,
but will have great rewards in the form of better use of scarce resources and there-
fore better outcomes for the disadvantaged children and families in Iinois.

CHARACTERISTICS OF A LOCAL FEDERATION

Purpose:
Improve the life outcomes of the disadvantaged (below poverty level) children and
families in the community. Help build a healthy community.

Membership:

There is no predetermined size, membership composition (by training, occupation,
ethnic group or any other criteria), except that the federation truly represent the
community and be capable of performing assumed responsibilities. Clearly the
Southern Seven federation will be much different than Grand Boulevard, for exam-
ple. The federation could be an existing group, a federation or existing groups, a
new group of community citizens, or any combination of these possibilities. Likewise
the procedure for selecting federation members will vary by community.
Responsibilities:

1, Identify highest priority community needs, independent of whether or not they
fall within traditional state human service system responsibilities (e.g. transpor-
tation to work).

2. Work with the State and the private sector to identify and evaluate all re-
sources flowing into the community and other resources spent on behalf of the com-
munity.

3. Utilizing training provided by the State, best practices information and success
models from other states, together with other relevant information identify opportu-
nities for improved outcomes and for savings (e.g. reducing out of home or out of
community placements).

Over the longer term, local federations would be expected to ensure the building
of local human services capacity and assume substantial responsibility for the allo-
cation and management of resources.

4. Make every effort to fund highest priority community needs through redeployed
resources and private support removing barriers as required.

5. Link private sector organizations (e.g. churches, business) with public sector
systems (e.g. public aid) and state funded providers (e.g. Catholic Charities) to work
toward a seamless array of services and to maximize effectiveness of community ef-
forts to improve outcomes.

6. Maintain accountability for the Governor's goals and principles and for measur-
ing outcome changes in the community.


15

Mr. Suays. I also ask unanimous consent that our witnesses be
permitted to include their written statements in the record. With-
out objection, so ordered.

[The prepared statement of Hon. Mark O. Hatfield follows:]

PREPARED STATEMENT OF Hon. Mark O. HATFIELD, A U.S. SENATOR FROM THE
STATE OF OREGON

I would first like to thank Chairman Christopher Shays for inviting me here to

testify today and for the wisdom that he and Chairman Clinger have shown by in-
troducing the Local Empowerment and Flexibility Act of 1995 in the House of Rep-
resentatives.

My motivation for introducing the companion bill to H.R. 2086 in the Senate is
two fold. First as a former governor of n, I experienced the frustration ex-

essed by many state and local authorities when federal policies do not make sense
Rr their particular communities. Blanket standards from the federal government
are incapable of taking into consideration the diversities of each locality. National
policy objectives often stifle creativity at the state and local level because authorities
are compelled io comply with rigid federal stipulations. In addition, as an Appropri.
ator, I have witnessed first hand the shrinking E pool of federal resources for local
and state governments. This decline is unavoidable and we must now concentrate
our efforts to making the most of the scarce dollars that are available.

As the debate over the budget continues, it is important to remember that long-
term fiscal responsibility should not only depend upon cuts in spending. It demands
a radical transformation in the way we do business as a government. Business as
usual is no Jonger sufficient. We have finally realized that we can no longer spend
more than we have, and the next step is to look to the innovators at the state and
local level to see how they are making limited resources go further. From my experi-
ence as governor I have discovered that it is on these levels that much of the inno-
vation and creativity in government takes place.

The federal budget outlook is growing increasingly bleak. Nondefense discre-
tionary spending will decline 12% from 1995 spen ing levels by the year 2002,

rinking from its current level of 18 percent of the total federal budget, to 13 per-
cent in 2002. As the attached chart indicates, total outlays in discretionary spending
as a percentage of GDP have declined from 13.5 in 1962 to a projected 6 percent
in the year 2000. It is this block of shrinking dollars that fund the grant programs
that benefit local governments. In our efforts to reduce the deficit, discretionary dol-
lars are becoming scarce. Faced with declining resources, we must turn our atten-
tion to developing the most efficient allocation of these dollars.

Permit me to provide one example from my home state that demonstrates a poor
allocation of federal dollars. As a result of the Crime bill passed last year, Marion
County in Oregon was the recipient of additional federal funds. These funds were
a welcome addition to the community but the money came with many strings at-
tached that prohibited the county from spending it where it was needed. Instead of
using the funds to hire additional corrections officers to deal with the growing num-
ber of prisoners, the county was directed by federal law to spend the money only
for hiring additional police. This federal mandate did not serve the best interests
of the community of Marion County in their to fight crime. This example high-
lights the need for providing increased flexibility for state and local governments.
‘The federal government was willing to spend federal dollars to help, but without
flexibility, the needs of the county could not be addressec

The federal government should compliment not hinder the efforts of innovators on
the local level. The need to provide flexibility to local and state governments is im-
mense. These localities need to be able to use their acquired funds in a manner suit-
able to the needs of their communities. While I was pleased with the passing of the
Unfunded Mandates Reform Act of 1995, Congress has failed to examine the exist-
ing regulations that continue to hamper the innovation of loca] authorities. We need
to replace pro; compliance and regulato Tgidity with local flexibility.

There are i r crucial aspects to H.R. 2086, First, different governments of this
nation have different strengths. The federal government does two things well: effec-
tively establishing broad goals that tie us together as a nation and achieving certain
economies of scale which cannot be attained at the local level. The federal govern-
ment often forgets that local governments bring a great deal of resources to the
table. Perhaps the greatest strength is that states and local governments are
innovators. Local and state governments have demonstrated again and again that
they find the most creative ways to tackle problems in solutions that fit the local
context. Local governments are eligible for hundreds of separate federal categorical



14

are now independent, have carved out and provided the amount of
money going into this inner city area. And we have come up with
$135 million a year flowing into a community that has only 35,000
people. You could walk around this community in an hour, $135
million a year, 28,000 of those people are in poverty. If you divide
out the per capita there, you are pretty close to $5,000.

There is a gap between that and the overall Statewide spending
that could be attributed both to bureaucracy and to some statewide
institutions that cannot be easily allocated, or should not be, to the
local community.

So here we are with knowledge—with a community for the first
time having the State budget director come and give them the
knowledge of the amount of money spent each year in the commu-
nity. The community then sits down and says, how can we use this
money better?

A typical program, Project Chance——

Mr. SoupERr. We need to have you wrap up.

Mr. MacDoueat. I'll move quickly.

There are programs easily identifiable that can be redirected, re-
deployed. We then take some uniform needs that they have, uni-
form intake and so forth, spread them across the State.

Your bill, three comments. Big cities are crucial to this. Chicago
is 65 percent or more of the problem in Illinois. But you should not
fund the city or the local government. There are 64 communities
within the city of Chicago. You have to find a way to get your flexi-
bility to the communities and bypass local government in the case
of big cities. At present most of the programs are Federal/State pro-

‘ams that go direct to the communities, not through the cities, so
that, I think, needs to be reflected in your bill.

You need to focus on outcomes. The word “outcome” doesn’t ap-
pear very often.

And finally on the bureaucracy in the reporting, remember that.
the bigger waste is on programs that don’t work, not on people
processing those programs.

Mr. SOUDER. Than you very much.

[The prepared statement ot Mr. MacDougal follows:]

PREPARED STATEMENT OF Gary MACDOUGAL, CHAIRMAN OF THE GOVERNOR'S TASK
FORCE ON HUMAN SERVICES REFORM FOR THE STATE OF ILLINOIS

Dear Chairman Shays: | want to applaud your efforts to begin to address the need
to have local communities play a key role in setting priorities for spending and de-
termining their desired outcomes. The framework that you outline sounds similar
in a number of ways to what we in Illinois are attempting to do through the Gov-
ernor’s Task Force on Human Service Reform by integrating the appropriate re-
sources to the specific needs identified by a community and helping to remove the
impediments that stand in the way.

linois Governor Jim Edgar appointed the Governor's Task Force on Human Serv-
ice Reform in February of 1993. The Task Force, composed of public and private sec-
tor members. was charged with the responsibility to reexamine Illinois’s Health and
Human Services delivery system, determine the nature and scope of the problems
of the system as experienced by citizens, providers, advocates, and public services;
and develop community-based strategies for implementation of state-wide reform.
This initiative is supported by the Annie E. Casey Foundation.

The Task Force works on multiple levels first through a state-wide board that in-
cludes community representatives from the five pilot sites in the state, the Gov-
ernors’ Deputy Chief of Staff (overseeing all human service departments), the direc-
tors for each of the human service departments, representatives of private industry,
academia and other elements of the private sector. The pilot sites are in five eth-


32

As far as the purposes of the act go, which I think are meritori-
ous and we certainly support them, the bill concentrates primaril
on consolidating two or more Federal programs. That’s pretty mucl
its essence. I believe, and if you look at the historical perspective
again going back to the lessons, I believe that the bill should per-
mit flexibility for State and—for Federal and State and local agen-
cies to join programs.

And I do not believe this needs to be more than one Federal pro-
gram; for instance, one Federal program and one State Program be
joined to achieve common goals at the local level. Why can’t we do
that? We could do that, for instance, in the pooling of funds, we can
do that in synchronizing time periods, regulatory requirements,
and reporting.

I have got language in my testimony which I would add to the
bill that would perhaps accomplish that purpose. I won't read it.
Second, I believe that the purpose of the bill should be to stream-
line Federal planning requirements. I believe that there should be
an objective of coming up with common standards that would per-
mit governments, local governments, to use their existing com-
prehensive plans for the purposes of the program, and assuming
that those comprehensive plans are up-to-date and reasonably ade-

uate.

I say this because for particularly small local governments the
planning requirements of Federal programs can be very costly.
When you take a look at what it costs them to put together the
plans necessary to apply, given the amount of money they are prob-
ably going to get, which is not a lot of money, the overhead cost.
is very, very excessive and a lot of local governments simply can’t
afford to participate as partners in our intergovernmental system
because they can’t afford the overhead requirements.

If we have more than one Federal program, we compound the
program because now we're talking about application requirements
‘or two, three, four, five. So, again, I’ve got language in here which
I believe would address that in the legislation.

As far as definitions go, the bill pretty much—well, it talks about
eligible local governments, which I believe looking at it does not in-
clude any other entity than a single local government. I would like
to change that language to read eligible applicant and I would like
to have that be able to include local governments, councils of gov-
ernments, regional bodies, and States, if my other suggestion were
adopted.

Regional bodies are particularly important because for many
local governments in States like I come from, Pennsylvania, they
depend on regional bodies to be their administering agent. They
can’t do it themselves. They don’t have the staff, as was said. They
don’t have the facilities or the expertise, so they look to regional
bodies to perform these functions.

If we gave this to a—if a regional body were able to be a partici-
pant under this program, they could submit one plan for multiple
governments, save a lot of money, save a lot of overhead, and they
would have the expertise to do it. So I would like to suggest that.

On the application review and approval part of the legislation, of
course that creates the flexibility council, and my suggestion would


103

feremmente for the direct benefit of individuals. As to that portion of the bill, the
fatural Resources Defense Council does not take a position.

‘The language of the bill, however, is broad enough to potentially cover environ-
mental programs, perhaps in a very dramatic fashion. To the extent this bill could
allow local governments to trade environmental protections against welfare pay-
ments, schools, or police enhancement, we would opposed it. Moreover, to the extent
this bill would allow waivers of substantive environmental and health programs and
standards we would oppose it. We urge you to re-examine this bill carefully and
limit its scope and clarify its effect. We would be happy to work with you in this
effort.

COVERAGE OF THE BILL

The first issue is whether environmental programs are meant to be covered by
the bill at all. The intent of the bill’s drafters or this Committee on this question
is not evident, We would suggest that you consider addressing flexibility in environ-
mental spending in a separate bill since that issue raises very different concerns
than flexibility relating to federal individual benefit payments.

By its precise terms, however, it would appear that environmental programs could
be addressed under flexibility plans under this bill. The Flexibility Council estab-
lished by the bill would include the Administrator of the Environmental Protection
Agency and the Secretary of Interior; does this imply the inclusion of environmental
matters? (On the other hand, the Secretary of Defense is also on the Council; are
military programs to be included?) Moreover, the definition of “eligible Federal fi-
nancial assistance program” has no subject-matter limitations. Thus, it appears that
environmental programs under the Clean Water Act, the Clean Air Act, Superfund,
the Resource Conservation and Recovery Act, the Safe Drinking Water Act, the Ma-
rine Mammal Protection, Research and Sanctuaries Act and other statutes could
come within the reach of this bill.

The second issue concerns the scope of coverage even within applicable federal
programs. The bill defines an eligible Federal financial assistance program as any

'ederal program under which financial assistance is available, directly or indi-

, to a local government or a qualified organization to carry out the specified
program.” What exactly is the coverage of this definition? Funds are available under
a number of federal environmental programs. If funds are available under one title
of a federal program, could the entire federal program be included in a flexibility
plan? Even within a title, are just the spending elements to be included within the

lexibility plan or the entire title? If this bill has the broader effects, we would be
very concerned about it.

SCOPE OF AVAILABLE WAIVERS

The scope of potential waivers also raises concerns. It is not uncommon for local
governments and other to complain about procedural requirements of federal pro-
ms. While some of these complaints are justified, and the Natural Resources De-
fense Council is not an advocate of unnecessary or excessive procedures, some proce-
dural safeguards such as those relating to public input, review and access are ex-
tremely important. There would seem to be no need to waive these requirements
in order to enhance municipal flexibility. Indeed, it would be a strange system that
a ty could get a “reward”—the avoidance of disliked requirements—for getting
feder money. We would suggest that such procedural requirements, especially
those relating to public accountability, not be eligible for waivers (or at least not
eligible absent a very compelling showing).

e waiver of substantive health, safety and environmental safeguards is even
more troubling. Many environmental limits are based on scientific assessments
about levels of certain pollutants that could cause human health or environmental
problems. A flexibility plan does not and cannot alter the scientific and health re-
ality underlying these standards. While there can be flexibility as to the timing of
environmental improvements—such flexibility is already provided under numerous
environmental laws. We do not believe there should be any waivers of the environ-
mental standards or requirements.

SPECIFIC EXAMPLES WHICH DEMONSTRATE POTENTIAL PROBLEMS

Let me offer a few specific scenarios which highlight some of the potential weak-
nesses of this bill. ;

The Clean Water Act has a number of titles. One establishes a pollution discharge
permit system that is the backbone of the Act, Another provides federal funds for
construction of sewage treatment plants. Ifa city proposes flexibility in the alloca-
tion of the construction funds, could this bill allow waivers of the permit system and


39

programs as part of the flexibility process, and to provide recommendations with re-
‘spect to local flexibility.

GAO is an experienced and quality research agency. But this agency does not
have state and local government officials serving in its leadership to guide the
study, and to decide what recommendations most effectively express their view of
the law’s merits and shortcomings.

T would like to suggest, Mr. Chairman, that this type of evaluation should really
be an intergovernmental endeavor with involvement ty federal, state, and local gov-
ernment representatives. As such, I believe that an organization like ACIR may bet-
ter serve this purpose.

Finally, I would also like to suggest that the report of this experience be pre-
sented to the President as well as the Congress. Again, this process involves and
impacts all branches and levels of government.

appreciate the opportunity to make these comments on H.R 2086, and wiil be
happy to answer any questions that you may have.

Mr. SuHays. But I would like to ask you, Mr. Stenberg, if you
have comments and would love to hear from you.

Mr. STENBERG. Thank you, Mr. Chairman, members of the sub-
committee. In the interest of time I have asked for my written
statement. to be submitted for the record.

Mr. Suays. That will be in the record.

Mr. STENBERG. I appear today in the capacity of chair of the Na-
tional Academy of Public Administration’s Standing Panel on the
federal System. As some of the Members and staff know, the Acad-
emy was chartered by Congress several years ago.

Mr. Suays, You make a big assumption. Did you know that?

Mr. STENBERG. I was just testing you. It was chartered by Con-
gress, and there are several current and former Members of Con-
gress who have been elected fellows. We would be happy to submit
a membership list as background to you.

Mr. Suays. It is interesting to know that.

Mr. STENBERG. The Academy basically is in business to identify
emerging issues and concerns that affect all levels of government
and to provide help to decisionmakers in addressing those. And it
stands ready to assist this subcommittee and others who are work-
ing on H.R. 2086.

We feel that this legislation goes a long way toward upholding
the golden rule and challenging the wisdom of the golden rule of
public administration. You know that the golden rule is do unto
others as you would have them do unto you.

Senator Hatfield made very good points as to his being sensitized
as Governor to the concerns of county and city and town officials.
We feel that many Federal regulators would benefit from some
service in Federal regional offices or at the State and local levels.
They would have an opportunity to see exactly how their policies
and regulations impact at the point of delivery.

The golden rule of public administration is a little bit different:
He or she who has the gold makes the rules. Senator Hatfield ad-
dressed many of the problems of the highly fragmented and highly
prescriptive categorical aid system.

But the legislation addresses a very difficult balancing act that
as stewards of Federal dollars and taxpayers’ dollars this sub-
committee and others have to be aware of: This involves ensuring
accountability to the Congress and to the Federal agencies admin-
istering programs on the one hand, and giving discretion and flexi-
bility to those at the delivery end on the other hand.


64

duce the excessively detailed micromanagement that has characterized some Fed-

eral grant programa in the past.

In his 1996 budget, President Clinton has proposed that 271 separate pro;
be consolidated into 27 “Performance Partnerships”. Each of these would consolidate
funding streams and eliminate overlapping authorities, create financial incentives
and reward results consistent with broad national purposes, and_ reduce
micromanagement and wasteful paperwork. The distinctive feature of the Perform-
ance Partnerships model, in contrast to the traditional block grant approach to con-
solidation, is the combination of greatly increased flexibility with accountability and
rewards for performance. This model empowers States and communities, who can
use Federal resources flexibility to construct the best local solutions to ‘problems,
and rewards them for their success. In the welfare progr: , a8 I mentioned earlier,
34 States have been granted waivers from Federal requirements which give them
flexibility to demonstrate alternatives that have the potential to address the job of
reducing welfare dependency more effectively, more flexibly, and in some cases more
innovatively than uniform Federal rules have allowed.

In similar vein, the Community Empowerment Board, comprising 17 Federal
agencies and departments, has helped the agencies provide waivers of Federal job
training, community development, and various “safety net” rules for 95 Enterprise
Communities and 9 Empowerment Zones. The difference between such waivers and
simple block grants is that the waivers required the development of comprehensive
community i ing and results-based measurement systems; they also ensure ac-
countability for taxpayer’s money.

ile these efforts have proven to be a strong beginning to devolving power to
the local level, they are not complete answers to the problem. For Federal grant pro-
grams to work, we believe strongly that the Executive Branch agencies must have

e flexibility to waive statues and remove barriers that interfere with communities
trying to improve their economic and social conditions. Some departments currently
have this authority, but others do not. Your legislation, with some key changes,
would help to address this issue.

The Administration would like to support legislation such as yours, if we can
reach agreement on the issues that we believe are critical to the effectiveness of
your legislation. These include:

1) improving ways to review applications for waivers such as establishing an ap-
propriate time frame for reviewing waivers (the 45 day review period does not pro-
vide sufficient time to ensure that strategic plans are of a high quality) and ensur-
ing the legislation does not make the process so complex and difficult to administer
that it unnecessarily delays community efforts;

2) making approval of plans by the Flexibility Council contingent upon the sub-
mission of a strategic plan containing specific goals and measurable performance
criteria;

3) making States as well as local governments eligible for waivers and expanding
the involvement of States in the review of proposed waivers;

‘4) providing additional exclusions for certain important areas, such as, tax policy,
worker safety, environmental protection, financial management, and public health;

5) providing appropriate authority for Federal agency heads to approve waiver re-
quests and sufficient administrative support for the interagency mechanism to effi-
ciently respond to the local strategic plans and waiver requests;

6) replacing the Flexibility Council with the Community Empowerment Board
(CEB), removing the Assistants to the President for Domestic and Economic Policy,
and maintaining the President’s discretion in choosing the CEB’s members;

7) tying the continuation of waivers to the performance measures provided under
related strategic plans; and

8) narrowing the criteria of those who can apply or providing some priority consid-
eration to communities of greater need or distress so that the departments can proc-
ess requests in reasonable time frames.

We look forward to working with you to address these concerns and we thank you
for your leadership in sponsoring this bill and the hearings.

I'would be happy to answer questions you and the members of your committee
may have.

Mr. Souper. Thank you both for your testimony.

Would you like to start with questions, Mr. Green?

Mr. GREEN. I have a number of questions. Let me—first of all,
the statutory waivers, you said in your outline that it will have—
I don’t think we have a copy of it. Can you give us an example of
some of those 40 percent—obviously, 60 percent were not statutory



35

Funding was “pooled” from the different federal agencies, and delivered as a single
funding stream through one federal agency.

Grantees were required to submit single financial reports to a single federal agen-
cy. These reports were guided by one set of coordinated federal requirements to
monitor Progress.

It should be noted that the IGA provided no additional funds to grantees other
than what they were already eligible to receive, and which had been appropriated.

The IGA began with 24 approved projects totaling over $33 million dollars. OMB's
first assessment of the program was a favorable one. For example, the assessment
found that the IGA promoted improved intergovernmental working relationships.

On the other hand, assessments by OMB and GSA found a need for greater com-
mitment on the part of federal agencies for participating in this program. Problems
of “turf”, as well as statutory barriers to program consolidation were seen as stum-
bling blocks to agency cooperation.

Tt was also found that the IGA required more time and effort by Federal agencies
than what would be normally expected with individual categorical grants. Observers
believed this to be an normal part of the “learning curve”, and not necessarily a
long-term condition.

‘is latter finding suggested that significant changes to existing financial assist-
ance processes require several years to implement and refine, before their full po-
tential could be realized.

JOINT FUNDING SIMPLIFICATION ACT OF 1974

Based on the encouraging experience of the IGA, the House Subcommittee on
Intergovernmental Relations held “New Federalism” hearings in 1974.

At the time, H.R 11236, the Joint Funding Simplification Act, was before the Sub-
committee. The purpose of this legislation was to embody the essence of the IGA
experiment.

In the hearings on this legislation, it was again stressed that it takes time to im-
plement and perfect significant changes to the federal aid system. It was pointed
out, for example, that the early years of the IGA tended to concentrate more on pro-
cedural issues than substantive outcomes.

The Joint Funding Simplification Act was enacted in 1974. The three purposes of
the act closely resemble the purposes of H.R 2086:

Enable states, local governments, and private nonprofit organizations to use as-
sistance of the United States Government more effectively and efficiently;

« Adapt the assistance more readily to particular needs through wider use of
projects that are supported by more than one executive agency, assistance program,
or appropriation. . . .; and

+ Uncourage Federal-State arrangements under which local governments and pri-
vate nonprofit organizations may more effectively and efficiently combine Federal
and State resources to support projects of common interest to those local govern-
ments and those organizations.

Some of the key provisions of this act included:

. Requiring the President to promulgate regulations to assure that the act was
applied by all federal agencies consistently, in accordance with the purposes of the
act;

« Authorizing federal agencies to identify programs suitable for joint funding, and
to develop guidelines and common application forms;

« Authorizing federal agencies to modify administrative requirements that might
impede joint funded projects;

* Permitting the Administration to develop a system for designating “lead agen-
cies” to coordinate the review of joint programs applications, and for overseeing
projects that are approved;

« Authorizing the creation of “joint management funds” to finance multipurpose
projects, into which the participating agencies could transfer their share of the fund-
ing to be paid out by the “lead agency”; and

* Permitting federal agencies to determine a single “non federal matching share”
for each project, where such requirements applied.

It is interesting to note that this act also permitted a federal agency to enter into
eit funding agreements with states, where a single federal program could be joint-
ly funded with a single state program, and granted to a local government for imple-
mentation.

After becoming law, and in successive executive orders, oversight of this act was

jiven first to GSA, and then later to OMB. The act was authorized for five years.
fn'1980, the act was reauthorized for another five years. However, in 1982, this act,



67

If we don’t have these monthly or every-six-weeks meetings, the
city will go off on theirs, the State will go off on theirs, and HUD
will go off on theirs, or the State will just say, well, that is a local
or Federal problem. But there can be cooperation even under cur-
rent law. Again, we are not asking for waivers; we just want us to
talk to each other in some cases.

Thank you.

Mr. Souper. I want to make sure the record shows that Mr.
Towns, our distinguished ranking member, was here and we have
also been joined by Mr. Barrett of Wisconsin.

I would like to ask Mr. Glaser, first, what further action is being
taken on the request for waivers, the statutory requirements that
the Community Enterprise Board does not have the authority to
approve; and are the relevant Federal agencies reviewing the re-
quest to determine if legislative changes are needed?

Mr. GLASER. Yes, they are, and primarily using this document for
the request for statutory waivers, one of the functions of the CEB
is to review the statutory impediments. When enough communities
come in and say, well, gee, we would like to get where we are
going, but we can’t because of this, then it argues for a broader ap-
proach than just the ad hoc waiver; and part of the import of this
process is what you learn by it.

Even with the nonstatutory ones, enough communities come in
for regulatory waivers; maybe you ought to take a look at changing
the regulation, so that process is ongoing, not just with the statu-
tory, but with the ones you can waive. In fact, at HUD as a result
of what we learned communities wanted to do that our regulations
wouldn’t let them do, we did about 53 regulatory changes, and as
a result, a lot of what communities wanted to do with the waiver
they no longer need a waiver to do. We changed the regulation to
allow them to do it as a matter of law. That is a positive result
of the process, too, and one to keep in mind. I believe that the bill
incorporates a reporting process for that purpose, and we would en-
hance that and like to see that as part of the final legislation.

Mr. KoSKINEN. I would just note, along those same lines, that in
the development of the performance partnerships in the 1996 budg-
et, where we took the programs and consolidated them, legislation
was required because waivers were not possible without specific
statutory authority. So technically your question is right: We could
do this with a series of statutory amendments.

The advantage of the legislation you are considering is it would
give general flexibility to our Federal agencies without having to
tailor specific pieces of legislation across the board.

Mr. Souper. It was very difficult in just skimming through the
different things here to—they are kind of all over the place, al-
though you do have them by different departments and so on.
Could you come up with a couple of general categories that you
might put these in? I saw there was one on a Pell grant waiver,
AFDC waiver requests. One category that would be useful for me
is how many of these are kind of income benefit related, like the
Pell grants, AFDC, SSI, housing funding?

Mr. GLASER. I think a pretty high percentage of them. Commu-
nities complained about the fact that these pro ‘ams, which often
serve the same populations, have different eligibility requirements


104

other substantive pollution limits? Could it allow waivers of the wetlands permitting
program? We certainly hope not, and would strenuously oppose such waivers, but
the bill is not now clear.

‘Another scenario: the Coastal Nonpoint Pollution Control Program, a part of the
Coastal Zone Management Act, requires states which have entered ‘into the CAM
program to develop runoff pollution control program with enforceable policies and
provides some federal funds for the development and implementation of the pro-

am. If a local government were to propose that these funds be included in a flexi-

‘lity plan, could it get a waiver of the remainder of the nonpoint pollution control

rogram? Or a waiver of other Coastal Zone Management requirements? Again, we

ope not, but again the bill is unclear.

et another scenario: Federal money may be available to a municipality indirectly
under the Superfund program if the EPA is working to clean up a Superfund site
within the city. Are such specifically targeted funds eligible for inclusion in a flexi-
bility plan? If so, could this bill allow a waiver of the Superfund provisions that re-
quire public input in the development of that cleanup plan or require that the clean-

standards be based on a sound risk assessment? More broadly, could this bill
allow waivers of other hazardous waste reporting and labelling requirements under
the Resource Conservation and Recovery Act? Again, we hope not, but these unfor-
tunate consequences could perhaps be a result of this bill.

THE PROPER BOUNDS OF FLEXIBILITY PLANS

Besides the problem of waivers of procedural and substantive environmental safe-
guards, we have broader concerns about trade-offs between environmental and other
programs.

A local government receives federal funds for sewage treatment plant construc-
tion, aid to families with dependent children, police equipment and numerous other
programs. Could this bill allow a local government to put all those programe into

lexibilit; pian and stop sewage treatment plant construction in favor of police
equipment? in favor of school construction? We do not believe such dramatic
trade-offs are in the public interest. While of course we support those other efforts,
we believe that any such trade-offs between such broadly unrelated programs could
not be done—or at least are extremely unlikely to be done—in a balanced, science-
or health-based fashion. Rather, the decisions would be made on the basis of crisis-
of-the-moment thinking or short-term political demands. It is not unlikely that in
such comparisons, environmental efforts would be unfairly and improperly dis-
counted given their long-term and widely dispersed impacts. (I recognize that this
could be criticized as an unfairly critical and cynical description of municipal deci-
sion-making, but my experience and that of others I have worked with suggests that
it is unfortunately a correct description far too often.)

On the other hand, NRDC does support increasing municipal input into establish-
ing local environmental priorities. Let. me ive you some examples of flexibility that
the Natural Resources Defense Council believes would be beneficial. A local govern-
ment faces numerous environmental issues and receives federal funds for a variety
of projects such as landfill closure, sewage treatment plant construction, and drink-
ing water supply protection or filtration. Within the bounds of programs where the
health and environmental effects can be compared, municipal input into reallocation
of federal assistance could be appropriate.

We could envision a local government properly deciding to focus all federal envi-
ronmental construction funds first on drinking water protection, then on sewage
treatment and finally on landfill cleanup. A reallocation of funds from three sepa-
rate federal environmental statutes, without a waiver of the related substantive re-
quirements and related only to the timing of the expenditures, could make a lot of
sense. We do not believe that the substantive requirements should be changed, but
we would favor allowing local prioritization in spending efforts. Certainly a local
government should be encouraged to make its views known to the federal govern-
ment, even if they are not binding on the federal government.

Consider another possibility. A local government is faced with the need to reha-
bilitate its sewer system to reduce overflows of raw sewage. It is also faced with
the need to develop and implement plans to reduce the environmental impact of
stormwater runoff discharges. Federal funds are available for both efforts but under
separate programs. It may be appropriate for a local government to apply to the fed-
eral government, with solid scientific support, to reallocate federal assistance be-
tween these two efforts and thus in essence be able to move funds from one federal
program to another. Of course, any such reallocation must be carefully reviewed by

nowledgeable people and bounded by proper conditions; nevertheless it may lead
to overall environmental improvement.


45

in the legislation to make certain that we don’t make some of the
mistakes that we've made in the past, make them again.

Ms. ENGLAND-JOSEPH. We would be happy to summarize it. We
also have a list that we can provide you which just lays out every
waiver that’s been requested.

Mr. SHays. That would be very helpful. And I am going to sug-
gest to the staff, both majority and minority, that they sit down
with all three of you and go through our legislation line by line.
You all have tremendous insight, especially since this hearing was
put together in just 3 days, and I’m very pleased with all three of
our witnesses.

Mr. Towns. Right. Deduct that from my time.

({Laughter.]

Mr. Towns. What percentage of the four community groups re-
sources have been devoted to satisfying Federa! administrative re-
quirements, you know, like completing paperwork, Providing docu-
mentation, et cetera? And, of course, would passage of this legisla-
tion—would it substantially cut down on the amount of time, in
your assessment?

Ms. ENGLAND-JOSEPH. I can’t give you a quantitative number for
how much money is actually spent to apply for all of these different
things, largely because when you get to a community level it’s hard
enough for them to have documentation to show the process that
they're following in meeting Federal requirements.

ey tend not to measure a lot of their activities and so evalua-
tion was another message in our report. It is often very difficult to
evaluate these programs and success of these programs because of
the lack yf real data, hard data, that are available at the commu-
nity level.
ut suffice it to say from an anecdotal perspective, all four com-
munities, community leaders, consistently said that it was ex-
tremely expensive and they could point to individual circumstances
where they had to hire people full-time to be either proposal writ-
ers or to design systems. So I mean we have either anecdotal or
specifics, but if you wanted me to roll that up and tell you a per-
centage of total, I can’t do that.

Mr. Towns. OK, last question, Mr. Chairman. What mechanism
can be put in place to ensure that organizations serving distressed
communities are actively involved in the development of the local
flexibility plan and ultimately receive their fair share of Federal
grant money?

You know, I think it’s important that we stress—I mean, the
community support is involved in the plan. You know, if not, I
think we will make mistakes that we would not make if we had
them talking to us.

Ms. ENGLAND-JOSEPH. Right. At a minimum, as a part of any
sort of planning or application requirement to ensure that the com-
munities are, in fact, including key representatives from the neigh-
borhoods that you are describing or that you are talking about.

What we saw from the application process of the empowerment
zone effort was that many communities that we talked to said for
the first time many community organizations typically not asked
for in the past were asked to participate in providing input in
terms of the application process.


87

In_ addition, Title I, migrant and English-as-a-second-language
regulations typically require children who receive these services to
be pulled out of the regular classroom which we found was
dumbing down the curriculum for the very children it was intended
to help. With ed-flex, all students may participate in the entire
school program and the students no longer feel isolated from the
rest of the class or stigmatized.

Those are just three examples, and every day we are finding
more. So I would urge that you extend this flexibility to more
States than just the six.

Thank you.

[The prepared statement of Ms. Paulus follows:]

PREPARED STATEMENT OF NoRMA PAULUS, SUPERINTENDENT OF PUBLIC INSTRUCTION
FOR THE STATE OF OREGON

It was not long after being elected Oregon’s superintendent of public instruction,
that I experienced the onerous and restrictive requirements that characterize fed-
eral education rants. In many instances, we were made to comply with regulations
that had no relevance to our circumstances in Oregon. These stipulations exist. be-
cause federal officials are compelled to administer grant programs to the lowest
common denominator. While many of these programs are effective in raising inad-
equate school districts to an average level, it conversely hampers successful school
districts by impeding innovation with universal requirements,

We presented our case for flexibility to Senator Mark Haffield and he resounded
by successfully amending the Goals 2000 legislation providing a flex factor in the
use of federal funds for six demonstration states. In February 1995, Oregon became
the first “ed-flex” state. Ed-flex has beneficial in Oregon in a multitude of situations.
Let me give three examples of the successes of this policy in my state,

© Federal dollars for mathematics and science education restrict teacher training
to school workshops. With ed-flex, school districts in Oregon may use the money to
send teachers to businesses and industries where they can learn how mathematics,
science and technology are used in the workplace.

© Oregon has a K-14 system. The Oregon Office of Professional Technical Edu-
cation urged the forming of regional consortiums because school reform and school-
to-work initiatives tends to be regionally focussed. This is a different configuration
than suggested in the Carl Perkins Vocational Education Act. Without ed-Flex, it
would not have been possible for Oregon to receive funds for our efforts in vocational
education.

* Title I regulations require money to be targeted to schools most in need. With
ed-flex, administrators can distribute the grant throughout the district in turn help-
ing all the children. In addition Title 1, migrant and English-as-a-second-language
regulations typically require children who receive these services to be pulled out of
the regular classroom. With ed-flex, all students may participate in the entire school
program. These students receiving special services will no longer feel isolated from
the rest of their class.

Each federal grant Program comes with its own paperwork and mandates compli-
ance to its own set of regulations and restrictions. With ed-flex, administrators can
allocate federal money where it is most needed, accounting for its use as a whole.
The existing accountability structure is very good at determining where federal
money is spent, but it tells us very little about whether we are actually achieving
results. Local administrators know best how to achieve the maximum results from
the scarce federal dollar. Ed-flex shifts the focus from the process and procedure to
the positive reaults achieved from the use of federal grants.

ie federal government should compliment, not hinder the efforts of innovators
on the local level. The need to provide flexibility to local and state governments is
i nse. These localities need to be able to use their acquired funds in a manner
suitable to the needs of their communities. The Local Empowerment and Flexibility
Act will not only permit variation in how local governments meet national goals, but
it will encourage solutions that best fit the Tocal context.

Federal laws and regulations have tended to treat every area of the country the
same. Consequently, we all strive to meet the median instead of to excel. Politically,
socially, structuraly, local and state governments are very different from one an-
other. Addin, flexibility to the federal/state relationship will encourage local govern-
ments to find solutions that fit the local context. In addition, providing flexibility



8

(D) the general public; and

(2) include individuals and representatives of community organizations who
shall help to enhance the leadership role of the local government in developing
a local flexibility plan.

(d) OPPORTUNITY FOR REVIEW AND COMMENT BY COMMITTEE.—Before submitting
an application for approval of a final proposed local flexibility plan, a local govern-
ment shall submit the final proposed plan for review and comment by a community
advisory committee established by the local government.

(e) COMMITTEE REVIEW OF REPORTS.—Before submitting annual or final reports
on an approved Federal assistance plan, a local government or private nonprofit or-
ganization shall submit the report Er review and comment to the community advi-
sory committee.

SEC. 10. TECHNICAL AND OTHER ASSISTANCE.

(a) TECHNICAL ASSISTANCE.—(1) The Flexibility Council may provide, or direct
that the head of a Federal agency provide, technical assistance to a local govern-
ment or qualified organization in developing information necessary for the design
or implementation of a local flexibility plan.

(2) Assistance may be provided under this subsection if a local government makes
a re est that includes, in accordance with requirements established by the Flexibil-
ity Counci

to ae description of the local flexibility plan the local government proposes
jevelop;
(B) @ description of the groups of individuals to whom benefits shall be pro-
vided under covered Federal assistance programs included in the plan; and
(C) such assurances as the Flexibility Council may require that—

(i) in the development of the application to be submitted under this
title for approval of the plan, the local government shall provide adequate
opportunities to participate to—

(I) individuals and families that shall receive benefits under cov-
ered Federal financial assistance programs included in the plan; and

(ci) governmental agencies that administer those programs; and
(ii) the plan shall be developed after considering fully—

(1) needs expressed by those individuals an families;

(I) community priorities; and

(II) available governmental resources in the geographic area to
which the plan shall apply.

(b) DeTalLs TO CoUNCIL.—At the request of the Flexibility Council and with the
approval of an agency head who is a member of the Council, agency staff may be
detailed to the Flexibility Council on a nonreimbursable basis.

SEC. 11. FLEXIBILITY COUNCIL.

(a) FUNCTIONS.—The Flexibility Council shall—

(1) receive, review, ani approve or disapprove local flexibility plans for
which approval is sought under this Act;

(2) upon request from an applicant for such approval, direct the head of an

ncy that administers a covered Federal financial assistance program under
which substantial Federal financial assistance would be provided under the
plan to provide technical assistance to the applicant;
bikie er the progress of development and implementation of local flexi-

'y plans,

4) Perform such other functions as are assigned to the Flexibility Council
by this Act; and

(5) issue regulations to implement this Act within 180 days after the date
of its enactment.

(b) REPoRTS.—No lesa than 18 months after the date of the enactment of this Act,
and annually thereafter, the Flexibility Council shal] submit a report on the 5 Fed-
eral regulations that are most frequently waived by the Flexibility Council for local
Agvernments with approved local flexibility plans to the President and the Congress.

President shall review the report and determine whether to amend or terminate
such Federal regulations.
SEC. 12. REPORT.
No later than 54 months after the date of the enactment of this Act, the Comp-
troller General of the United States shall submit to the Congress, a report that—
(1) describes the extent to which local governments have established and
implemented approved local flexibility plans;
(2) evaluates the effectiveness of covered Federal assistance programs in-
cluded in approved local flexibility plans; and



H.R. 2086, THE LOCAL EMPOWERMENT AND
FLEXIBILITY ACT OF 1995

THURSDAY, AUGUST 3, 1995

U.S. House or REPRESENTATIVES,
SUBCOMMITTEE ON HUMAN RESOURCES AND
INTERGOVERNMENTAL RELATIONS,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 9 a.m. in room
2247 Rayburn House Office Building, Hon. Christopher Shays
(chairman of the subcommittee) presiding.

Members present: Representatives Shays, Morella, Souder,
Towns, Barrett, and Green.

Staff present: Lawrence J. Halloran, staff director and counsel;
Doris F. Jacobs, associate counsel; Christopher Alfred, Demi
Greatorex, Robert Newman, professional staff; Thomas M. Costa,
clerk; Kevin Davis, minority professional staff; and Jean Gosa, mi-
nority staff assistant.

Mr. Suays. I would like to call this hearing to order. And before
we invite our first witness, for the record, provide a short state-
ment and then invite our vice chairman to do the same.

This is our first hearing on H.R. 2086, the Local Empowerment,
and Flexibility Act of 1995, a bill Congressman Clinger and I re-
cently introduced in the House, a bill similar to the one considered
by this subcommittee in the last Congress. The bill will create a
statutory framework to give local governments greater flexibility in
administering Federal funds.

The President’s National Urban Policy Report concluded Federal
agencies cannot possibly know what is best for each of America’s
diverse regions and communities. They cannot design a “one-size-
fits-all” strategy. H.R. 2086 addresses this problem. It permits local
variation in spending based on local needs, freeing up dollars for
services that might otherwise be drained away by burdensome and
high administrative cost, duplicative audits, and paperwork.

lexibility is important even in a Federal-State funding relation-
ship dominated by block grants. The principle of local flexibility
should be part of the permanent Federal statutory framework.
Block grants come and go. Flexibility will always be needed.

We look forward to this hearing and particularly want to thank
Senator Mark Hatfield, who is really the originator of this legisla-
tion. And we are very happy that he was on short notice able to
allow us to set up this hearing so that we can bring this legislation
before the full committee and, ultimately, before the floor of the
House. In my judgment, this is his bill that we are hearing about.

00)


42

grams are too narrow and regulatory rigidity translates into funding spent waste-
ly in audits and record-keeping rather than directed to meet community needs.”

e golden rule of public administration is equally succinct: “He who has the gold,
makes the rules.” In exercising their duties, fedlera officials are exercising a sacred
public trust. You must ensure that the public’s money is allocated to meet our high-
est priorities and that each and every taxpayer dollar is used as effectively as pos-
sible. Generally, the intergovernmental system has sought to meet this obligation
by imposing # series of processes, management, accounting, and reporting require-
ments.

However, depriving our partners in the intergovernmental system of discretion
that could produce misbehavior also limits the discretion that could call forth out-
standing innovation and achievement of important and legitimate public responsibil-
ities. That doesn’t mean the federal government should hand out blank checks. It
does mean a more balanced approach that gives greater flexibility to make the sys-
tem work and at the seme time requires acccuntability for achieving results—a dif-
ficult balancing act.

In the kind of overly centralized, prescriptive system that’s been created, we also
pay # price for limiting the ability’ of others to experiment and to learn how to get
the publics work done better, faster, or cheaper. Setting priorities and ensuring ac-
countability for producing real results are the responsibility of top policymakers and
political leaders. Dictating the details of the strategies, methods, and procedures ap-
plied to meet those goals may be counterproductive, however. The control of discre-
tion and resources does not fuarantee that the holder has a monopoly on the knowl-
edge about how to adapt and respond to the disparate needs of communities across
the country. America is too diverse for “one size fits all” policies and programs. Ad-
ministrative “stovepipe” mentality precludes addressing functionally related needs.
To be effective, federal, state, and local programs must recognize the differences
among our communities, permit variation in spending and administration based on
local needs and changing conditions, and seck to provide flexibility while enhancing
accountability for results that, really matter.

During the 1980s, corporations around the world learned a powerful lesson. If the

ap between those with the power to decide and those on the production line or in
the front line with consumers grows too large, the businesses’ vitality and profit-
ability sag. The federal government specifically—and the public sector generally—
should learn how these lessons apply to the public service.
blic and nonprofit organizations at the state and local level are the front line
in our intergovernmental partnership. ‘They are the vital key to achieving the best
possible performance. Rather than enforce compliance with rigid rules, we should
challenge these capable and committed people to apply the full measure of their
skills, creativity, and adaptability to achieving results for communities and people.
The good news is that there is a wellspring of promising innovations at the state
and focal levels and from community-based and other nonprofit organizations that
others can learn from.

The bad news is that the burden of federal compliance and oversight measures
can be overwhelming and often wasteful and detrimental to achieving program
goals. For example, in Multnomah County, Oregon, a local community coflege feads
@ consortium that has integrated a wide range of services and is showing remark-
able success in supporting the transition from dependency to work for local welfare
recipients. A portion of the funds are provided by the Job Training Partnership Act
(ITPA). The JTPA link created two administrative problems. First, although Sepa
funding amounts to less than 10 percent of the community college’s overall funding,
@ separate accounting process is required to mect JTPA’s precise financial monitor:
ing and reporting requirements. Second, in some cases equipment purchased with
ota funds cannot be used by clients or students who do not meet JTPA cligibitit
requirements. To comply with the letter of the law, some equipment would be lel
idle when it could be put to fuller use with clients who are not JTPA eligible.

To achieve the highest level of performance, we should create systems that are
capable of continuous learning and adjustment. Prescriptive systems place too much
emphasis on outmoded “command-and-control” models and too little emphasis on
flexibility with accountability for meeting ambitious performance goals and cross-
cutting needs.

We can and must do better. H.R. 2086 is a good starting point in at least five
respects:

« First, authorizing Local Flexibility Plans creates a powerful incentive for the
most innovative local governments and nonprofit organizations to pioneer new ap-
proaches to meeting pressing social needs. It will help demonstrate the efficacy of
placing greater emphasis on aligning public and nonprofit resources through a “bot
tom up” process. State governments are also an important conduit for categorical



73

person in poverty. And nobody can tell you exactly where all that
money goes because, for a family of four, that is $36,000, which is
more than twice the $14,700 poverty line for a family of four, giv-
ing rise to that old question, why not just write them a check? But
that is not what I am proposing here today.

But after 9 months of hard work, we came up with a list of basic
principles upon which we would reorganize the human service sys-
tems in Illinois. Those principles are provided in your material, Bx.
hibit II. There are 13 of them. They are the cornerstone of our ef-
fort, and summarized briefly, they relate to decentralizing the sys-
tems to get closer to the people, linking the systems to communities
and to the private sector--a huge amount of interest, effort, and re-
sources in the private sector are at this point virtually disconnected
from the State and Federal Government efforts—and then third,
measuring the outcomes, actually seeing whether this spending
changes the life of a human being.

This measuring of outcomes sounds obvious, but with the excep-
tion of Oregon, Illinois, and a couple of other places, process is
measured and measurement is done to make sure the funds went
where they are supposed to go, not that the funds produced any
difference in anybody’s life.

We know that poverty problems in southern Illinois are dramati-
cally different from the problems in Chicago’s inner city, and yet
both have well above the Nation’s and the State’s average unem-
ployment and poverty levels.

The basic building block or the core of this reform effort is an or-
ganization called a Community Federation. Right now we have five
test sites where Community Federations have been formed. One is
in the southern seven—the southern seven counties of Illinois
where there is severe rural poverty; one is Waukegan, a largely
Latino community that is a suburb dependent on Chicago, but
which has an independent economy as well; Grand Boulevard, one
of the toughest inner city areas in the Nation—some say the
worst—where two of the three most difficult housing projects in
America are located, the Robert Taylor Homes I and II, Springfield,
and then DuPage County.

Each of these federations is made up of independent volunteer
people—ministers, principals of local schools, executives of busi-
nesses in the areas, users of services, people who, when the public
aid fellow gets up and explains how public aid works, can interrupt
the meeting and say that is how it is supposed to work, but let me
tell you how it really works. Federations are also linked in each
case to the local community.

There is a trustee of the city of Waukegan on the Waukegan Fed-
eration. There is a representative of Mayor Daley’s office on the
inner city federation, as well as representatives from the Chicago
Housing Authority—CHA. So these are the broadest groups ever
formed in these communities linked to all of the important players
in those communities.

What do the federations do? First of all, they are provided with
all of the information on the amount of money flowing into their
community from all sources relating primarily to human services.

This means, for example, in Grand Boulevard that the seven
major State departments providing human services, all of which


82

Create a plan to support the information needs of the pilot Community Federations

Determine the information needs of the pilot Community Federations. Identify in-
formation systems that can be developed and implemented in the near- and mid-
term to support these groups. Develop costs estimates for these systems and create
a plan for their implementation and maintenance.

Establish Committee Workplan

poreate a workplan and preliminary schedule for completing the activities outlined
above.

INTRA-GOVERNMENT PLANNING COMMITTEE,

Develop and implement a plan for creating an effective intra-government planning
function. As part of the plan, define planning activities necessary to support commu-
nity based service development.

valuate state progress toward establishing an effective state level collaborative,
ensuring responsive decision making in support of community federations. Make
recommendations as necessary to simplify the process of removing barriers (admin-
istrative, legislative, federal) impeding Federations as they seek to redeploy funds
consistent with community priorities and state mandates.

Identify and evaluate state of the art ideas/human services innovations which are
suitable for implementation in Illinois.

Identify necessary and current planning activities related to health care reform,
state agency litigation management and emerging social welfare issues such as wel-
fare reform.

Carry out other intra-government human services activities not assigned to any
other Task Force group which will facilitate achievement of Governor’s Task Force
on, Human Services Reform goals (e,g. establishment of common geographic bound-
aries),

ATTACHMENT |

Agency Laisons for Field Trial Sites

Grand Bhd Waukegan So Seven DuPage Springtaid
DASA... John Moran 312/ fim Potter 312/ Sandy Marshal! John Moran 312/ Theresa Tudor 217/
814-4766 814-4778 240/524-9074, 814-4766. 782-9088
Bureau of Valerie Biggs 217/ Valen Biggs 217/ Valerie Biggs 217/ Valene Biggs 217/ Valerie Biggs 217/
Budget. 782-8485, 782-8485. 782-8485, 782-8485, 782-8485
DOES... Mozell Nelson 312/ Chis Munson Sue Castellano Chris Munson 708/ Donna Morrison 217/
814-7416. 708/801-3448, 618/993-7128. 801-3448, 524-2106
DMH/DD ...... Helen Sorrell 312/ Gordon Reiher Carlene Rumple Gordon Reiher 312/ ingrid Hansen 217/
814-4906. 312/814-4908. 312/785-6023, 814-4904. 785-6023
Public Aid... Mary James 312/ Roberta Leonard Kathy Rushing Jon Walen 708/ Greg Matarelli 217/
538-8900. 312/793-7520, 618/524-2631, 530-1120. 782-0400
Public Linda Miller 312/ — Merryjo Ware 312/ Janet Stone 618/ Gloria Singer 708/ Ralph Schubert 217/
Health. 814-4836. 814-6126. 993-7010 293-6800. 782-2735
RS anne Vivian Collins Betty Butler 312/ Ron Condry 618 Betty Butler 312/ Dean Hale 217/244—
708/857-2380 84-2924. 997-1864, 14-2924, 0678

ATTACHMENT IT
IMPROVE THE LIVES OF CHILDREN AND FAMILIES

Economic Well Being

Increase the proportion of children above the poverty line.

Reduce unemployment especially by increasing work opportunities which pay
above minimum wage.

Increase home ownership.

Increase savings and equity formation.

Increase the opportunity for residents to own their own businesses.

mote community economic stability.
Increase the percent of dollars that stay within the community.
Reduce homelessness.

Good Health

Reduce health disparities.
Reduce malnutrition.


H.R. 2086, THE LOCAL EMPOWERMENT AND
FLEXIBILITY ACT OF 1995

HEARINGS

BEFORE THE

SUBCOMMITTEE ON HUMAN RESOURCES
AND INTERGOVERNMENTAL RELATIONS

OF THE

COMMITTEE ON GOVERNMENT
REFORM AND OVERSIGHT
HOUSE OF REPRESENTATIVES

ONE HUNDRED FOURTH CONGRESS
FIRST SESSION
ON

H.R. 2086

TO INCREASE THE OVERALL ECONOMY AND EFFICIENCY OF GOVERN-
MENT OPERATIONS AND ENABLE MORE EFFICIENT USE OF FEDERAL
FUNDING, BY ENABLING LOCAL GOVERNMENTS AND PRIVATE, NON-
PROFIT ORGANIZATIONS TO USE AMOUNTS AVAILABLE UNDER CER-
TAIN FEDERAL ASSISTANCE PROGRAMS IN ACCORDANCE WITH AP-
PROVED LOCAL FLEXIBILITY PLANS

AUGUST 3, AND SEPTEMBER 20, 1995

Printed for the use of the Committee on Government Reform and Oversight

es

U.S. GOVERNMENT PRINTING OFFICE
22-846 CC WASHINGTON : 1996

For sale by the U.S. Government Printing Oftice
Superintendent of Documents, Congressional Sales Office. Washington, DC 20402

ISBN 0-16-052455-5



108

happy to work with the committee in correcting what we see are
some major concerns with the bill, particularly around labor stand-
ards and environmental standards.

Thank you for the opportunity to testify.

[The prepared statement of Mr. Baker follows:]

PREPARED STATEMENT OF DAVID BAKER, DIRECTOR OF THE PUBLIC DIVISION OF THE
SERVICE EMPLOYEES INTERNATIONAL UNION

Good morning. I am David Baker, Director of the Public Division of the 1.1 million
member Service Employees International Union (SEIU). Thank you, Chairman
Shays, and the other members of the Subcommittee on Human Resources and Inter-

vernmental Relations of the Committee on Government Reform and Oversight, for

e opportunity to present the views of my union. I am here today to voice strong

sition to H.R. 2086, the “Local Empowerment and Flexibility Act of 1995.” This
bill would allow localities to waive critical labor and environmental statutes and
regulations—all in the name of local innovation and Hexibility.

EIU represents members employed in both the public and private sectors, includ-
ing thousands of local government employees who are committed to delivering serv-
ices effectively and efficiently within their communities. While SETU recognizes the
value of granting localities greater flexibility in tailoring programs to meet the
unique needs of their communities, we also believe that this “flexibility” should not
come at the expense of important federal laws and regulations.

According to H.R. 2086, the Flexibility Council can waive any requirement under
federal law for the administration or provision of benefits under federal assistance
programs as long as the waiver is “reasonably necessary for the implementation of
the plan.” Such janguage grants localities broad discretion in seeking waivers for
federal statutes and regulations. SEIU is particularly concerned about the threat
these waivers may present to maintaining essential labor standards.

SEIU strongly believes that all citizens of this country are entitled to certain basic
rights and protections—regardless of the state or locality in which they live. Labor
standards, including the minimum wage, overtime, and occupational safety and
health are among fundamental protections to which all American workers are
entitled. Yet H.R. 2086 may allow these statutes—which organized labor fought for
decades to attain—to be waived with the sweep of a pen. This kind of blatant dis-

for workers’ rights should not occur.

e bill’s broad waiver authority also opens the door for widescale contracting out
of public sector jobs, which SEIU opposes. We represent over 25,000 social service
workers throughout the country who administer various federal benefit programs,
including AFDC, food stamps, and Supplemental Security Income. Federal laws gov-
erning client confidentiality and fiscal accountability, for example. have kept the ad-
ministration of these programs within the public domain.

If existing laws and regulations are waived, local governments could be free to
turn these programs over to the private sector. Contracting out public services to
the private sector always raises questions of accountability of public funds, as well
as issues of discrimination in the delivery of services.

The legislation appears to favor private, nonprofit organizations over the public
sector in other respects as well. For example, the Flexibility Council can give “prior-
ity funding” or higher priority to applications for federal financial assistance submit-
ted by local governments having approved local flexibility programs by private, non-
profit organizations. The bill clearly gives preference to localities that engage in con-
tracting out of public services to the private sector.

In addition, the Community Advisory Committee established under the bill in-
cludes representatives from private, nonprofit organizations as well as persons with
leadership experience in the private and voluntary sectors. With the exception of
local elected officials, the advisory committee does not include any corresponding
representatives from the public sector, or from the unions representing these work-
ers. To be meaningful, any advisory committee must tap the expertise and years of
experience that public employees bring to bear in the operation of social programs.

EIU also opposes this bill because it fails to take into account the needs of low-
income individuals or the communities in which they live. In fact, the bill provides
no assurance that low-income communities will benefit from these federal grant pro-
frame. Given the shrinking share of federal dollars that make their way to the local

level, it is essential that these monies be spent where they are needed most—in eco-
nomically depressed localities. It would be a shame to squander these scarce re-
sources in areas where there is no demonstrated need.



VV

Page
Letters, statements, etc, submitted for the record by—Continued
Green, Hon. Gene, a Representative in Congress from the State of Texas,
prepared statement repres eaveee oe 54
Koskinen, John, Deputy Director for Management, Office of Management
and Budget, prepared statement of ..... 62
Lehner Peter, senior attorney, Natural Resources Defense Council, pre-
ared statement Of eesseseensnsn 102
MacDougal, Gary, chairman of the Governors ‘Teak Force on Human
Services Reform for the State of Illinois, prepared statement of .. 4
Paulus, Norma, superintendent of public instruction for the State af
Oregon, prepared statement of .. seen 87

Shays, Hon. Christopher, a Representative in Congress from the State

ynnecticut, prepared statement of 53



109

Allow me to close with the following observation. The consensus in Washington
these days seems to be that the government closest to the people governs best. t
certainly appears to be the rationale behind this bill. But simply turning federal
money over to local governments, with few or no stris attached, presents a host
of problems on its own. We enter dangerous territory when we try to disregard fed-
eral laws that have been enacted over the years to benefit and safeguard the rights
of all US. citizens.

Thani you for, the opportunity to present SEIU's concerns with. the Local
Empowerment and Flexibility Act. I would be happy to answer any questions.

Mrs. MorELLA. Thank you, Mr. Baker, and I thank both of you.
I have just one question that I would pose to you, and that is, how
would you individually—how would you correct this legislation to
make sure that the environmental standards, the labor standards
are not totally ignored? Is there phrasing that you think could be
included? Do you think the bill moves in the right direction if there
are some reservations to preserve safety, other laws, environ-
mental?

Mr. Baker. I believe section 8 of the bill, Mrs. Morella, talks
about the Flexibility Council could not waive any statutory rights
that inure to individuals; but then it articulates or enumerates five
specific statutes. So to specifically answer your question, including
in that list of specific statutes which could not be waived, the Fair
Labor Standards Act, the Occupational Safety and Health Act,
Davis-Bacon, some of the other labor standards that we are con-
cerned about, it would at least correct that piece of it.

We do have some concerns about public policy by waiver to begin
with, but that is another discussion, but I think enumerating some
of those specific statutes would get to the problem.

Mrs. MORELLA. Could you give us that in writing, too, directed
to the subcommittee?

Mr. BakeER. Surely.

Mr. LEHNER. To also answer the question, I have some specific,
actually man; specific suggestions, in the written testimony, but I
think, more fun mentally, one possibility is to simply provide that
environmental programs are not covered by the statute.

I noted in the testimony that one of the administration officers
gave this morning, he pointed out that in the environment enter-
prise community and empowerment zone program, environmental
protections are specifically excluded from that program. I would
suggest that although we support the notion of municipal flexibility
in some ways, and we give some examples in our written testimony
of what we mean, the issues are so different from the issues con-
fronting flexibility of the sort that I have heard testimony this
morning—administrative flexibility concerning the provision of
money to individuals—that it really should be addressed in a sepa-
rate statute. I think it would be very hard to jigger this bill a little
bit and make a program that works well for your goals with respect
to social service Programs and also works well for environmental
programs. Thus I would suggest perhaps starting with a new bill.

(rs. MORELLA. With a new bill that would cover everything as
you have suggested, not two bills?

Mr. LEHNER. No, two bills, to exclude environmental protections
from this bill; and perhaps to the extent you want to follow on the
concept of municipal input to environmental decisionmaking or en-
vironmental funding by the Federal Government at the local level,


30

that enabled it to set priorities consistent with its community's needs. Finally, the
organizations built a cadre of experienced staff to administer and manage the array
of programs.

FRAGMENTATION OF FEDERAL PROGRAMS IS BURDENSOME TO COMMUNITIES

The federal government assists distressed urban communities and their residents
through a complex system involving at least 12 federal departments and agencies.
Together, these agencies administer hundreds of programs in the areas of housing,
economic development, and social services. For example, we reported that there are
at least 154 employment and training assistance programs, 59 programs that could
be used for preventing substance abuse, and over 90 early childhood development
programs. Considered individually, many of these categorical programs make
sense. But together, they often work against the purposes for which they were es-
tablished, according to a National Performance Review report.

In addition, there has traditionally been little coordination among the many fed-
eral departments and agencies with the responsibility for administering the pro-
grams that can be used to assist distressed communities. Agencies have tended not
to coordinate efforts with one another because they have been protective of their
own resources and separate organizational missions.

The proliferation of federal programs and the lack of coordination among agencies
impose a burden on local organizations that attempt to piece together programs to
serve their communities. The neighborhood organizations we studied found it bur-
densome to manage multiple programs with dual funding streams, application
requirements, and reporting expectations, In addition, one organization reported
that it had strained its managerial and financial systems to meet federal record-
keeping and accounting standards for several funding sources. While the organiza-
tion implemented the necessary procedures to comply with the standards, officials
said that the administrative burdens nearly forced the organization to reduce the
scope of its services.

'e see the potential for ongoing efforts to make federal programs more accessible
to community organizations. As you know, the Empowerment Zone and Enterprise
Community ‘program allowed communities to request waivers to federal require-
ments. In addition, the President established the Community Enterprise Board to,
among other things, assist with the implementation of the program. In their appli-
cations for this program, urban applicants requested over 1,000 waivers. Almost 60

cent of the requests will require statutory changes. The Local Empowerment and

‘lexibility Act of 1995 includes provisions for a similar board to review and a) pareve
local plans for flexibility and requests for waivers. If such a board is to falta its
mission, it will require the commitment of high-level agency officials and open dia-
logue among the agencies.

ir. Chairman, this completes my prepared statement. I would be pleased to re-
spond to any questions that you or Members of the Subcommittee may have.

Mr. SHays. We'll have some questions. Thank you.

Mr. Griffiths.

Mr. GRIFFITHS. Thank you, Mr. Chairman. I appreciate the op-
portunity to comment, and I believe in support, of H.R. 2086. I
would like to point out my comments are as a staff member of the
ACIR. Our commission has not yet taken a position on either this
legislation or the companion legislation in the Senate, Senate bill

I have worked in the intergovernmental arena for nearly 25
years and during that time I have probably been involved with

‘ederal assistance in just about every capacity that you can think
of at the State and local level. And I believe over those years I can
characterize that experience as a love-hate relationship.

“See Multiple Employment Training Programs: Major Overhaul Is Needed (GAO/T-HEHS,
94-109, Mar. 3, 1994), Use Among Youth: No Simple Answers to Guide Prevention (GAO/
HRD-94-24, Dec. 29,'1993), and Early Childhood Programs: Multiple Programs and Qverlap-
Ping Tatget Groups (GAO/HEHS-95-4FS, Oct. 31, 1994.

®'the Empowerment Zone and Enterprise Communities (EZ/EC) program was adopled in 1993
under the Omnibus Budget Reconciliation Act. This program promotes the comprehensive revi-
talization of distressed communities by funding broad, community-based strategic plans.



89

ers, because to some degree, if the program works, people move up
and out, which is one of the goals in these communities,

But a second thing we toyed around with in some legislation is
that if we do statutory changes, should there be—as we heard on
the first panel, a lot of the complaints that are coming in are actu-
ally State and local. Should there be some sort of a tie, much like
what you are talking about doing in Illinois, and what you have
done in Oregon, that in order to get waivers, the State and local
governments have to participate in that also, and there needs to be

ind of a shared relationship; or do you think it is sufficient to
focus on what we can concentrate on this?

Mr. MacDoucat. Well, first, on people exiting, such as the Bee-
thoven experience, Beethoven itself has proven to be less wonderful
than we might have hoped in the sense that it required a lot of pri-
vate money and the cost per student doesn’t make it easily
replicable. An awful lot of what we are talking about is rebuildin;
the community, and the core of the federation people are focuset
on making the community a better place to live, the black metropo-
lis, It was once a great community. We will have exits, but we don’t
expect that to be the norm.

ir. SouDER. And the exits were not from Chicago, they were
even movements within Chicago neighborhoods?

Mr. MacDoucat. Within Chicago, yes, but the same would apply
with regard to the Grand Boulevard neighborhood. If you lived in
Grand Boulevard, you would think the West Side was another
country. We do think that we can help rebuild and maintain com-
munity. However the question you raise makes the evaluation chal-
lenge much more substantial, and we haven't gotten around to
spending as much time on evaluation as we hoped, but we know
that is going to be a problem.

Mr. SouDER. How do you feel about, if we grant Federal waivers,
the, States should also be granting waivers and flexibility to be eli-
gible?

Mr. MacDoucat. Absolutely. The State—I think the State is
really the key player if you look at who runs this money, particu-
larly human services money; and I hope you don’t make us go over
a city hurdle in order to get it changed. Right now, we don’t have
to do that; we can go to the State and get waivers, and we can in-
form and make sure politically we are bipartisan and together with
the city. But we don’t have to file and go through a formal request
with the city in order to get things done. I think that would be an
extra barrier rather than a removal of the barrier for us.

Mr. SoupER. You have touched on another thing, and the ques-
tion is how can we get at this with our Federal dollars, and both
of your States, particularly Oregon, is strong on citizen participa-
tion, but Bob Whitson has suggested over the years that we have
some sort of a ZIP code test that up to one-third of any Federal
grant has to go to people who live inside that ZIP code, because
many of our Federal dollars go into basically what we call in Wash-
ington the “Beltway Bandits,” but the local versions of Beltway
Bandits where you have researchers who get it, they come in.

There is a joke in Los Angeles, when I was there, that they could
always tell who had a Federal grant for gangs because it would be
some white guy who had a walkie-talkie in his belt, a clipboard,


84

Incorporate the knowledge and the expertise of the community voluntary sector
into service delivery.

Increase the effectiveness of private and government dollars invested.

Create an integrated financing strategy to support the service system.

POSITION DESCRIPTION
EXECUTIVE DIRECTOR—GRAND BOULEVARD FEDERATION

Overall Responsibilities

Working with the Federation Board, assume staff leadership in linking ther
and maximizing the effectiveness of all human services resources flowing into Grand
Boulevard, with the primary objective of improving the outcomes of people in the
community.

Working Relationships

1, Report to the Grand Boulevard Federation Board of Directors

2. Work closely with the staff of the state Task Force and the Assistant to the
Governor for Human Services Reform

3. Maintain a close working relationship with the state liaisons (a group with a
representative from each major state human service department)

4. Maintain mutually productive working relationships with the following groupe:
Grand Boulevard Mental Health Initiative, Provider Advisory Council, Mid-South
Planning & Development, Chicago Community Trust’s Children, Youth, & Families
Initiative
Specific Duties

1. Support the Federation in determining the highest priority community needs,
independent of whether or not they fall within traditional state human service sys-
tem responsibilities.

2. Work with the state and the private sector to identify and evaluate all re-
sources flowing into the community and other resources spent on behalf of the com-
munity.

3. Tentify attractive opportunities to re-deploy state funds to achieve better out-
comes and present them to the Federation for approval by the Federation and the
State Colla rative, consistent with Task Force and Federation principles (at-
tached).

4, Ensure effective implementation of approved projects.

5. Establish and manage effective staff organization to achieve above changes.

6. Inventory and develop effective linkages with al] other relevant community or-
ganizations (churches, businesses, schools, etc.) to work toward creating a ladder of
opportunity to self-sufficiency.

. Take a leadership role to assist the community in building relevant human
services capacity appropriate to primary priorities.

8. Maintain accountability for the Governor's goals and principles and for measur-
ing outcome changes in the community.

9. Develop and implement a public relations/media strategy for the reform effort.

Grand Boulevard is off to a good start with enthusiastic participation of the very
senior leadership of the community, and an interviewing committee was established
to select an executive director. Agreement was reached on the composition of the
Federation membership by category, and a number of additional names have been
submitted. The overall workplan over the next 12-plus months is as follows:

Date Responsibility

Reach agreement with senior leadership group (Attachment i) on spe- 12/1/94 Norwood/MacDougal
cific names for Grand Boulevard Federation membership.

Hold initial Grand Boulevard Federation meeting, select chau, and 12/15/94 Norwood/MacDougal
name by which group will be known; establish meeting schedule.

Conduct interview and select Grand Boulevard Federation Executive Oi- 01/15/95 GBF Selection Committee/Norwond/

rector. MacDougal
GBF establish committee structure, commence determining community 02/15/95 GBF/Executive Director
priorities.

Conduct initial review of current state spending in Grand Boulevard to 02/15/95 GBF/Norwead/MacDougal
provide background for determining redeployment possibilities.

Develop and evaluate GBF budget and operations plans (“free” office 03/01/95 GBF/Norwoad/MacDougal
space? staff?, etc)

Identify other groups in the community with similar or related objec- 04/01/95 GBF/Assistant to GovernorfExecutive
tives. Develop linkage mechanisms. Director


12

and then take in benchmark tests within the year to see how we
are reaching those goals. That means we don’t have all of the en-
ergy diverted to filling out forms, paper requirements, regulations,
all the costs and the energy that goes into that. I think we are
going to prove the validity of that.

I would like to close by saying let us remember that Social Secu-
rity, the progressive income tax, unemployment compensation,
workmen’s compensation, child rights, women’s rights, civil rights,
were all proven at the State level before the Federal Government
ever got into that business.

We had demonstrated through the innovative creative federalism
that was intended by the forefathers anyway to give that diversity
a focus of stimulus, of creativity, innovation. Now we are at this
conforming, standardizing, bureaucratic control or bureaucrats
talking to bureaucrats. We're not listening to the local areas be-
cause they are too busy in complying with all the rules and regula-
tions.
So I believe that we can do this in every area where there is a
Federal relationship. We have now 528 categorical grant programs,
and that has grown by about 150 in a period of 20 years and it’s
goin to grow another 150, probably, at the rate we're going. And

rr. ‘Chairman and members of this committee, every one of those
categorical grants have spawned their own bureaucracy, and it’s
bureaucrat talking to bureaucrat.

Let’s get back to let the people who have the creativity and the
desire to innovate to achieve these goals that we all share and not
be so concerned about compliance that we've destroyed the creative
abilities and settle for the mediocre.

Mr. Suays. I thank you very much, Senator. And I would like to
welcome Mr. Green and, obviously, as well, our ranking member,
Mr. Towns. Before we ask you some questions, I just want to ask
either gentleman if they had an opening statement that they want-
ed to insert into the record or any comments they wanted to make,
and then we will get right to your questions.

Mr. Towns. Mr. Chairman, I would like to just include my open-
statement in the record and just go right to the Senator.

ir. GREEN. Mr. Chairman, I have a statement I would like to
put in the record.

Mr. Says. Thank you. And so I would ask unanimous consent
that all members of the subcommittee be permitted to place an
opening statement in the record and that the record remain open
for 3 days for that purpose. And without objection, so ordered.

[The prepared statements of Hon. Christopher Shays, Hon. Wil-
liam F Clinger, Jr., Hon. Edolphus Towns, and Hon. Gene Green
follow:

PREPARED STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF CONNECTICUT

This is our first hearing on H.R. 2086, the Local Empowerment and Flexibility
Act of 1995, a bill Congressman Clinger and I recently introduced, and a bill similar
to one considered by this Subcommittee in the last Congress.

The proposed legislation is designed to help solve the longstanding problem of
fragmentation of federal government programs to assist distressed communities and
their residents, The bill would create a statutory framework to give local govern-
ments greater flexibility in administering federal funds.

in;


54

tressed communities across America today do not come in the neat little categories
described by regulation-writers, accountants, or even congressmen.

Instead, we saw housing needs, education and job-skills needs, health care needs
and community economic development needs inextricably woven into a barrier
stronger than any individual, or individual federal program, could overcome, Only
a ly targeted, coordinated and comprehensive approach will move people
through that barrier. In this bill, we endeavor to give distressed communities the
power and the flexbiity to implement those community-based strategies to move
families from dependency and isolation to self-sufficiency and community.

One of our witnesses today will describe Illinois’ effort to give Chicago public
housing residents greater flexibility in addressing their problems. Illinois is rede
signing its health and human services delivery system to decentralize decision mak-
ing, create flexibility at the local level, to link the state’s efforts to local community
needs and to measure program outcomes.

‘These are the same goals of H.R. 2086. Under the framework established by the
bill, local governments would be permitted to integrate federal funds, combine them
with state and local resources, and address local problems with local solutions.
Through waivers of federal regulatory requirements, communities would be able to
target those resources and eliminate costly, duplicative compliance overhead and
red tape.

The purpose of this legislation is to encourage solutions that fit the local context,
allow public monies to go farther to meet urgent needs and empower communities
to design their efforts based on solutions rather than federal restrictions.

Tam pleased to welcome all our witnesses today to help us achieve that purpose.

PREPARED STATEMENT OF Hon. GENE GREEN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF TEXAS

Thank you, Mr. Chairman, for calling this second hearing on your bill, The Local
Empowerment and Flexibility Act of 1995. We will have an opportunity today to dis-
cuss in greater detail the pros and cons of relieving local governments and entities
of federal laws and regulations.

At the outset, I am very interested in the general aims of this bill. I believe that
one-size-fits-all regulations can impede innovation and creativity at the local level.
I need some assurance, however, that certain statutory laws will not be overturned,
at least not without evidence that it is absolutely necessary to do so: I am talking
about laws like the minimum wage, Davis-Bacon, OSHA requirements, and the like.

I was heartened by Sen. Mark Hatfield’s response to my question on this issue
during the first hearing by responding that his intention was not to engage in regu-
latory reform legislation through the back door.

I look forward to seeing that sentiment reflected in the final bill. Along those
lines, 1 am very interested in hearing the testimony of today’s witnesses and, once
again, I thank the Chairman.

Mr. SoubeEr. I think I will go ahead right way to the first panel.
You have been patiently waiting. We need to swear you in, so if
you will stand and raise your right hands.

[Witnesses sworn.]

Mr. SouDER. I note for the record that the witnesses answered
in the affirmative.

Our two witnesses on the first panel are Howard Glaser, Deputy
Assistant Secretary for Operations, Office of Community Planning
and Development, Department of Housing and Urban Develop-
ment; and Mr. John Koskinen, Deputy Director for Management,
Office of Management and Budget. I welcome you here today to
talk about this legislation and look forward to your testimony.

Mr. Glaser.


96

Mr. SHays. I have some, but I am going to let you go. Ms. Paulus
probably can respond to some of those questions, so 1 do think you
need to get on your way. Anytime I hear “legal Proceeding ——

Mr. cDoucaL. Thank you very much. I think you all are on
the right track, very exciting.

Mr. SHays. Thank you.

Mr. Barrett.

Mr. BARRETT. Ms. Paulus, as I was saying, I think of public edu-
cation as being basically in the province of the State. What areas
do you see specifically where we hamper you too much, just to help
me out?

Ms. PauLus. Well, as I said earlier——

Mr. Barrett. And I apologize, I missed a lot of it because of the
vote.

Ms. PauLus. Sure, I understand that.

In 1991, the Oregon legislature, which was dominated on one
side by the Republicans and in another by the Democrats from an
urban center, passed the most comprehensive school reform effort
in this country; and it has been heralded now by most people in-
volved in education and the business community as a true leader.
And we were working very closely with President Bush’s Secretary
of Education, Lamar Alexander, who praised our efforts, and we
are working very closely with Secretary Riley; and I would like to
emphasize to you, sir, that it has been an extremely bipartisan ef-
fort with myself as a Republican and two Democratic Governors
that have been totally supportive. So legislators and State office-
holders have been working very closely on flexibility at the local
level for schools and for human resources.

Governor Barbara Roberts, a Democrat, was leading the fight for
flexibility for human resources in our State, following what we
were doing with education. We found that so many of the Federal
restrictions that, our impression is, started with addressing inner
city, large inner-city problems. When they came to—when the
money came down to Oregon, with the programs, with restrictions
and the accounting processes, it didn’t give us the flexibility that
we needed to maximize the use of that money; and with flexibility,
we can demonstrate that we have raised test scores for the children
that were targeted by the moneys.

I would also like to emphasize to you as a former legislator and
as a statewide elected official, I feel very keenly about following
legislative intent and laws, and if I don’t like or agree with one,
I don’t ignore it, I try to change it. So I would not under any cir-
cumstances condone a procedure whereby the State would take
money given to me for mi 't_ children and let it be melded into
the generic pool and benefit children for whom the money was not
intended.

But some very quick examples: Most of our categorical grants
and most Federal money is given to us in that way. We would have
to pull children out of schools and out of classes and put them in
mobile homes. They were stigmatized; they often got a teacher that
was at the end of their career, not nearly as bright-eyed and bushy-
tailed and energetic as the teacher in the elementary classroom.

We found that if we can keep all of the children together and
bring extra resources in, provided by Federal dollars, that those


15

nically and geographically distinct areas that reflect the overall make-up of the
state. The sites are referred to as Federations; the composition of each Federation
is inclusive of all segments of the community. The role of a Federation is to deter-
mine the needs of their communities and to develop strategies that enable the state
human services system to effectively reach specific outcomes relevant to those
needs,

The project has created linkages to management.and labor through a employee
involvement committee that has representation both state-wide and at each local
site. The federations are each assigned key department staff who function as liai-
sons between state government and the local community to insure participation and
communication among all the partners.

At this point, the Task Force and the Federations have made strong linkages to
other institutions and organizations. One example has been in the Grand Boulevard
Federation which, as the attached list shows, has a very broad representative

up—probably the most inclusive ever put together by this community of 35,0000.
rand Boulevard. while linked to the City of Chicago, is a community entity not
a city or state entity. This distinction between big city government and communities
often gets lost. The Grand Boulevard Federation is one of the most impoverished
communities in the nation and includes the infamous Robert Taylor Homes, housing
development,

‘The Federation recognized early on the need to develop an on-going relationship
with the Chicago Housing Authority (CHA). The Chicago Housing Authority has as-
signed a representative to be an active member of that Federation and Vince Lane,
the Former Chairman of CHA, is a member of the state-wide Task Force. The Grand
Boulevard community has what appears to be about 100 million dollars per year of
resources flowing through it design to address a host of human service needs. The
reform effort has provide this community the mechanism for beginning to strategize
how to use those current resources to produce outcomes that more families from de-
pendency to self-sufficiency and strengthens the role of the whole community,

Tam enclosing a packet of information on the Governors’ Task Force and the Fed-
erations for your review and welcome your thoughts or comments on our state ini-
tiative on Human Services Reform. The principles and outcomes to be measured, de-
veloped by the Task Force and all the state agency heads, is particularity valuable
and guides our efforts. Again, I want extend my support to your effort to expand
the role of local communities in the determining and overseeing the utilization of
their local resources to address the needs they have identified to reach their desired
outcomes for the future.

GoveRNor’s TASK FORCE ON HUMAN SERVICE REFORM
BACKGROUND

In early 1993, Governor Jim Edgar appointed the Governor's Task Force for
Human Services Reform. The Task Force, with the support of Annie E. Casey Foun-
dation, is broadly charged with the re-examination and. restructuring. of human serv-
ices delivery in Illinois. The purpose of the effort is to improve the lives of children
and families and to improve the delivery system in our State, consistent with the
attached principles.

Principles

The Task Force has adopted some basic principles which are listed below:

« We are helping families and children help themselves by seeking to increase the
capacity of families to meet their responsibilities to their children,

* Only with a partnership effort involving parents, businesses, the community,
schools, churches and synagogues, and local, state and federal government will re-
structuring, redirection and renewal be successful.

‘* We need to make fullest use of, work with and learn from highly effective pri-
vate sector and community-based ‘organizations, rather than presume solutions
through additional efforts by the state.

We will emphasize cost effective prevention over inefficient, after the fact, treat-
ment, amelioration, and crisis management.

¢ Local/community efforts are likely to be more flexible, relevant and effective
than centralized/uniform state-wide efforts.

« We will be working to integrate services and to work with the whole family—
bringing together programs historically separated by bureaucratic boundaries and
categorical funding. This includes an emphasis on case management and fund
decategorization.


36

along with a number of other laws considered to be obsolete or ineffective, including
the ergevernmental Cooperation Act of 1968, were repealed.
Lhave been unable to find any significant evaluations of the Joint Funding Sim-
lifeation Act, I did find, however, passing comments about the act that lead one
the conclusion that act never really got off the ground. Some who remember the
act believe that there was never a strong commitment on the part of federal agen-
cies to make this process work (because of the difficulties of crossing agency and
rogram boundaries), Those stave and local governments who knew about the act
find this was mot a large number), found it difficult and time-consuming to pureue
joint funding, and therefore became less interested in attempting to do so.

HLR 2086

I believe that H.R 2086, in combination with current block grant reforms, provides
important opportunity to address grant assistance issues that have bothered
state and local governments for many years.

The suggestions below attempt to build on the lessons of the past, and to reflect
the circumstances found today.

Governmental Focus

H.R 2086 focuses on local governments. This is understandable because local sv
ernments are on the “front-line” for achieving most federal policy objectives. The
success of these objectives rests largely on the ability of local governments to apply
and manage federal and state funding as effectively and efficiently as possible.

Hi attempts to strengthen focal abilities by providing increased flexibility
for local officials to pursue federal objectives in a cost-effective manner most suit-
able to local circumstances and needs. Greater flexibility will enable local officials
to better coordinate and achieve federal, state, and local priorities.

H.R 2086 is particularly useful to smaller and rural communities that lack the
capacities to obtain and manage federal programs. In effect, these communities are
not able to participate as full partners in our intergovernmenta] system for no other
reason than their size.

Nonetheless, I believe that the purposes of H.R 2086 are important objectives for
all governments, including state and Tribal governments. H.R 2086 is concerned
with achieving maximum economies and efficiencies in the use of federal funds, by
focusing on outcomes rather than rigid requirements and processes. Certainly these
are worthy goals for state and tribal governments as well.

Tn addition, we are now in a period of dramatic reforms of American Federalism.
These reforms will result in shifting roles and responsibilities, including how federal
money is distributed and applied. The movement towards consolidating and blocking
federal programs at the state level will result in stronger state-local assistance rela-
tionships. These changes will give states a greater role and involvement. in the kind
of “local empowerment and flexibility,” envisioned by H.R 2086. Not to give states
and tribal governments the same flexibility is to leave out a very important compo-
nent that can be critical to the purposes of the act, and to federal reform efforts.

Purposes

The purposes of H.R 2086 are meritorious. But I would like to make two sugges-
tions that believe would help to clarify the intent of the legislation.

First, the bill’s focus appears to concentrate on consolidating two or more federal
programs or appropriations. I believe that it is also important to provide the flexibil-
ity for federal and state agencies to join programs that can serve a common purpose
at the local level. This may involve the pooling of funds through a single administer-
ing agency, and/or synchronizing time periods, regulatory requirements, and report-
ing. I would add here that this flexibility should be available even if only one federal
program is involved.

Perhaps the bill’s language could be changed under Section 3.(3), that in-
cludes a new subsection (C) to read: “integrating one or more federal programs
or appropriations with one or more state programs.”

Second, I believe one purpose of the bill should be to streamline federal planni:
requirements, by providing common standards that can be met by applicants witl
existing comprehensive plans that, are up-to-date and reasonably adequate. This is
particularly important to smaller local governments. Federal planning requirements
are costly for small communities, and more so if they have to develop separate plans
for each federal program.

This purpose could be made clear if, under Section 3, a new (2) were inserted
as follows: “reduce local government costs by streamlining federal planning re-

uirements, and by allowing communities to use existing, updated comprehen-
sive plans for federal program planning purposes



48

a beneficiary of that financial assistance or to a State as a direct
payment to an individual.

0 I guess that would eliminate Medicare and Medicaid from
that category so, therefore, what is the area where you think it
would be most important where the need is greatest? Would it be
education or would it be community development?

Ms. ENGLAND-JOSEPH. Well, based on the work that we have
done, it was clearly in the community development area if you
broadly define it to mean housing, economic development, and so-
cial services.

There are many support programs, local support programs, that
are intended to provide services but not in a direct subsidy to the
individual and economic development programs beyond the social
service side, meaning jobs creation, jobs programs, day-care assist-
ance,

So there are a number of—if you broadly define community or
economic development there are a number of Federal programs
that fit under that category that tend to be very narrow in focus
or categorical. And what we found was looking at it from a commu-
nity’s perspective in trying to match the problem they are trying
to solve with the Federal program in its design, sometimes there
weren't nice, neat matches between the right program and the
right problem. And what this legislation would allow is greater
flexibility in trying to marry need with a multitude of programs.

Mr. GrirFiTus. I can give you one good example in that housing
illustration I brought up. We had this model that housing doesn’t
do much good unless you have the employment and social services
to go along with it. One of the problems we had was that we were
serving the low-income to moderate-income population. Every one
of those programs, and there was at least a half a dozen, had a
statutorily defined level of low income and moderate income, and
not one of them was the same.

Now, the problem was how do we combine those pro ‘ams and
fit one person who has got six different definitions of what his in-
come has got to be. And in that case, we waived it. In that case
we were able to waive it in that 2-year period.

But this is a problem today. There is a lot of statutory require-
ments among programs that attempt to do the same thing, but
they define it differently. There are six different definitions of rural
in our Federal laws. I mean, are you rural if you are 5,000, are you
rural if you are 10,000, are you rural if you are outside of a metro-
politan area? What are you when you're rural?

Well, that’s the problem with the Federal programs that you
can’t look at that program and define rural as far as the Federal
Government goes. So what do you do? You waive some of these
things so that you can address a problem without having to break
your head trying to figure out what rural is.

Mrs. MORELLA. Don’t they do it already though? I mean, it just
simplifies something that an enterprising government would pro-
mote? Because I think a jurisdiction would say, OK, you know,
we're tural even though we are part of Montgomery County, MD,
you know.

Mr. GRIFFITHS. Well, you can be rural for, say, a HUD program
but Agriculture can’t touch you because you're not rural to them


H.R. 2086, LOCAL EMPOWERMENT AND
FLEXIBILITY ACT

WEDNESDAY, SEPTEMBER 20, 1995

HOousE OF REPRESENTATIVES,
SUBCOMMITTEE ON HUMAN RESOURCES AND
INTERGOVERNMENTAL RELATIONS,
COMMITTEE ON GOVERNMENT REFORM AND OVERSIGHT,
Washington, DC.

The subcommittee met, pursuant to notice, at 10:15 a.m., in room
2247, Rayburn House Office Building, Hon. Christopher Shays
(chairman of the subcommittee) presiding.

Members present: Representatives Shays, Morella, Souder,
Towns, Barrett, and Green.

Staff present: Lawrence J. Halloran, staff director and counsel;
Christopher Allred, professional staff, and Thomas M. Costa, clerk.

Mr. SoupbeER [presiding]. I call this hearing to order. For the
record, I note that a quorum is present.

I welcome Mr. Green, Congressman Green from Texas, and I ask
unanimous consent that all members of the subcommittee be per-
mitted to place any opening statements in the record and the
record will remain open for 3 days for that purpose. Without objec-
tion, so ordered.

lL also ask unanimous consent that our witnesses be permitted to
include their written statements in the record. Without objection,
that is so ordered.

We will insert Mr. Shays’s and Mr. Green’s statements in the
record.

{The prepared statements of Hon. Christopher Shays and Hon.
Gene Green follow:]

PREPARED STATEMENT OF HON. CHRISTOPHER SHAYS, A REPRESENTATIVE IN
CoNGRESS FROM THE STATE OF CONNECTICUT

This is our second hearing on H.R. 2086, the Local Empowerment and Flexibility
Act of 1995, a bill Congressman Clinger and I introduced recently, and a bill similar
to one considered by this Subcommittee in the last Congress.

In our first hearing, witnesses told us that communities need local control and
greater flexibility in their management of numerous, often overlapping or duplica-
tive, federal grant programs. We heard that local initiative and a comprehensive ap-
prosch to deeply rooted problems are too often stymied by regulatory handcuffs and
red tape.

‘The proposed legislation is designed to address that problem. The bill would cre-
ate a statutory framework to give communities the flexibility they need to use
federal funds most effectively. Flexibility is the key, and the door we seek to unlock
leads to the more efficient and beneficial use of scarce federal tax dollars.

When this Subcommittee traveled to Chicago recently to examine that city’s trou-
bled public housing agency, we learned in stark detail that the problems facing dis-

(53)



49

but Pa may be rural to HUD. I mean, the problem is it’s across
the landscape.

And what this legislation is trying to do is be able to mix and
match programs from different agencies, different appropriations,
and that’s where you run into a real problem.

Mrs. MoreE.ia. Are you satisfied with the composition of the
flexibility boards in this bill? I mean, is there over-or under-rep-
resentation in some areas, or have you had a chance to really look
at it? Should the composition be changed?

Mr. GRIFFITHS. It’s fairly large.

Mr. STENBERG. I think the question is who is left off.

Mrs. MoRELLA. That’s what I wondered.

Mr. STENBERG. It may be worth taking another look at, in light
of the clustering of Federal programs in particular, which secretar-
ies or other key Federal officials should be on the board. The board
may be too large a body, given just the working realities of it.

Mr. GRIFFITHS. This, by the way, was one of the reasons why I
suggested the delegation of responsibilities to agencies, lead agen-
cies. This was done in the past and what this does is it cuts down
on that need for that board to meet quite as often. I think it gives
a different dynamic to it and I think there is something to be said
for that, particularly if you want to save money at the Federal
level,

Mrs. MORELLA. I want to thank the three of you very much, and
thank you, Mr. Chairman.

Mr. Suays. I thank the gentlewoman.

Mr. Towns. A real quick one. This bill prohibits civil rights laws
from being waived. Are there any other additional laws or regula-
tions that should be prohibited from being waived?

Ms. ENGLAND-JOSEPH. I can describe for you some of the cat-
egories that are included in the empowerment zone legislation.

Mr. Suays. If the gentlewoman would yield, I am just going to
point out that this is the second to last day. I have to be some-
where in 1 second so I am going to give the gavel to my ranking
member to close up.

But I want to say my biggest concern is, obviously, going to
spend money better? I have no doubt about that. What would be
helpful in your interaction with the staff is how we make this a
workable system where we don’t have this large bureaucracy, don’t
have a lot of government red tape, and don’t increase administra-
tive costs more in the process. Money will be spent better, but I
want to make sure we don’t have those administrative costs.

And I am going to give you the gavel, sir. And, I am going to
thank all of the witnesses for coming this morning, especially on
such short notice.

Ms. ENGLAND-JOSEPH. Thank you.

Mr. TOWNS [PRESIDING]. Ms. Joseph.

Ms. ENGLAND-JOSEPH. Mainly because I think your question is a
public policy call. So as I read off the areas that are clearly not al-
lowed as a waiver opportunity within the empowerment zone it
may give you some idea of some of the other categories that you
may want to consider. It’s public or individual health and safety,
civil rights or nondiscrimination, environmental protection, labor
relations, labor standards, occupational health and safety, pen-


78

© to link private sector organizations (e.g. churches, businesses) with public sector
systems to work toward a seamless array of services and to maximize effectiveness
of community efforts to improve outcomes.

* to mainiain accountability for the Governor’s goals and principles and for meas-
uring outcome changes in the community.

Over the longer term, local federations would be expected to ensure the building
of local human services capacity and assume substantial responsibility for the man-

ment of resources.

‘ederations will be empowered with information necessary to propose change op-
tions to the State for possible approval. The federations will be provided by the
State with information on all programs carried out by the State on behalf of human
services users in the communities. The State will also provide information to the
federations on the various mandates governing humar: service delivery, guidelines
‘on the practical implications of these mandates, and a description of the current
programs and procedures for meeting these mandates. Federations will be encour-
aged to develop alternative, locally-relevant service solutions for meeting the re-

quirements of these mandates within the local community. Where the State has af-
Armed that the suggested changes meet all judicial and other requirements efforts
will be made to adopt them within the comminity area.

The incentive for strong community involvement will be the Administration’s com-
mitment to make its best effort to support change based upon community deter-
mined priorities and to redeploy community achieved savings within the community.
This commitment will include the State's best efforts to meet community priorities
in areas other than those traditionally defined as human services. This might be
achieved through collaboration with other agencies (in the area of economic develop-
ment, for example), or through using human service programs to meet multiple com-
munity needs. The WIC food stores in Illinois are a current example of such a multi-
focused program promoting job creation and economic development as well as meet-
ing public health needs. Similar programs that focus specific attention on providing
jobs to community members through human services will be an important goal.

This major move to bottom up community based priority determination in the pro-

ed Task Force pilot programs is not without risk. However, strong controls are

uilt into the trial as follows:

¢ Initially, few rules can be changed and almost no funds going into the commu-
nity are discretionary. To make changes in programs or combine programs, federal
or state waivers must be obtained, and thus community “responsibility” will be
phased in over time as the community earns it. In addition, judicial and legislative
mandates must be met.

Any change or redeployment of funds would appear in a proposed “budget” that
would have to be submitied to the designated state group/administrator for ap-

roval. Other than funds needed for an executive director and a small staff for the
Federation, it would not be necessary for the federation to have direct fiscal control
of funds.

* A regular, independent, third party audit of each federation would be required.

A complete discussion of the community federation idea is contained throughout
the proposal and in detailed Appendices.

As this community based approach is developed and refined in the pilot program
sites, planning will be earried out to extend the approach to other Illinois commu:
nities. Perhaps new communities would be accepted into the program based upon
their application and demonstration that they have an effective federation and relat.
ed plans. Hopefully, in 5-7 years almost all Yilinois communities would become part
of the new, reformed human services system.

The importance of community “ownership” and responsibility cannot be over-
emphasized, The Governor cannot be the primary person responsible for each
abused and neglected child. It takes a whole village to raise a child.

C. State Level Collaborative

A crucial element in Illinois Human Services is the creation of a collaborative at
the highest levels of state government. The purpose of the collaborative is to provide
a single point of response and support to community federations and to break down
bureaucratic barriers, replacing categorized decision making with holistic, family
centered plans and structure. The current Governor's Task Force, appropriately aug-
mented, could function as the collaborative if it met frequently enough, but it would
need to be supported by a senior state official. Assistant to the Governor. reporting
directly to the Governor's Executive Assistant for Human Services.

The Assistant to the Governor’ after consultation with the Governor's Office and
the Task Force, would have authority to make cross departmental decisions regard-
ing requests from the five pilot sites, and lead other cross departmental reform



88

will eliminate regulations that force local governments to “solve” problems that they
not have.

Local education ia best administered on the local level. The superintendent of the
local schoo) district has a better understanding of the needs of their district than
a federal bureaucrat 3,000 miles away in Washington. By cutting many of the
strings attached to federal dollars this superintendent can use this money more cre-
atively and effectively. Local school districts can tailor the use of federal money to
best address the needs of their students. Until we became an ed-flex atate, we had
no relief from these federal impediments. Now that the program is so succesaful, all
50 states have expressed interest in participation. To meet the growing demand for
ed-flex, a bipartisan effort is underway to expand the current limit of 6 ed-flex
states to 12.

‘As the statewide elected official for education in Oregon, I wanted a say in how
Oregon spends its federal education dollars. Other elected ‘state officials in Oregon
and across the country want the same opportunity. The Local Empowerment and
Flexibility Act of 1995 would do for other state and local agencies what ed-flex did
for our loeal school districts. In a time of budgetary constraints, this legislation
would maximize the use of federal resources while still accomplishing federal goals.
By freeing the creative spirit at the state and local level, Local Flex establi
new standard of excellence in governing.

Lest I be accused of biting the hand that feeds, let me assert that a federal pres-
ence in education is imperative. The Department of Education was originally cre-
ated to serve as a supportive partner to the states and local communities, working
to set national standards and implement needed changes. The Department of Edu-
cation has enabled many middie- and low-income students the opportunity to attend

college.

Federal assistance has also ensured that students with disabilities receive a qual-
ity education. The Department of Education has served a vital function in the im-
provement of our schools, and the Local Flexibility and Empowerment Act would en-

ance the positive influence of the department in local school districts.

The State of Oregon has worked in a bipartisan manner to ensure ed-flex was a
success, and it has Been, I hope that this bipartisanship will continue with the Local
Empowerment and Flexibility Act of 1995.

peration between all levels of government is the key to success for so many
problems this nation is trying to address. If Congress is willing, I know the states
are ready to make the commitment to seeing this idea work.

Mr. SoupeER. Thank you very much for your testimony.

We have been joined by our Chairman, Mr. Shays.

Mr. SHays. Sorry I missed the first panel. I am sorry, Mr.
MacDougal, I missed yours.

Mr. Souder, do you want to start with some questions? Then Mr.
Barrett is going to come back and he can begin asking, and we
won’t have to keep the witnesses waiting.

Mr. Souper. I had for Mr. MacDougal, but also for Mrs. Paulus,
Superintendent Paulus.

A number of years ago I was, I visited and I talked to Greg
Kohler some about Operation Beethoven, which was one of the first
experiments in the effort to coordinate State, Federal, local and pri-
vate sector, targeting the kids in a given school and hoping to track
them all the way through from birth through graduation, figuring
that we could see then which programs were working and how.
couple of things arose out of that that were frustrating.

Among other things, what they found was, anybody who was in-
terested in getting in the program and focused in the program very
long and kind of started paying attention to things, their first goal
was to get out of the Robert Taylor Homes and out of the neighbor-
hood, which meant that if you, in effect, self-selected yourself to get.
into the program, soon you left. And you weren't able to track
them, which is one of the problems that I would assume we poten-
tially have in some waivers in estimating the effectiveness of waiv-


43

programs and provider of services and we urge you to consider expanding the bill
to include State Flexibility Plans as well. The broadening of the scope of the Flexi-
bility Plan approach has merit in view of the fact that relatively few direct federal-
local grant programs currently exist.

Second, the bill would require participants to “specify goals and measurable
performance criteria.” to monitor and report performance against these goals, and
to provide for a “comprehensive evaluation” of the impacts and costs. All are impor-
tant steps toward more results-oriented governance systems.

However, the proposal may benefit from greater specificity on the procedures for
ensuring accountability. The “Evaluation and Termination” provisions would require
annual reports on activities under each approved Local Flexibility Plan. Periodic re-
porting will be necessary. but it may be better to authorize the Flexibility Council
to establish reporting periods appropriate for individual cases. Further. rather than
emphasizing termination of plane when goals and performance criteria have not
been met, the proposal should stress prompt consultation between the federal agen-
cies and the local authorities and the opportunity to adjust both the flexibility plan
and its goals and measurable objectives based on experience and changing condi-
tions, Ambitious goals may not be met by successful programs, just as modest goals
can be met by failing programs.

« Third, the bill recognizes the importance of developing data bases, Planning,
and evaluation processes in building more results-oriented governance systems. Pol-
icymakers too often assume data are available—reliable, current, and with appro-
priate geographical coverage—to support effective benchmarking, performance mon-
itoring, and reporting. This is not generally the case. Data systems and collection
efforts should improved to meet the uses envisioned. Confidentiality require-
ments, such as those that limit the use of Social Security Numbers as identifiers,
can limit the utility of administrative data bases for these purposes. In many cases,
integrating administrative data bases across an array of state and local programs
will be the best method for tracking results. On the federal level, proposals to re-
duce funding or limit the type of social and demographic data to be collected in the
next census would also hamper performance measurement. Roth are issues that
merit cor ssional attention.

* Fourth, the proposal creates a feedback system by requiring reports on the fed-
eral regulations most frequently waived under this new authority. Congress should
consider giving an “early out” to statutory and administrative restrictions that are
identified as outmoded in the course of implementation and evaluation of Local
Flexibility Plans. To do so, you may consider a process similar to the system used
to review and recommend the closure of military Bases, The most frequently granted
waivers of statutory and regulatory restrictions could be reviewed by a nonpartisan
panel. They would recommend which of the many individual changes should be con-
sidered in a single package in the legislative process. There should be some mecha-
nism to trigger congressional action to allow broader exemption from general rules
when identical or similar waivers arise from separate jurisdictions and from across
the jurisdictions of a number of authorizing committees.

«Finally, section 10 of the proposal will help ensure that technical assistance will
be available to local governments and others involved in designing flexibility plans.
This is a desirable feature in view of the complexity of and inadequate information
available about applying this new approach. While federal agencies can be an effec-
tive provider of such assistance, you may consider broadening the range of options
by authorizing or directing the agencies to support technical assistance provided by
others—such as ACIR, state governments, state and national associations of public
officials, and NAPA and other organizations with existing capacity to provide effec-
tive technical assistance and support.

The 104th Congress has dedicated itself to addressing fundamental issues in our
system of governance. In his January 4, 1995 address to the opening of this session,
Speaker Gingrich declared:

“We should insist that our success for America is felt in the neighborhoods,
in the community, is felt by real people leading real lives who can say ‘yeah,
we're safer, we're healthier, we're better educated, America succeeds.’ ”

In light of the critical role the state and local public and nonprofit sectors play
in meeting those goals, the reforms and exciting challenges presented by this pro-
posal would be a good step toward translating the speaker’s and this Congress’ vi-
sion into reality.

‘Thank you Mr. Chairman for the opportunity to share NAPA’s viewpoint on this
important proposal. I would be happy to answer any questions you or other mem-
bers may have.



113

Mr. Suays. OK. I am Boing. to suggest that we bring you down,
and others, and go through this. I think that you want this system
to work, and you have raised some valid concerns. We need to get
on to a vote, and I am going to adjourn this hearing. I believe very
strongly in this legislation, and I guess the extent of how broad we
make it will be the issue. I would not like to exempt anything, but
I would like to be able to narrow it so it would not be abused, but
still allow flexibility. So I have some conflicting desires maybe, but
your input would be very helpful.

Mr. LEHNER. We would be happy to provide it.

Mr. BAKER. I will follow up, Mr. Chairman.

Mr. SHays. Thank you very much.

With that, I am going to adjourn the hearing and thank all wit-
nesses for coming.

{Whereupon, at 12:40 p.m., the subcommittee was adjourned.]

e)


CONTENTS

Aucust 3, 1995

Hearing held in Washington, DC
Text of HR. 2086
Statement of:

England-Joseph, Judy A., Director, Housing and Community Develop-
ment Issues, General Accounting Office; Charles Griffiths, director,
intergovernmental liaison, Advisory Commission on Intergovernmental
Relations; and Carl W. Stenberg, director, Center for Public Service
at the University of Virginia, representing the National Academy of
Public Administration .

Hatfield, Hon. Mark O., a U.S. Senator from Oregon

Letters, statements, etc., submitted for the record by:

Clinger, Hon. William F., Jr., a Representative in Congress from the
State of Pennsylvania, prepared statement of

England-Joseph, Judy A., Director, Housing a y
ment Issues, General Accounting Office, prepared statement o!

Green, Hon. Gene, a Representative in Congress from the State
prepared statement of .

Griffiths, Charles, director, Intergo
sion on Intergovernmental Relations, prepared statement of ....

Hatfield, Hon. Mark O., a U.S. Senator from the State of Oregon, pre-
pared statement of

Parente, Frank, American Federation of Labor and Congress of Industrial
Organizations, prepared statement of a

Shays, Hon. Chnstopher, a Representative in Congress from the State
of Connecticut, prepared statement of .. x

Stenberg, Carl W. director, Center for Public Service at the University
of Virginia, representing the National Academy of Public Administra-
tion, prepared statement of ... .

Towns, Hon. Edolphus, a Representative in Congress from the State
of New York, prepared statement of .. a

SEPTEMBER, 20, 1995

Hearing held in Washington, DC ...
Statement of:

Glaser, Howard, Deputy Assistant Secretary for Operations, Office of
Community Planning and Development, Department of Housing and
Urban Development; and John Koskinen, Deputy Director for Manage-
ment, Office of Management and Budget

Lehner, Peter, senior attorney, Natural Resources Defense Council; and
David Baker, director of the public division of the Service Employees
International Union

MacDougal, Gary, cha
Services Reform for the State of Illinois; and Norma Paulus, super-
intendent of public instruction for the State of Oregon

Letters, statements, etc., submitted for the record by:

Baker, David, director of the public division of the Service Employees
International Union, prepared statement of ne

Glaser, Howard, Deputy Assistant Secretary for Operations, Office of
Community Planning and Development, Department of Housing and
Urban Development, prepared statement of ... aoe

(qty

53

55

100

72

108

57


106

© §8(dX1XB) (p. 20): The evaluation of a plan should also address the effect im-
plementation has had on those who received fewer benefits under the plan.

© §8(eX2) (p. 22): There appears to be no limitation on the time frame of the plan
beyond the sunset provision of the entire bill. It may be appropriate to require that
the first plan be only for one year and that there be a comprehensive review of the
plan before it can be renewed for longer periods of time.

* §$XbX2) (p. 22): We suggest that reviewing the potential environmental impact
of plans should be explicttl identified as one of the functions of the community ad-

i committee (CAC) if this bill addresses environmental Programs at all.

© §%c) (p. 23): It is not clear what it means that the CAC shall “consist of the

neral public.” It appears that the community advisory committee is weighed inor-

jinately in favor of the very municipal government devising the plan since it is rep-
resented by three of the four identified interests to be included on the CAC. We also
believe that neighboring municipalities should have a voice on the CAC, at least as
to environmental issues that could affect them. (For example, landfills are almost
always located on town lines.)

* §9(d) (p. 23): There is no time provided for input by the CAC and other mem-
bers of the public. Adequate time for knowledge about the plan to be disseminated
and for careful, constructive comments to be developed must be provided.

In sum, the Natural Resources Defense Counci appreciates this opportunity to
comment on H.R. 2086. While we support the general concept of greater flexibility,
we are concerned that the bill as drafted is overbroad and could be used to weaken
vitally important environmental programs. Thank you.

Mrs. MORELLA. Now David Baker, the director of the public divi-
sion of the Service Employees International Union.

And, again, welcome and thank you for being so patient and
waiting for the third panel.

Mr. BAKER. Thank you, Madam Chair. Good afternoon, I am
David Baker; I am the director of the public division of the 1.1 mil-
lion-member Service Employees International Union. I am here
today to voice the opinion of our union, which is in strong opposi-
tion to H.R. 2086, the Local Empowerment and Flexibility Act of
1995. Our concerns are that this bill could allow localities to waive
critical labor and environmental statutes and regulations all in the
name of local innovation and flexibility.

We represent members employed in both the public and private
sectors, including thousands of local government employees who
are committed to delivering services effectively and efficiently with-
in their communities. While we recognize the value of granting lo-
calities greater flexibility in tailoring programs to meet the unique
needs their communities, we also believe that this flexibility
should not come at the expense of important Federal laws and reg-
ulations.

According to H.R. 2086, the Flexibility Council could waive any
requirement under Federal law for the administration or provision
of benefits under Federal assistance programs as long as the waiv-
er is “reasonably necessary for the implementation of the plan.”
Such language grants localities broad discretion in seeking waivers
for Federal statutes and regulations. We are particularly concerned
about the threat these waivers may present to maintaining essen-
tial labor standards.

SEIU strongly believes that all citizens of this country are enti-
tled to certain Basic rights and protections, regardless of the State
or locality in which they live. Labor standards, including minimum
wage, overtime, occupational safety and health and the regulations
that clarify them are among the fundamental protections to which
all Americans are entitled; yet H.R. 2086 may allow these statutes
and regulations, which organized labor fought for decades to attain,


66

AFDC or welfare programs, we can’t do that ourselves; that is
something that has to be done in conjunction with the State itself.
So there is a partnership that takes place.

I might mention that one of the real values of that whole process
is not just at the end of the day that you did a waiver, because it
is really not about waivers, it is about getting done what the local
community wants to get done. But part of the advantage has been,
it has forced really the Federal agencies, the States, the local city
and the local community to enter into this dialog about where they
want to go, and the waiver has been the excuse for that in many
cases, but, you know, lots of times not always the end in itself.

Mr. GREEN. Mr. Koskinen, in the time I have left, I am going to
try to combine two questions. One, you suggest expanding the in-
volvement of States in the review of waiver requests, and if you
could give specifics on how States could be more involved—and also
you indicate that the 45-day review period may not be enough for
the flexibility council to review the waiver applications in light of
the empowerment zone. Was there time limits on the
empowerment zone to grant waivers like 45-day? So if you could
cover both of them——

Mr. KOSKINEN. I may turn to my expert here on_ the
empowerment zones for the answer to your second question. With
regard to the involvement of the States, the statute presently pro-
vides that a locality will provide its plan to the State, and the Gov-
ernor has 30 days to comment. A comment is not required, and the
community after the 30 days can apply directly to the Federal
evel.

What we would like to do, while not giving the States a veto over
our applications, is encourage more of a dialog between localities,
States, and the Federal Government to make sure that everybody
is on the same page. Our experience thus far is that one of the
major benefits of the waiver process has been the development of

red set of expectations and goals at the local and the State
level as well as at the Federal level.

What we have also found in our prior experience is that many
of the things to be waived are at the State level. Therefore, we
would like to encourage communities to come to the Federal Gov-
ernment with a joint plan with the States for what the States not
only will waive but what their contribution will be to the strategic
plan of the local area.

Again, I would stress, we don’t want to give the Governors a veto
over the localities, on the other hand, we would like to make it
clear through the statutory mechanism, that we would like more
and to encourage or require more of a dialog between the localities
and the States when they come to the Federal Government for
waivers.

Mr. GREEN. Mr. Souder, I don’t have any more questions. Let me
comment, though, since we have a person here from HUD, I have
been involved for about 8 months with a group in Houston between
our local housing and urban development, the city of Houston, the
State of Texas, and our office dealing with low-income housing, try-
ing to make sure not that we grant waivers, but we have all these
State, local, and Federal agencies all together working. And it is
working, but we have to keep the fire burning.


52

while at the same time respecting civil rights, fair labor standards and other worth-
while social regulations.

The Empowerment Zone program for urban redevelopment launched only last
year contains a more comprehensive and, in our view, more reasonable list of fed-
eral requirements that can't be waived. The U.S. Department of Housing and Urban
Development, which administers the Empowerment Zone/Enterprise Community
program explains its requirements to applicants as follows:

‘ou should not . . , base your entire strategic plan on receiving apecific waivers
or particular changes in Federal statutes or regulations. Our ability to take action
varies widely from program to program and in some cases may be constrained by
statute. Nevertheless, we will make every effort to accommodate your needs; and,
where appropriate, we will work with you to seek statutory authority for broader
flexibility of Federal programs, including waivers.

“You should be aware that’ we will not consider changing any Federal require-
ments that pertain to: (1) public or individual health or safety, civil rights or non-
discrimination, environmental protection, labor relations, labor standards, occupa-
tional health and safety, pensions, taxation, and banking standards; and (2) chet
bility and benefit provisions of the Social Security Act and the Food Stamp Act.
will work with you to meet such essential mandates.” (Empowerment Zones and En-
terprise Communities Application Guide. Building Communities: Together.
President’s Community Enterprise Board. U.S. Dept. of Housing and Urban Devel-
opment. U.S. Dept. of Agriculture, p. 11 Undated.)

There is and will continue to be a tension between the achievement of national
Reals and the need for flexibility so that scarce federal resources are used efficiently.

is legislation places too great an emphasis on flexibility and thus threatens ac-
countability and the achievement of national goals. Further, if enacted, it would en-
courage states and localities to attempt to repeal by waiver those-laws and regula-
tions they disagreed with or perceived to be too costly or inconvenient, Federal labor
standards protect workers, their families and their communities.



101

170,000 members. I am a senior attorney at NRDC in its New York
office, and I am particularly pleased to be commenting on this pro-
posal, because prior to wor! ing for NRDC, I worked for the law de-
partment of the city of New York for 8 years. There I had the op-
portunity to learn about both the need for and the benefits of local

exibility and also the need for limits on that flexibility. I also
came to have fet respect for municipal government personnel
and the many difficulties they face.

The Natural Resources Defense Council supports the concept of
local input into the establishment of Federal spending priorities at
the local level. More particularly, we support an enhanced munici-

al role in the establishment of local environmental priorities.

ere is a substantial body of local knowledge about environmental
health and social issues that could never be replicated at the State
or Federal level and that could improve spending decisions.

There is also an important incentive that can motivate municipal
officials and local residents to spur on local environmental improve-
ments. The challenge, however, is to tap into this knowledge and
energy without hindering the attainment of important baseline na-
tional environmental health and safety safeguards that the Ameri-
cans deserve and desire.

We believe that any enhanced municipal role must be guided by
four key principles:

First, tradeoffs between programs must be limited to those
groups of Programs where the benefits of the tradeoffs can be un-

lerstood and balanced rather than based on the vagaries of politi-
cal power and media hype.

Second, flexibility in waivers should not jeopardize fundamental
health, safety, and environmental protections. The Federal environ-
mental standards were based on scientific assessments of health
and environmental impacts and do not really depend on bureau-
cratic changes.

Third, important procedural requirements that now exist, par-
ticularly those relating to public input to decisions—environmental
and health decisions particularly—and access to information and
data need not and should not be waived. Procedural requirements
such as these exist under most Federal environmental laws, allow-
ing the public to participate in permit hearings and get access to
pollution data. I believe these have been key to their success and
to their credibility.

And finally, the flexibility should relate to the establishment of
relative schedules for funding environmental improvements. It
should not allow environmental requirements to be weakened.

Upon review, it appears that H.R. 2086 fails to conform to these
four principles. To be candid, it appears that this bill was not writ-
ten, or this proposal was not written, with environmental programs
in mind. The language of the bill suggests that it was primarily
aimed at Federal social welfare programs, or as the prior witness,
Mr. MacDougal, said, “the ladder out.”

Indeed, the letter inviting me to come here today referred to Fed-
eral categorical grant programs in which one does not generally in-
clude environmental programs. So to the extent that it would not
address environmental issues, the Natural Resources Defense
Council does not take a position.


26

or a program funding or design perspective, the problems are inter-
related. Many different programs actually are needed and many
different types of funds are needed in order to support solving very
difficult urban problems.

What we found was that you have to link together—I guess the
hypothesis we were attempting to test, linking together the housin,
or physical aspects, infrastructure issues, with social needs, whicl
would include education, health care, child care, all the supportive
services necessary from a social perspective, and economic develop-
ment, jobs, businesses, with the intent of trying to understand
whether if we were to combine those three broad elements together
could we, in fact, better address the complex problems that face
local communities.

What we did was a case study approach, looked at four commu-
nities across the country who had over the past maybe 7 to 10
years been experiencing and experimenting with a comprehensive
approach. And what we found was that there—it holds a great deal
of promise if you look at those problems in those ways rather than
to be forced to look at problems from a stovepipe Federal program
design perspective.

Now, what we also learned, in addition to the fact that this may
be promising as an approach, is that it takes a lot of time. It’s very
difficult to do. You need to bring a lot of different people together.
And, clearly, these problems are so complex. You need to under-
stand clearly what the problems really are.

But having said that, I think what the communities were able to
teach us and what I think we have to offer you today, is that it
was extremely difficult when addressing complex problems at the
community level when you have hundreds of Federal programs
with many different application and reporting requirements, a lot
of levels of sophistication, timing differences, so that from a com-
munity’s perspective when they are focused on problem solution
and attempting to try to solve these very difficult problems, tryin
to match those problems with Federal programs and Federal fund-
ing sources is extremely difficult.

In some cases, communities told us it was worth it not to involve
or participate with the Federal Government and that in the event
that they did participate or did receive funds from the Federal Gov-
ernment, they preferred the community development block grant or
the community service block grant that allowed them the flexibility
to use funds in a wide variety of ways to solve problems, rather
than many of the categorical programs that were so narrow in de-
sign and focus that it made it extremely difficult to try to force-fit
a program requirement to the problem itself.

Now, what they told us were that there were several problems,
even in their attempts to try to use Federal programs, they needed
a level of sophistication or expertise that required full-time staff in
some cases. That was clearly an additional cost to these commu-
nities.

In_some cases, people were hired strictly to write proposals for
the Federal Government Proposals: for Federal Government grants
and applications. They found that they had to create whole systems
of tracking and accounting for these Federal program funds even
if some of those funds were fairly small in comparison to private


22

think we can approach it in a uniform, hard and fast formula be-
cause the States are so different. I think the goals that we would
want to set should be done on a flexibility factor.

I would think that the mutual goals we had set in education
would depend on what the State is doing today in education. Is it
behind the average? Is it ahead of the average? There is so much
flexibility there in their resources. You would have to set those
goals within reality of what can be achieved by the States.

I voted against revenue sharing, and I still oppose revenue shar-
ing on the basis that when you separate the tax collecting from the
tax spending authorities, you don’t strengthen federalism; you
make it more centralized.

People often ask me did I like being Governor better than bein;
a Senator. I said, well, my view in a very semi-facetious ani
oversimplified way, is that when I was Governor I had to raise my
revenues and I had to raise them for the programs.

Today, Governors spend about half their time complying with
Federal! regulations and the other half of their time being bag peo-
ple to the Federal treasury. And I just don’t think that strengthens
the States at all. I think States are going to have to assume those
responsibilities, as we have, to set our priorities. We should be set-
ting our priorities, which we aren’t doing in my view, at the Fed-
eral level; so must the States.

And I don’t think that you could set up a single formula that
would work in New York, Mississippi, Oregon, and Louisiana, just
as an example. I’m not being critical of any of those States. I’m just
saying look at the schedule of how much they are spending for edu-
cation per student in comparison to each other and, therefore, I
don’t think we could set up a Federal formula. I think what we
have to do is stimulate those States that are paying less of how
they can be more economically prosperous to assign more of their
revenues to education.

But I do think we could set goals and give those stimulus
through the setting of mutual goals in education and any other pro-

‘am. I don’t think what you & in education is going to apply per-

aps in housing or what would apply perhaps in transportation or
the management of your resources. I just think we have to look at
flexibility in any kind of a relationship with the States.

Mr. SOUDER. What we are getting into in the careers bill is mere-
ly by saying, for example, that you have to spend a certain amount,
like I had one amendment that said that they had to show that
they were serving a high-risk Population. They didn’t have to show
us how they were serving the high-risk population. That is the lati-
tude of the States. But the Governors maintained that that was
prescriptive because that would lead to an agency looking at them
trying to define the regulations as to whether or not that popu-
lation was high-risk, lead to paperwork with that. And there is
some sort of a balance here.

Senator HATFIELD. You are right. And I think that balance could
be achieved by a series of thresholds. In other words, rather than
setting one threshold of what the States have to be doing in order
to comply enough to get a grant or to be eligible, I think you would
have to set a series of thresholds based upon the economic realities
of those States amongst other issues as to what they can afford.


105

‘THE NEED FOR ACCOUNTABILITY

Let me add one very important additional issue: accountability. We are discussin;
taxpayer money here. Federal taxpayers have repeatedly indicated in polls—botl
Republican and Democratic and from all parts of the country—that they are williny
to spend money oh environmental Protections. (In fact, they want to spend more)
However, they also want to know what their money is getting and that their money
is being well spent. Any flexibility must keep this in mind. All federal taxpayers,
not just those in the relevant municipality with the flexibility plan, have an interest
in how federal money is spent. The flexibility plans must continue to work for the
environmental goals of a clean and healthy environment that taxpayers have agreed
to support; they must not divert from that end.

SPECIFIC RECOMMENDATIONS ON THE BILL'S LANGUAGE

In addition to these larger conceptual concerns with the bill, which are closely re-
lated to ite drafting, we have several more specific concerns that you might consider.
« §3(2) (p. 3): We are not sure what is meant by placing less emphasis on “meas-
uring resources.” If this could be construed to mean having less information about
environmental program, impacts and causes being available to the public, we would

be very concerned.

© §4(3) (p. 4): The Flexibility Council is comprised of so many high level members
that it will in reality be delegated far down the bureaucratic chain of command. As
noted above, we believe that flexibility plans should be limited to groups of pro-
grams where trade’ offs could be understood; if this is the case, fewer federal officers
will have an expertise or jurisdiction relevant to the plan and thus fewer will be
needed to review a plan application. NRDC believes that one top level federal officer
should pay personal attention to Plans within his or her specific jurisdiction. For
example, the Administrator of EPA should be the lead and should be expected per-
sonally to review any plan that would reallocate funds among EPA administered
funding Brograms,

 §6(a) (p. 8): The bill appears to exempt payments pursuant to a plan from all
other provisions of law. As noted above, if this were to allow payments to avoid im-
portant public participation requirements or substantive requirements (such as lim-
its on infiltration and inflow on sewage treatment plant funding), we would be

strongly 9 posed,
o§ x5 ( . 9): It appears that the local government developing a flexibility plan
does not need to respond to public comments that are submitted on the plan. We
believe coherent responses should be required as they are in the National Environ-
mental Policy Act process.

. $o(ex2) @ 10): The plan currently requires the identification of those who will
benefit from the plan. It is important that it also identity those people and services
which would be temporarily reduc lan. It is easy and pleasant

ced under a flexibility pl
to discuss who gets more; the real rub is discussing w 10 gets less.

+, $6(0X8) (p10): We support the requirement that the plan include specific goals
and measurable performance criteria related to the plan.

© §6(cX5) (p. 11): The plan is to identify those “federal statutory or regulatory re-
quirements applicable under a covered Federal financial assistance program” the
waiver of wl “is necessary to implement the plan.” Who makes this determina-
tion of necessity? Is it reviewable? Can any requirement be waived? The bill should
expressly provide that health and environmental requirements may not be waived.

© §6(dX2) and §7(aX1) (p. 12): The Governor has 30 days to review a plan; it is
not clear that this is enough time in all circumstances. The state may est addi-
tional information or data to assess the merits of the plan. Similarly, the Flexibility

ncil has only 45 days to review the plan. For the same reasons, this may not
be sufficient time in all circumstances. Both reviewing governments should have the
opportunity to request additional information. It is not clear the provisions in sec-
tions 6(bX5) and 6(cX9) are sufficient to permit requests for information after plan
application submittal.

* §7(b) (p. 13): The Flexibility Council's decisions are made by majority vote.
Since as noted the Council has numerous members, many of whom may have little
information or interest in the programs discussed in the plan. We suggest that a
consensus, among the interested Council members be required for approval of a

plan.

°  §80x2) (p. 18): We support the limitation on waiver of requirements that it
“shall not result in a qualitative reduction in services or benefits for any individual
or family that is eligible for benefits.” This language, however, must be clarified to
ensure that it covers environmental protections that benefit individuals indirectly
as members of a larger community.


34

PREPARED STATEMENT OF CHARLES GRIFFITHS, DIRECTOR, INTERGOVERNMENTAL
Liaison, ADVISORY COMMISSION ON INTERGOVERNMENTAL RELATIONS.

Mr. Chairman, I appreciate the opportunity to comment on H.R. 2086, the Local
Empowerment and Flexibility Act of 1995.

ly remarks today are from the perspective of a staff member of the Advisory
Commission on Intergovernmental Relations, The Commission itself has not taken
@ position on either H.R. 2086 or its companion legislation, Senate Bill 88, that has
been introduced by Senator Hatfield.

I hasten to add, however, that I believe the Commission would endorse the gen-
eral purposes and thrust of this legislation. For over two decades, ACIR has stressed
the need for the type of federal assistance reform embodied in H.R. 2086.

Mr. Chairman, I have worked in the intergovernmental arena for nearly 25 years.
Prior to coming with the ACIR, I served as Chief of Federal Program Coordination
for the Commonwealth of Pennsylvania, and then served as Director of the Penn-
sylvania Intergovernmental Council, a state-local body similar to ACIR.

I am well acquainted with the growth, benefits, and problems associated with fed-
eral assistance. In a sense, state and local governments have had a “love-hate” rela-
tionship with federal aid. These governments have certainly appreciated the help
that federal aid has been in critical program areas. At the same time, though, these
governments have had to endure federal program structures, processes, and require-
ments that often frustrated state and local efforts to apply and manage this assist-
ance effectively and efficiently.

In response to the frustrations expressed by state and local governments, there
have been numerous efforts over the years to reform the federal aid system, by
streamlining and simplifying it in ways intended to increase effectiveness and effi-
giencies. Some of these efforts were successful in whole or part, while others simply

failed.

I believe that the overriding ingredient of successful reform is a commitment to
success. This ingredient has three important characteristics:

A long-term outlook that gives the sense that the initial resolve and energy
behind the reform is enduring and will not dissipate with time;

Flexibility that allows for adaptation and refinement; and

The avoidance of excessive complexity in the objectives being sought, and the
processes involved. The results must be truly cost-effective, and time-saving.

Mr. Chairman, I believe that H.R 2086 already embodies the first two of these
important characteristics. There can be no doubt of the long-term resolve of this
Congress and the President to reform the current federal aid system. This legisla-
tion can be seen as part of that reform effc

The very heart of H.R 2086 is the flexibility it endeavors to bring to this reform.
Its focus is on outcomes as opposed to rigid rocedures. Federal agencies, as well
as local governments are given considerable leeway to adapt federal assistance to
specific needs and circumstances.

As to the last characteristic, I believe there is room for further refinements to
avoid undue complexity, while making the process more cost-effective and time-sav-
ing. Most of my remaining comments speak to this point.

Before turning to those comments, I would like to briefly outline two past reform
efforts that I believe are instructive, and which help to set the foundation for my
suggestions.

INTEGRATED GRANT ADMINISTRATION

The Integrated Grant Administration (IGA) was initiated in 1972 by OMB, as a
test for simplifying the funding and administration of federal program assistance.
The central objective of the [GA was to simplify the process by which state and
local grantees identified, applied for, and administered funds comprised of more
than one Federal assistance program to carry out a single project. Initially, the only
rograms excluded were those Supporting construction or the acquisition of land.
ater, even these exclusions were lifted for some demonstration projects.

Federal Regional Councils (FRCs), which were in place at that time, were given
the primary responsibility for liaison with state and local governments, and to co-
ordinate the pac! aging of IGA applications.

To qualify as an IGA project, the federal programs involved had to be included
in a single application, be related by a common purpose or ability to support related
goals, and based on an overall strategy to achieve a common objective.

One Federal agency “point-of-contact” was be appointed to process each consoli-
dated application, rather than making an applicant deal with multip'e federal agen-
cies. A single grant award notice was issued with synchronized funding periods.



58

I convey to you his appreciation for your efforts to find ways to empower local gov-
eraments, and your leadership in encouraging federal, state and local partnerships.

FEDERAL FLEXIBILITY INITIATIVES

During the past two and one half years, the Federal government has undertaken
a number of initiatives to promote federal-local partnerships. You will be hearing
about one of those models, the federal partnershtp with the State of Oregon, from
that states representative today. In addition, the Vice President has been working
with the U.S. Conference of Mayors to encourage the creation of additional perform
ance partnerships between the Federal, State and local governments. These partner-
ships, based in concept on the Oregon Option, would provide State and local govern.
ments with far more flexibility in how they use Federal resources in exchange for
measurable results. In fact, Mr. Chairman, with your encouragement, the State of
Connecticut has entered into discussions with the Vice President’s Community
Empowerment Board about creating a broad partnership between the federal gov-
ernment and Connecticut's Neighborhood Revitalization Zones, an initiative which
aims to aupport the growth of distressed areas by enhancing program flexibility on

focal level.

a state an These efforts complement the Empowerment Zone/Enterprise
Community Initiative, a cornerstone of President Clinton’s urban revitalization
strategy.

HUD FLEXIBILITY INITIATIVES

Under the leadership of Secretary Cisneros, the Department of Housing and
Urban Development has also been very aggressive in redefining relationships with
local governments to reduce federal burdens and encourage local innovation. The
Department has, for example, entered into a partnership agreement with the city
of Dallas to coordinate federal, state, and local resources for maximum impact in
a time of limited funding streams. Assistant Secretary Cuomo has re-engineered the
Community Development Block Grant and HOME programs—mainstays of many
city economic development strategies—to reduce application and reporting require-
ments from twelve submissions into one Consolidated Plan, replacing thousands of
pages of reports with an electronic mapping system which provides a visual picture
of how federal funds are spent, neighborhood by neighborhood, block by block. And
the Secretary has proposed a sweeping reinvention Of HUD, which would replace 60
different programs with three streamlined funds.

e Local Empowerment and Flexibility Act would support these efforts. In par-
ticular, the Act would complement the objectives of the Empowerment Zone/Enter-
prise Community Initiative. The EZ/EC Initiative represents one of the most ambi-
tious efforts to date by the federal government to provide flexibility to local govern-
ments to implement locally determined solutions to inner city and rural problems.
In considering the Local Bm werment and Flexibility Act, it is useful to review
some of the lessons to date of the EZEC Initiative, including the limits of current
authority, and the challenges and opportunities presented by an across the board
effort to maximize local flexibility.

THE EMPOWERMENT ZONE/ENTERPRISE COMMUNITIES EXPERIENCE

Legislation creating nine Empowerment Zones and 95 Enterprise Communities
was passed and signed into law by President Clinton in 1993. The basic premise
of the program was that, in return for a comprehensive strategic plan to revitalize
a distressed community, incorporating private sector investment, meaningful resi-
dent input, and measurable results, the federal government would make a substan-
tial investment of tax incentives and block grants, and remove regulatory barriers
to local solutions. Over 500 communities submitted strategic plans in this competi-
tive application process, and on December 21, 1994 President Clinton announced the
designation of 71 urban and 33 rural Empowerment Zones and Enterprise Commu-
nities.

EZEC applicants were invited to identify within their strategic plans the specific
programmatic or regulatory impediments to achieving the outcomes sought by the
locality. The federal government, in turn, pledged to strive to overcome these im-
pediments, wherever possible. Applicants were advised that the EZ/EC initiative
does not contain authority to eliminate statutory constraints. In addition, we indi-
cated that we would not consider changing any Federal requirement that, pertains
to: (1) public or individual health or safety, civil rights or nondiscrimination, envi-
ronmental protection, labor relations, labor standards, occupational health or safety,
pensions, taxation, and banking standards; and (2) eligibility and benefit provisions
of the Social Security and the Food Stamp Act.



112

to conform to certain federally mandated standards, such as sec-
ondary treatment for sewage, or certain ecology requirements.

Mr. Suays. If I could interrupt, your concern is that in the proc-
ess of getting money for a sewage treatment plant a community
might not have to meet the entire standards of that sewage treat-
ment plant?

Mr. LEHNER. That is correct. Or, for example, one could apply
and take environmental grant money that you are getting to build
a sewage treatment plant, and either not have to comply with the
substantive standards, which are in a different title or perhaps a
related title of the bill; or perhaps not use it for environmental
matters at all, and perhaps use it for welfare payments or some-
thing like that.

Mr. Suays. The grants have to be used in the area of concern;
they would have to be used for environmental purposes. I don’t see
the funds being redirected, and if you see that the legislation al-
lows that, then that is well beyond—with block grants, you have
the > possibility of other things happening, but I don’t sense that
would be a problem in this bill.

Mr. LEHNER. That may not be the intent. I am concerned in the
provision, on the approval of the bills, it requires that the money
be spent for providing benefits under covered Federal programs; so,
for example, if you put both a welfare program and an environ-
mental program and a few others into one big flexibility plan, you
could—you would still be addressing the covered Federal programs,
but you would be putting almost all of it where it wasn’t intended.
And I think that would be a concern.

Mr. SHays. The comment from my staff is that you would have
to show outcomes. I am going to concede that there is that poten-
tial danger, but you do have to show outcomes. The question would
be how you would relate the outcome to each area of the grant if
you mix the grants together.

Mr. LEHNER. If I can add two more comments about that: One
is that the Flexibility Council, as Mr. Baker noted, is comprised of
so many high-level people it will become a staff issue—and I have
nothing against staff, I usually work with the staff and have great
respect for them, but it would be very hard in an area like this,
with so many different people, for anyone to pay close attention
and really take personal charge of the tradeoffs being made.

So what we recommend is that, for example within an area of
tradeoffs, such as among environmental programs, that a very
high-level administration member—for example, the Administrator
of EPA—would be personally in charge of making those Flexibility
Council decisions and——

Mr. Suays. I think that is feasible.

Mr. LEHNER [continuing]. And have a specific role.

The second, if I could say, is that tradeoffs between as broad an
issue as environmental protections and something entirely unre-
lated are extremely hard. to do in a very careful way. My experi-
ence suggests that it would more often be based on, as I mentioned,
crisis-of-the-moment thinking, so—

Mr. SHAys. Are you both based in Washington?

Mr. LEHNER. I am based in New York, but I am available.


76

¢ We will eliminate disincentives to preventive and integrated responses that

have inevitably appeared with the hodgepodge of laws and programs that have been
ier over the years.

ll find ways to end permanency of participation in and dependence upon
the welfare system.

© We will explore opportunities to increase the effective use of volunteers (compa-
nies, community groups, individuals. etc.) providing social services.

We will increase the proportion of caregivers (those in direct contact with dis-
advantaged people) in relation to recordkeepers, administrators, etc.

» We will measure the effectiveness of private and government dollars invested
in terms of real outcomes and real costs.

We will find ways to strengthen community economic development, utilizing re-
sources coming into the community to provide training and jobs for residents of the
community.

EXECUTIVE SUMMARY

A. Introduction

Governor Jim Edear appointed the public/private membership of the Governor’s
Task Force on Human Services Reform in February 1993. The charge to the Task
Force was the reexamination of Illinois health and human services delivery systems.
The work before the Task Force in the past year was to determine the nature and
scope of the problems of the human services system—as experienced by citizens,
providers and advocates, and public servants—and to develop frameworks for plan-

ing and implementation of system-wide reform.

ugh this process the Task Force has identified systems problems and articu-
lated goals in the areas of outcomes, broad prevention efforts, management, financ-
ing, and practice. This proposal: describes the best thinking of the Task Force, illu-
minates the difficult terrain we must cross, and suggests new structures and sctivi-
ties. These represent the first steps toward the creation of an outcome-driven, geo-
graphically based flexible, and comprehensive services system for children and their
families.

In organizing its continuing work, the Task Force recommends the field trial of
two major structural entities: community federations and a State-level collaborative.
The Task Force recognizes the many community based networking efforts underway
in the State and will bring these efforts together through the establishment of fed-
erations at the community level and the creation of a State-level collaborative to co-
ordinate planning and decision making These structures will focus and organize the
complex work of reform. The relationship between these structures will yield impor-
tant new directions and learning in a new and non-categorical public/private part-
nership.

B. Community Federations

A centerpiece of the Administration’s plan to reinvent the State’s human services
systems will be the identification or formation of a human services federation in
each of the field trial communities: Grand Boulevard, Waukegan. the Southern
Seven counties, DuPage County and Springfield. The organization of local federa-
tions will be flexible to insure that they are truly representative of the community.
The primary goal of each federation is to improve life outcomes for its disadvan-
taged families and children. The work of the federation involves establishing specific
community priorities and needs and drawing upon the full range of resources, public
and private, to address those priorities and needs.

First year activities will focus on information gathering and capacity building
within field trial communities. Initial responsibilities of the local federations in
the first project year will be:

* to identify highest priority community needs, independent of whether or not
they fall within traditional state human service system responsibilities.

* to word; with the State and the private sector to identify and evaluate all re-
sources flowing into the community and other resources spent on behalf of the com-
munity.

* to utilize training provided by the State, best practices information and success
models from other states, together with other relevant information, identify opportu-
nities for improved outcomes and for savings.

Once these original development activities have been undertaken federation re-
sponsibilities will be expended to include:

* to make every effort to fund highest priority community needs through rede-
ployed resources and private support, removing barriers as required.



28

these communities are asking for, and so that is a difference from
perhaps what you are intending in the legislation that we're talk-
ing about today.

owever, there is a need to recognize there could be potential for
duplication of effort and a recognition that once you open the doors
in terms of waivers you should and will probably expect many,
many waivers to come from communities because of the need from
a community’s perspective to try to have the flexibility they cur-
rently do not have to address their problems.

0 I hope this was helpful and I will be happy to answer any
questions you or members may have.

[The prepared statement of Ms. England-Joseph follows:]

PREPARED STATEMENT OF JUDY A. ENGLAND-JOSEPH, DIRECTOR, HOUSING AND
CoMMUNTTY DEVELOPMENT ISSUES, GENERAL ACCOUNTING OFFICE

Mr. Chairman and Members of the Subcommittee:

We are pleased to be here today to participate in your hearing on the Local
Empowerment and Flexibility Act of 1995, whose purpose is to create increased
flexibility for local governments and private nonprofit organizations using federal

rograms to assist communities and their residents. The act would, among other
Things, create a council componed primarily of eabinet-level ofcals to review and
approve local plane that could include requests to waive federal requirements.

r testimony is based primarily on our February 1995 report on community
groups that are using a multifaceted—or comprehensive—approach that relies on
residents’ participation to address housing, economic, and social service needs in dis-
tressed neighborhoods.! Comprehensive efforts are often begun out of the frustration
of residents regarding neighborhood conditions and the dissatisfaction of assistance
providers with the results of more limited approaches, In our February report we
Examined (1) why community development experts and practitioners advocate this
approach, (2) what challenges they see to ite implementation, and (3) how the fed-
eral government might support comprehensive approaches, The report incorporated
information obtained during our review of four organizations that are applying a
comprehensive approach for improving their respective communities.2

Tn summary, we reported that community development experts advocate com-
prehensive approaches to address the problems of distressed neighborhoods because
Such complex, interrelated problems are better addressed in tandem than individ.
ually. The comprehensive approach was endorsed by the Department of Housing
and Urban Development )) in March 1994. Several national foundations—frus-
trated with the results of programs they previously funded—have begun funding or-
ganizations that are taking a comprehensive approach.

Multiple challenges confronted the four organizations we studied. The organiza-
tions hed to, among other things, plece together a complex web of funding from sev.
eral private and public sources to cover program and administrative coate. Overal
the groups relied on public funding—often with conditions and/or restrictions on its
use“for 30 to 60 percent of their budgets, The organizations elso faced the onerous
task of managing a diverse set of concurrent housing, economic development, and
social service programs.

The federal government assists distressed urban communities and their residents
through a complex system involving at least 12 federal departmenta and agenci
Together, these agencies administer hundreds of programe in the areas of housing,
economic development, and social services. These agencies have tended not to co-
ordinate their efforts with one another because they have separate missions and

1 Community Development: Comprehensive Approaches Address Multiple Needs but Are Chal-

Jenging to Implement (GAO/RCED/HEHS-95-69, Feb, 8, 1995).
\¢ four organizations we studied were (1) the Core City Neighborhoods in Detroit, Michi

n, (2) the Dudley Street Neighborhood Initiative in Boston, Massachusetts, (3) the Marshall

jeighta Community Development Organization in Washington, D.C., and (4) the Neighborhood

jousing Services in Pasadena, California.

2The Departments of Agriculture, Commerce, Education, Health and Human Services, Hous-
ing and Urban Development, the Interior, Justice, Labor, Trang} ion, and the Treasury; the
Environmental Protection Agency; and the Small Business Administration operate programs
available to distressed communities. Other agencies, such as the Department of Defense, also
operate programs that may be regarded as assisting distressed urban communities under certain
circumstances,



94

this Program, I watched the young men being trained in how to fill
out applications and how to apply for a job, how to do an interview,
and how to dress and so forth.

Then I talked to the MSW—Master in Social Work—that was
running the program, and I said, What kind of success are you hav-
ing? He said, Not very good.

I said, What percentage of these people get jobs? He said, 3 per-
cent or less.

Well, why are you doing this? Well, this is what the regulations
call for in order for them to be eligible for other programs.

What would you do if it was your money? Well, that is easy. I
would get a van and I would run it from Robert Taylor Homes out
to Elk Grove Village where the jobs are.

There is a WIC computer that by Federal law can’t be used for
any other services than WIC. And yet, one of the big needs we have
at the community level is integrated MIS systems, so that when a
person who is receiving services comes to an intake worker, the in-

formation can cover the whole range of services provided. No State,
to my knowledge, has this yet.

It is a very complex thing getting all of these silos linked on a
computer system. Right now, a family has to go to all six systems,
and most of the inner city users are multiple system users. I asked
the Governor what he thought about it 1 day. He said, You know,
70 percent of the problems we have got are the Feds, and if we
could get rid of that, we really could get more done with less money
in terms of outcomes.

Mrs. MorELLA. Thank you. We will see whether that can happen.

Thank you, Mr. Chairman.

Mr. SHAys. Mr. Barrett, do you have any questions?

Mr. BARRETT. Yes, I do.

Mr. MacDougal, I understand you are in a hurry. My under-
standing also is that the Governor’s Task Force in Illinois is con-
centrating on five pilot sites; is that right?

Mr. MAcDoucat. That is right.

Mr. BarRETT. Do you think it is wise for us at this level to use
a demonstration project approach, pilot approach, or should we go
for the whole enchilada and just open it up throughout the coun-
try?
Mr. MacDouGaL. I think there are steps you can take to encour-
age the formation of community groups and give them a voice at
the table. I don’t think there is anything fundamentally risky about
that.

Some of the things—how far we can go in empowering these com-
munity groups is yet to be determined, but with proper checks and
balances there is really nothing wrong with going broad scale. En-
couraging the formation of these federations and giving them a
major say in how the community priorities are developed and how
the money is spent in their communities.

Mr. BARRETT. Are there certain areas where you think we should
still keep our finger in the pie? I think of, for example, in Wiscon-
sin, right over the border from where you are, there is always a
concern that people are being encouraged to move to Wisconsin
from Illinois for welfare; and I assume you have the same thing at
your southern border as they do at their southern border.


9

(3) includes recommendations with respect to local flexibility.
SEC. 18. REPEAL.
i Act is repealed on the date that is 5 years after the date of the enactment
is Act.

Mr. Suays. I would just ask if Mr. Souder has a statement he
would like to make for the record.

Mr. Souper. I congratulate both of you on your efforts. I have
worked as a staffer for a number of years and worked with Bob
Woodson in a lot of neighborhood efforts and went out to Operation
Beethoven and have seen grassroots efforts where this type of flexi-
bility really can make a difference. I look forward to working with
you in legislation and the hearing today.

Mr. SHaysS. We will have a few unanimous consents, but out of
courtesy we will wait for the minority to come to make sure that
meets with their approval.

Senator Hatfield, welcome. Great to have you here, and look for-
ward to your testimony.

STATEMENT OF HON. MARK O. HATFIELD, A U.S. SENATOR
FROM OREGON

Senator HATFIELD. Mr. Chairman, thank you very much for the
privilege of being here today. Congressman Souder, I welcome this
opportunity to share a few thoughts on this particular piece of leg-
islation that you are holding your hearing and to also congratulate
you, Mr, Chairman, and Chairman Clinger for introducing this
piece of legislation here on the House side.

I would ask unanimous consent, if that’s the procedure to follow,
to have my full statement in the record.

Mr. Suays. That’s the procedure. And we're going to allow that
eventually, but until we get a minority member I won't ask for
unanimous consent. But you can be assured that your full state-
ment will be in the record.

Senator HATFIELD. I would like to just take a few moments to
highlight and respond to any questions that you may have.

ir. Chairman, as you know, the Republican majority now in
both the House and the Senate have taken action through the
budget resolution process to commit this Government to a balanced
budget by the year 2002. And as chairman of the Senate Appro-
priations Committee, we are proceeding on our bills of appropria-
tion for fiscal yoor 1996, much as Chairman Livingston is doing on
the House side to comply with that commitment that we have
made to the American people.

By the same token, I think it is important to recognize that we're
not going to balance the budget merely by continuing the old ways
of doing business. I think what has brought us, in part, to this hor-
rible situation that we face in the deficit is our failure to radically
transform the way we do business as a Government, as well as the
amount of dollars it takes us to do business.

I say that in context of a letter that was signed by Speaker Ging-
rich and Leader Dole on the Senate side, a letter that was sent last
December to the President of the United States urging that the
President consider the flexibility factor in these various and sundry
programs that relate us to the State and local governments.

of


71

ny
ating wach

GUNLONULS INAS WALSAS SHOTS NVANE SIONITTI



83

Increase the access to primary health care and promote daily health.

Increase the healthy lifespan.

Increase immunization.

Reduce infant mortality and the number of low birth weight babies,

Reduce the teenage birthrate.

Reduce the incidence of AIDS and other STDs.

Reduce emergency room admissions.

Reduce the percentage of psychiatric readmissions.
Drug-Free Lives

Decrease the substance abusing population.

Reduce substance related illnesses and emergency treatment needs.
a Reduce the number of young people starting to use alcohol, tobacco and other

irugs.
Increase the recovery rate of substance abusers.
Reduce the rate of recidivism among ex-users.

Strong Community
Make greater opportunities available for community participation.
Increase the resources available for recreation.
Promote the integration of persons with disabi
Reduce the number of individuals in institutions.
Increase the availability of childcare and other supports for working parents.
Increase the availability of affordable/accessible housing.
Promote stable community residence.
Lower the crime rate and reduce the incidence of violence in the community.

Life Readiness
Ensure that all children are prepared for school.
Ensure that children will achieve self sufficiency.
Promote literacy and numeracy.
Increase the job readiness of adult family members.
Increase the proportion of adults who are high school graduates.
Promote family well-being and stability.
Reduce the rate of out-of-home placement.
Reduce the rate of child abuse and neglect.
Reduce adult domestic violence.

ies into community life.

IMPROVE THE HUMAN SERVICE SYSTEM

Empowered Communities

Create community collaborative that includes businesses, community organiza-
tions, schools religious institutions, and local, state and federal government.

Provide structural and organizational resources for community planning and deci-
sion making.

Incorporate the community ‘voice’ in all service delivery decisions.

Increase the involvement of volunteers and existing community based organiza-
tions in human service delivers.

Utilize and build upon the capacities of the community for service provision.

Accessible and Appropriate Services

Integrate service delivery to focus on the family rather than categorical program-

ming or funding decisions.
_ Create a social service system that reduces dependency and increases self suffi-

ciency.

Assure that community members are aware of services available.

Emphasize preventive and developmental rather than interventive services.

vide an array, of services to meet the full spectrum of needs.

Utilize service dollars to strengthen community economic development by provid-

ing training and jobs for residents of the community.

System Efficiency

Reduce duplication (intake, assessment, or certification of programs).

Create an effective referral mechanism to link families with the most appropriate
publicly or privately funded programs.

reamline case management, record keeping, accountability and fiscal manage-

ment through the use of MIS systems and standardized forms.

Replace the inefficient centralized state-wide system with a flexible community
based system.


5

(6) fiscal control and related accountability procedures applicable under the

an;
¥ (7) a description of the sources of all non-Federal funds that are required
to carry out covered Federal financial assistance programs included in the plan;
,_(8) written consent from each qualified organization for which consent is re-
quired under section 6(bX2); and
(9) other relevant information the Flexibility Council may require to ap-

ve the plan.
a} PROCEDURE FOR APPLYING.—(1) To apply for approval of a local flexibility plan,
a local government shall submit an application in accordance with this section to
the Governor of the State in which the local government is located.
(2) A Governor who receives an application from a local government under para-
graph (1) may, by no later than 30 days after the date of that receipt—
4) prepare comments on the proposed local flexibility plan included in the
application;
(B) describe any State laws which are necessary to waive for successful im-
plementation of a local plan; anc
(C) submit the application and comments to the Flexibility Council.
(3) If a Governor fails to act within 30 days after receiving an application under
paragraph (2), the applicable local government may submit the application to the
lity Council.
‘SEC. 7. REVIEW AND APPROVAL OF LOCAL FLEXIBILITY PLANS.
(a) REVIEW OF APPLICATIONS.—| Reo receipt of an application for approval of a
local flexibility plan under this Act, the Flexibility Council shall—
[o) approve or disapprove all or part of the plan within 46 days after receipt
of the application;
(2) notify the applicant in writing of that approval or disapproval by not
later than 15 days the date of that approval or disapproval; and
(3) in the case of any disapproval of a plan, include a written justification
of the reasons for disap val in the notice of disapproval sent to the applicant.
(b) APPROVAL.—(1) The Flexibility Council may approve a local flexibility plan for
which an application is submitted under this Act, or any part of such a plan, if a
majority of members of the Council determines that—
(A) the plan or part shall improve the effectiveness and efficiency of provid-
benefits under covered Federal programs included in the plan by reducing
inistrative inflexibility, duplication, and unnecessary expenditures;
(B) the applicant local government has adequately considered, and the plan
or part of the plan appropriately addresses, any effect that administration of
each covered Federal program under the plan or part of the plan shall have on
administration of the other covered Federal programs under that plan or part
of the plan;
(C} the @ plicant local government has or is developing data bases, plan-
ning, and ev luation processes that are adequate for implementing the plan or
part of the plan;

(D) the plan shall more effectively achieve Federal financial assistance
goals at the local level and shall better meet the needs of local citizens;

) implementation of the plan or part of the plan shall adequately achieve
the purposes of this Act and of each covered Federal financial assistance pro.
gram under the plan or part of the plan;

(F) the plan and the application for approval of the plan comply with the
requirements of this Act;

(G) the plan or part of the plan is adequate to ensure that individuals and
families that receive benefits under covered Federal financial assistance pro-

ams included in the plan or part shall continue to receive benefits that meet
the needs intended to be met under the program; and

(H) the local government

) waived the corresponding local laws necessary for implementation of
plan; ani
(ii) sought any necessary waivers from the State.

(2) The Flexibility Council may not approve any part of a local flexibility plan if—

(A) implementation of that part would result in any increase in the total
amount of obligations or outlays of discretionary appropriations or direct spend-
ing under covered Federal financial assistance programs included in that
over the amounts of such obligations and outlays that would occur under those
programs without implementation of the part; or

(B) in the case of a plan or part that applies to assistance to a qualified
organization under an eligible Federal financial assistance program, the quali-

it
a



111

whether or not that is good enough, because the bill, it seems to
us, covers so much territory, so many laws and regulations.

We are specifically concerned about the labor standards, but it
also seems that we are setting up yet another level of bureaucracy
even. Given the level of appointees to the Flexibility Council, this
is going to end up being staff work. We are not going to have the
Secretaries of 13 Cabinet departments and all fe other agencies
sitting around in a room every 2 weeks going over flexibility plans,
obviously, so it is going to be another staff-driven thing. I don’t
know what kinds of decisions they are going to make.

And so the concern I have is setting up a fundamental public
process, a policy process where we have laws, regulations on the
books, when our goal is to kind of push them aside.

Again, I laud the ultimate objective of this bill, which is flexibil-
ity to local level, making government work better. SEIU is second
to no one—we represent—over half our membership work in the
public sector, and my job is to deal with our public sector members
all the time. We are renowned nationwide, working in worker par-
ticipation Programs to help government work better at the State
and local level, and we applaud those kinds of efforts. We just get
very concerned about the comprehensive nature of what could ‘be
waived.

Mr. SHays. I have to agree with the one thing it doesn’t do; it
certainly doesn’t get rid of the red tape, because in order to get the
categorical grant, you have to go through all that process. You have
to work with a bureaucracy to get it. It is a signal to me that we
have to try to focus on the bigger areas where we want flexibility
and not have it so often that you end up with a whole new bu-
reaucracy to deal with.

Mr. BAKER. Just one concern, Mr. Chairman, on the Fair Labor
Standards Act. A few years ago the public sector was brought back
under its coverage, and every year, literally, we have to deal with
Republican Governors, Democratic Governors asking the Labor De-
partment to do away with the regulations that implemented the
provisions of the Fair Labor Standards Act that cover our workers.
And if they get yet another forum in which that could happen, we
have some grave concerns.

Mr. SHays. The Federal Government oversees States on pollution
spillover and protects me, living in Connecticut, from the pollution
of New York and New Jersey, including air and water. In the same
way, on the Hudson River the State of Connecticut is going to pre-
vent one local community from polluting the next one down.

I just don’t—with Mr. Green’s comment about the Mississippi
River, I don’t see how our bill would enable someone to pollute a
river upstream and how our bill would give them that opportunity.
So maybe you could run through a scenario that you fear.

Mr. LEHNER. Sure. Again, I have tried to provide some more de-
tails of these comments in the written material, but for example,
under the Clean Water Act there are many different titles. Under
some of those titles, funding is available to States and localities for
construction of sewage treatment plants and other matters. There
are also titles which provide that there shouldn’t be pollutant dis-
charges except in conformance with a permit, and that permit has


81

fessional associations, local political leaders and others. Responsibility for relations
with opinion leaders in local pilot sites would be shared by the local federation. It
is this area that will be the principal focus of the outside public relations firm.

This outside public relations/communications effort is crucial to the success of the

roject. The immediate thrust would be the communication of the principles under-
[ying the reform and the basic structural framework (state collaborative, community
federations, pilot sites the intention of eventual statewide implementation, etc.).
‘Also communicated would be current statewide improvement efforte that parallel
and facilitate the overall direction of structuring reforms e., developing and imple.
menting the outcome and community based budget process, parallel MIS systems;
geographic alignment of state agencies by community, etc.

Fiture dialogue will relate to subsequent stages in the process as it unfolds, At
every step, involvement and dialogue will be sought, thoughtful considered and
acted upon as appropriate.

BUDGET COMMITTEE

The Budget Committee has overall responsibility for analyzing and monitoring the
allocation of resources that fund services and programs in the field trial sites for
purposes of determining:

‘Aggregate government funding and its purposes;
‘Aggregate not-for-profit funding and foundation funding and their purposes;

© Specific program funding and any related restrictions or limitations.

« Funding disparities between field trial sites and other geographic areas;

« Funding gaps where an identified need is not being met;

* The availability of flexible funds that can be used for specific unmet needs.

The Committee will develop outcome and performance measures for each of the
state programs within the field trial sites through the following means:

* Creating common definitions of terms (program, service, etc.) among agencies;

© Developing a uniform indirect cost and cost-of-service methodology;

« Developing statistical and demographic indicators/descriptors that can be used
for benchmarking the field trial sites against the state as a whole and its subdivi-
sions:

 Formalizing progranvservice goals and measuring current performance to estab-
lish baseline measures.

The Committee will use the annual budget process to develop and reinforce state
policy regarding the allocation of resources as it relates to both geographical dis-
tribution and achievement of outcomes. The Committee will seek to improve and re-
fine the development of outcome/performance measures and determine the viability
of relating allocation decisions to outcomes as a long range goal.

MANAGEMENT INFORMATION SYSTEMS COMMITTEE,

Organize and Start-up MIS Committee

Identify and recruit a small group of individuals to sit on the committee. Member-
ship would be targeted at information systems professionals and key functional ex-
representing the human services agencies and the Task Force. The Committee

will establish a formal meeting schedule and project plan.
Create a long-term vision for integrated human services information systems

Prepare an information systems vision that reflects the long-term goal of a client-
focused, community-based human services system. This vision should:

© describe how various parties (state agencies, community groups, provider orga-
nizations, and individual clients) interact with the system;
describe how the system supports local decision-makin,

* describe how the system provides for more elfective deployment and use of re-
sources.

Create a development and implementation approach for fully-integrated information
systems

Prepare a development approach and implementation plan that identifies the
steps, timeframes, and costs involved in converting the existing information systems
to one that supports the long-term vision. Identif incremental steps that will facili-
tate migrating towards the long-term vision within practical constraints (budgets,
manpower, reasonable levels of change, etc.). Determine how the vision and imple-
mentation plan will be modified over time to support changes in the human services
system as well as for new and changing technologies.


107

to be waived with the sweep of a pen. This is a blatant disregard
for workers’ rights and should not occur.

The bill’s broad waiver authority also opens the door for wide-
scale contracting out of public sector jobs, which SEIU opposes. We
represent over 25,000 social services workers throughout this coun-
try who administer various Federal benefit programs, including

iC, food stamps, and SSI. Federal laws’ governing client con-
fidentiality and fiscal accountability, for example, have kept admin-
istration of these programs within the public domain. I existing
laws and regulations are waived, local governments could be free
to turn these programs over to the private sector.

Contracting out public services to the private sector always
raises questions of accountability of public funds, as well as issues
of discrimination in the delivery of services. This legislation also
appears—although we are a little unclear about the way the lan-
guage is written, appears to favor private nonprofit organizations
over the public sector in other respects.

For example, the Flexibility Council can give “priority funding”
or higher priority to applications for Federal assistance submitted
by local governments having approved local flexibility programs by
nonprofit organizations. The bill clearly Sives preference to local-
ities that engage in contracting out of public services to the private

sector.

In addition, the Community Advisory Committee, as suggested in
the bill, includes representatives from private, nonprofit organiza-
tions, including persons with leadership experience in the private
and voluntary sectors; but with the exception of local elected offi-
cials, the advisory committee does not include any corresponding
representatives from the public sector or from the unions rep-
resenting those workers, the folks who really know how the jobs
get done. To be meaningful, any advisory committee must tap the
expertise and years of experience that public employees bring to
bear in the operation of social programs.

We also oppose this bill because it seems to fail to take into ac-
count the needs of low-income individuals or the communities in
which they live. I think Mr. Barrett raised that question earlier
today. In fact, the bill provides no assurance that low-income com-
munities will benefit from these Federal grant programs. Given the
shrinking share of Federal dollars that go to the local level, it is
essential that these moneys be spent where they are needed most,
in economically depressed localities.

Allow me to close with the following observation: The consensus
in Washington these days seems to be that government closest to
the people always governs best. That certainly appears to be the
rationale behind this bill, but simply turning over Federal money
to the local governments with few or no strings attached presents
a host of problems of its own. We enter into dangerous territory
when we try to disregard Federal laws that have been enacted over
the years to benefit and safeguard the rights of all U.S. citizens.

Thank you for the opportunity to present our views on this bill.
And I might add, Mr. Chairman, that being at this hearing has
been somewhat of an educational process for me and my staff in
terms of where we are coming from on this bill. It is a very com-
plicated, obviously, piece of legislation; and we would be most


92

It saves money, makes it more efficient and allows—frees up time
to work with children.

Another example, and something that I have suggested to our
two Congressmen this year and last year, was the way in which
the Federal Government gives us money for nutritional programs,
I think, is just nonsensical. If you would give us the Federal dollars
and allow us to buy locally—Oregon grows the most wonderful veg-
etable and fruit products, and if I could buy locally, it would not
only help the farmers, but the children would get more palatable
food and certainly more nutritious.

Mr, SHays. Would you elaborate, what you mean by sbuying lo-
cally.” In other words, I am not familiar with how you have to buy.

is. PAULUS, There were some States that were given the flexibil-
ity to buy locally from their own dairy farmers, dairy products,
meat products.

Mr, Suays. Where would you ordinarily buy if you didn’t buy lo-
cally?

is. PAULUS. Well, oftentimes we get surplus food; we get all
kinds of restrictions that come with it, that we are not able to give
it to the local schools and say, here it is, and you can buy locally,
local products. We need that freedom.

You have given that—I wish I could remember the States, be-
cause I asked to be included in it, but we were not. You, in the
past, have given a few States that maximum freedom and flexibil-
ity to buy locally.

Now Oregon has just recently won a national award because we
changed—in some school districts we were able to, as a demonstra-
tion project, change the system so that the students themselves
were given the choice. At the cafeteria lines, they had a greater
choice, and they weren’t all served the same meal, that certain
things were made available to them, and that has provided more
nutritious food and less waste. So if we could have more freedom
to buy from Oregon producers with Federal dollars, that would help
not only the nutritional content of the food, but it would be much
more palatable, fresher and certainly less expensive.

Mrs. MorRELLA. I would like to just pick up again on the edu-
cation issue.

We have many different kinds of scholarships and so many dif
ferent programs under education. This 104th Congress is probably

‘oing to combine a lot of them, to begin with anyway. How we give
tates the kind of flexibility they need, without all those regula-
tions and still get our points across? How can we tell States, for
example, there should be scholarships for women in math and
science or some more work should be done with a Perkins loan or
vocational education?

Can we do that, too? Can we still get some points in with maybe
some of the money that would go to you and let you still do it, or
are we making it more cumbersome? Are you saying to us, Hands
off, completely?

Ms. PAULUS. Well, my first--——

Mrs. MorELLA. Mr. MacDougal is.

Ms. PauLus, My first si stion to you would be to expand the
present flexibility program that Secretary Riley is administering so
well—it fits right in with what we are trying to do in the State of


60

state rather than federal agencies. And very often, a community's objectives re-
quired not a formal waiver, but simply technical assistance from a federal agency
to work through perceived impediments, The lesson is that the waiver process can-
not simply be a static process wherein the locality submits a request and the federal
government approves or disapproves it. A substantial amount of dialogue and tech-
nical assistance is required to help the community achieve its desired objectives.
The legislation recognizes this by making technical assistance available to local gov-
ernment and others involved in designing flexibility plans, Third, within each fed-
eral agency, there is a different framework for dealing with individual waiver re-
quests. Some agencies lack global authority to grant regulatory waivers; others have
authority but must formally issue new regulations prior to making any waivers. The
majority of agencies simply have no formal process for reviewing and granting waiv-
ers. Decision authority may lay in the field in some agencies, or at central head-
quarters in others. As a general matter, a prime mission of a good part of the fed.
eral government is regulation; the move toward greater flexibility and federal-local
partnerships requires not only new processes, but also a cultural change within fed-
eral agencies regarding their relations with local governments and communities.

Chairman, the Department believes that H.R, 2086 would support and ex-
pand the federal government's ability to respond to local innovation and creativity
in kind, Based on the observations and the experience the EZ/EC Task Force has
had to date with the EW/EC requests for flexibility, the Department has several rec-
ommendations which would enhance the effectiveness and efficiency of the Local
Empowerment and Flexibility Act, and avoid duplication. There are two specific
areas I would like to mention:

Avoid Duplication by Substituting the Existing Community Empowerment Board for
the Flexibility Council

The Community Empowerment Board (CER) is already in place with a member-
ship and mission very similar to that outlined in the bill for the Flexibility Council.
‘The CEB has proven to be an effective entity for managing interagency cooperation
and ensuring federal responsiveness to locally driven, “bottom-up” strategic plan-
ning. The Department believes that the CEB should replace the lexibility Council
with the CEB, as suggested by prior witnesses Judy A. gland Joseph of the Gov-
ernment Accounting Office and Charles Griffiths of the Advisory Commission on
Intergovernmental Relations. Moreover any effort of this type should allow for the
time and staff intensive nature of the process, recognizing that dialogue with the
community is an important element to help them get where they want to go. The
workload required on a single waiver to adequately serve a community's objectives
can be quite substantial. With the expansion of waiver requests we can expect under
this bill, the CEB or Flexibility Council should be provided with adequate adminis-
trative support to enable it to serve communities and process waiver requests as ef-
fectively as possible.

Include the States as Eligible Participants

We learned in the EZ/EC waiver process that the role of states is critical. Some
agencies, such as Education, Labor, and HHS make a large number of categorical
grants directly to state agencies. The States are thus important partners in any at-
tempt to devolve flexibility to local governments.

Once again, Mr. Chairman, on behalf of Secretary Cisneros and Assistant Sec-
retary Cuomo, thank you for the opportunity to share with the Committee some of
the early results and lessons of the Empowerment Zone/Enterprise Community Ini-
tiative. We stand ready to assist you and the Committee in any way possible to sup-
port your efforts to achieve the objectives of H.R. 2086 and the BA/EC Initiative.

{Exhibits 1 and 2 have been retained in the subcommittee files.]

Mr. Souper. Mr. Koskinen.

Mr. KoSKINEN. Thank you, Mr. Chairman. I am pleased to have
the opportunity today to testify before the subcommittee on H.R.
2086, the Local Empowerment and Flexibility Act of 1995. The
leadership of this subcommittee and its efforts to encourage innova-
tion and entrepreneurship at the State and local levels has been
exemplary. .

The administration believes H.R. 2086 is focused on an impor-
tant issue, especially the question of how to assist our distressed
rural and urban communities to empower themselves. We appre-
ciate the chance to express our views and concerns about this legis-



56

The EZEC initiative represents one of the most ambitious efforts
to date by the Federal Government to provide flexibility to local
governments to implement locally determined solutions to inner-
city and rural problems. In considering the act, it may be useful
to take a look at some of the lessons that we have learned about
the EZEC initiative, including the limits of the current authority
that we have and the challenges and opportunities presented by an
across-the-board effort to maximize local flexibility.

By way of background, the legislation creating nine
empowerment zones and 95 enterprise communities was passed
and signed into law by President Clinton in 1993. The basic
premise of the program was that in return for a comprehensive
strategic plan to revitalize a distressed community, incorporating
private sector investment, meaningful community input, and meas-
urable results, the Federal Government would make a substantial
commitment of tax incentives and block grants and remove regu-
latory barriers to local solutions.

Over 500 communities responded by submitting strategic plans
in a competitive application process, and on December 21st of last
year, the President announced the designation of 71 urban and 33
rural empowerment zones and enterprise communities. In the ap-
plication process the applicants were invited to identify within
their strategic plans the specific programmatic or regulatory im-
pediments to achieving the outcome sought by the locality.

We, in turn, pledged to strive to overcome these impediments
wherever possible. Applicants were advised that the EZEC initia-
tive did not provide authority to eliminate statutory constraints. In
addition, we indicated that we would not consider changing any
Federal requirements that pertain to a variety of areas such as
public or individual health or safety, civil rights or nondiscrimina-
tion, environmental protection, labor relations and standards, occu-
pational health and safety, pensions, taxation and banking stand-
ards, and eligibility and benefit provisions of the Social Security
Act and Food Stamp Act.

Applicants made very broad use of the invitation. We received
over 1100 requests for Federal program flexibility for programs at
17 different Federal agencies. The majority concern programs at
EPA, Labor, Health and Human Services, HUD and SBA. To move
this process ahead, the President created the Community
Empowerment Board or the CEB to coordinate Federal programs
in the zones and communities and to respond to requests for flexi-
bility in program administration.

The board consists of the heads of 17 agencies and departments.
The agencies have detailed staff on a full-time basis to the task
force, managed at HUD by Assistant Secretary Cuomo. We process
the waivers, provide technical assistance and engage in true inter-
agency collaborations to support the zones and communities.

I would like to take a moment, if I could, to review some of the
results of the EZEC waiver process to date. The first phase of our
response focused on the 12 largest empowerment zones and enter-
prise communities. Together, these 12 cities accounted for almost
50 percent of the requests received from designated EZ’s and EC’s.
Of the 271 requests made by the 12 cities——

Mr. SOuUDER. Could you move to kind of summarize?


18

everyone has to wear a size 9. That’s why I am particularly inter-
ested in this legislation.

How many years did you serve as Governor?

Senator HATFIELD. I beg your pardon?

Mr. SHays. How many years did you serve as Governor?

Senator HATFIELD. Eight.

Mr. Suays. So you have been able to see the need for this, obvi-
ously, as a Governor and you have been able to see it in your posi-
tion as the chairman of appropriations.

Do you think that by allowing this flexibility you have, in a
sense—I mean, it’s interesting to me that the chairman of the Ap-
propriations Committee, which more likely would want to make
sure things are just the way you’ve written them would support
flexibility. How long did it take for you to evolve to this position?
Did you come to this position over time?

Senator HATFIELD. Mr. Chairman, I must say that 1 was taught
this viewpoint, literally taught it, by my county governments and
city governments the 8 years that I was Governor of my State. It’s
a small State. We have about 3 million people and at that time
probably closer to 2 million.

But I still found that in our State agencies, they can be just as
bureaucratic as Federal agencies. Let’s not think that all bureauc-
racy and the mentality of bureaucracy is in the Federal Govern-
ment.

I saw just as much in the State agencies that somehow those
rules and regulations in our relationship with the counties and the
cities could be totally uniform. We couldn’t because of the diversity
in our State. So I learned it in that kind of a laboratory and I have
felt that very strongly since that time.

A few years ago | convened a proup of 150 small water districts
in my State because we were looking at this Clean Water Act
which I co-sponsored. And I believe in that legislation. And they
were showing me where they were required by Federal contami-
nant listings to test for contaminants that didn’t exist in my State,
and yet they had to go through that cost and that expense to test
for those same that were tested in Florida or Louisiana or New
York or any other State.

We have built into the Senate version now a flexibility factor
that there has to be two things: the flexibility relating to if those
contaminants exists, and you make that by scientific determina-
tion, not by a political decision. If they do not exist in those areas,
those local small water districts don’t have to test for that.

Or how frequently should the test be run? Well, that’s a varia-
bility too in terms of different contaminants. And so, because we
had that rigid formula at the Federal level, these small water dis-
tricts were going to go out of business. They couldn't perform. And
so, by building that in, and there again I’m learning all the time
about the importance of flexibility.

Mr. Suays. The importance of flexibility is constantly getting re-
inforced by examples like that. Let me just ask this one last ques-
tion. It is logical to me on the face of it that if you allow flexibility
you are going to be able to spend your money more wisely and
more appropriately?



AT

iven permission to be as flexible as I wanted. And this was in

jousing, community development, transportation, the whole nine
yards. And for 2 years they wanted to see how this worked.

And the overriding comment from community People who I dealt
with said this is the most interesting and the first time practical
and reasonable approach we have ever seen. Unfortunately, that
was a 2-year trial and it died because the Congress changed.

But the point of it is it did work and one of the reasons why they
felt it so intriguing was because it made sense to them. You know,
I can recall programs where we just wanted to rehab a particular
home and we had to use farmers home, we had to use HUD, we
had to use some HHS money, we had to use some other types of
money.

And these officials were pulling their hair out saying that this
reg contradicts this reg contradicts this reg contradicts this reg,
and what their final conclusion was we can’t rehab this house. This
wasn’t just a house. It was a homeless shelter.

But, I mean, the point is that’s the kind of frustrations and this
bill would try to overcome that.

Mrs. MorELLA. Would the—if the flexibility plan were approved,
would it be for an indefinite period of time or would it be like a
demonstration program?

Mr. GRIFFITHS. No, as I understand it, the waivers are limited.
I mean, they are for a finite period of time and they would have
to be reviewed again, I would assume.

Mr. STENBERG. Congresswoman Morella, that is my understand-
ing as well. The National Academy has been wrestling with a prob-
lem that might help address your concern about what is the pur-
pose here. One of the purposes, I think, is to get around the so-
called stovepipe mentality in delivering Federal programs.

The NAPA Federal System Panel concern has been the need for
public schools to deal with at-risk children’s problems in a com-
prehensive and integrated way which the stovepipe mentality
makes very difficult, if not impossible.

Because of the array of separate Federal programs, it’s very dif-
ficult at the school site to provide health care, counseling, social
services, drug abuse prevention programs and the like as part of
the education system. Oftentimes, the child or his or her parents
have to travel around the community getting services and, in part,
that’s because of the separate programs having separate require-
ments and agency reporting relationships.

This bill offers some promise to allow school officials, for exam-
ple, to pool together those programs as part of a flexibility plan and
deliver them in a comprehensive way. It may save money but I
think, more importantly, it may look at the problem as a whole and
perhaps enable the intergovernmental system to better address it.

Mrs. MoRELLA. So education is probably a good field where you
could find the need for this kind of flexibility and creative planning
that would still, you know, reap benefits for a particular system.

With regard to my questions about Medicare and Medicaid, I
note here it’s been pointed out to me that in the legislation it says
that the—it does not include a Federal program under which finan-
cial assistance is provided by the Federal Government directly to


51

PREPARED STATEMENT OF FRANK PARENTE, AMERICAN FEDERATION OF LABOR AND
ConGRESS OF INDUSTRIAL ORGANIZATIONS

The AFL-CIO appreciates the opportunity to present its views on H.R. 2086, the
Local Flexibility and Empowerment Act. The Act authorizes local governments to
develop a “Loc: Flexibility Plan” for the integration of federal funds. The local gov-
ernment would identify all available federal, state, loca) and private resources and
any federal, state and local statutory or regulatory requirement which would need
to be waived in order to promote efficiency and flexibility in the administration of
federal categorical grant Programs A federal “Flexibility Council” is charged with re-
viewing and approving local flexibility plans submitted by state and local govern-
ments,

This legislation aims at improving overall economy and efficiency of government
operations through the more efficient and flexible use of federal funds. However, the
legislation goes too far by threatening statutory protections covering occupational
health, safety, labor standards, prevailing wage protections and more.

Section 8 of the bill requires that any funds included in a local flexibility plan
be paid and administered in the manner specified in the approved local flexibility
plan. This section also states that the Flexibility Council may waive the require-
ments applicable under federal law to the administration of, or provision of benefits
under, any covered federal assistance program included in an approved plan if that
waiver is reasonably necessary for the implementation of the plan. The Flexibility
Council is forbidden in Section 8(bX3) to waive any requirement under title VI of
the Civil Rights Act of 1964, Section 504 of the Rehabilitation Act of 1973, Title IX
of the Education Amendments of 1972, the Age Discrimination Act of 1975, or the
Americans with Disabilities Act of 1990.

The bill, however, leaves undefined which statutes or regulations might be
waived. It is the AFL-CIO’s fear that the act will permit waivers of national stat
tory labor standards such as, but not limited to, the Fair Labor Standards Act i
cluding the minimum wage, OSHA, the Davis-Bacon Act, the Family and Medical
Leave Act, the Occupational Safety and Health Act, or the Service Contract Act.

We believe this legislation has the potential to undermine or eliminate national
laws through an administrative waiver mechanism, rather than through the delib-
erative congressional processes which set them up in the first place. We do not think
it is good policy-making to repeal national legislation through an administrative
waiver by a Flexibility Council headed by unelected public officials, including assist-
ants to the president, the Attorney General, Secretaries of the various federal agen-
cies, the FI Director and others as listed in Section 4 of the bill. There should,
in fact, be representation from all interested groups, including, but not limited to,
Jabor unions, local government groups, non-profit service provider coalitions, and the
private sector. The language covering Community Advisory Committees should be
strengthened to require the Committee to represent “all interested parties,” which
would include those who would be giving up their current funding to support the
local flexibility plan. The Flexibility Council should have the right to send back a
plan into which all the interested parties have not had adequate input.

While it is much in fashion to advocate sweeping away regulations and to give
state and local people more discretion and flexibility, many regulations represent
safeguards against waste, fraud and mismanagement. The August 7, 1995 issue of
Business Week cites recent examples of where block grant programs were misused
by states. In Mississippi a state audit has disclosed that existing federal block grant
money intended for child care for the poor was diverted by state officials to buy
items such as $37.50 designer salt-and-pepper shakers, as well as $40,000 in i

rovements to a building the state didn’t own. And it would be a serious undermin-
ing of federal efforts to address important national priorities, if local governments
were permitted, through a local flexibility plan, to abandon their responsibilities for
matching federal dollars with local monies. This obviously suggests that the subject
of waivers of statutory and regulatory requirements be approached with caution.

It is doubtful that there is a need for a waiver mechanism such as contained in
this bill. Many federal programs already have waiver mechanisms. Isn’t it possible
that the national Flexibility Council could itself become yet another bureaucratic
layer through which cities must operate to carry out local programs? It is not clear
that introducing program simplifications and consolidations through the mechanism
of waivers is thus appropriate or necessary at this time.

Avery troubling aspect of this bill is the list in Section 8 of laws that the Flexibil-
ity Council may not waive. The list is arbitrary and incomplete. Why should some
laws be listed as untouchable, but not the minimum wage law, for example, or occu-

ational safety and health laws? The goal of Congress should not be to facilitate
focal programs at all costs in the name of efficiency, but for programs to go forward



80

Working Relationships:

1. Works with the community: activities must be conducted in a manner to ensure
the Sidest possible community support and consistent with the highest ethical
standards.

2. Works with the other community groups (providers, churches, Boys and Girls
Clubs, etc.) in mutually supportive manner.

3. Works the state collaborative and the State Director of Human Services
Reform or designee to secure budget approvals, ‘assure necessary state training and
planning assistance, review audit results, ensure accomplishment of mandates, and
to obtain necessary executive actions, legislative approvals, federal and state waiv-
ers ete.

4. Develop mutually supportive relationships with local and county governments
as required.

EMPLOYEE INVOLVEMENT COMMITTEE

Charge

The Employee Involvement Committee is charged with ensuring the transition to
a client/community based human service delivery system which will have as positive
an impact as possible on the state employees affected. The Employee Involvement
Committee will provide workers and management with opportunities to study and
explore new and innovative approaches and enhance the involvement of workers in
planning, problem-solving and decision-making that affect their working lives. State
employees, collective bargaining and community agency representatives will be in-
volved in the planning and implementation, development of goals and objectives,
identification and prioritization of critical processes, provision of necessary supports
and resources, an development of appropriate reward and recognition systems. As
this process evolves it will be necessary to retrain and reorient the existing staff
in relation to the new model while maintaining the integrity of the present pay and
benefit structure, union representation and number of jobs.

Tasks

1) Assume primary responsibility for public relations component to employees.

2) Develop a plan for introductory sessions with state agency staff to prepare
them for involvement with Local Federations and State Level Collaboratives.

3) Work with Andersen Consulting to conduct a Change Readiness Survey.
on Disseminate information to department personnel to increase involvement with

e project.

5) Develop a mechanism in which employees can offer feedback and guidance in
the development of the Local Federations and State Level Collaboratives.

6) Collaboratively develop a model(s) of employee involvement. The approach for

achieving thi will focus on the retraining and reorientation of employees and
is specific to the human service redesign and organization practices of each field
site.

7) Develop a policy and procedures manual which delineates the characteristics
and objectives of the employee involvement model(s) specifically adapted to each
field site.

PUBLIC RELATIONS COMMITTEE.

Overall responsibility for public relations with all individuals and groups inter-
ested in Human Services Reform wit the exception of state employees. State employ-
ees and the unions will be the responsibility of the Employee Tnvolvement Commit.
tee. Relevant groups are providers, legislators, associations, advocacy groups, opin-
ion leaders, media and the general public. Assistance will be provided by an outside
public relations firm. Also responsible for developing appropriate communications
With the Leadership Advisory Council Plans should be developed and implemented
in at least the following three areas:

© Service providers: regular face to face, and written communication and involve-
ment with leading service providers both in Chicago and Springfield (initial list, At-
tachment 1). Development and implementation of a plan for involvement of service
providers on Leadership Advisory Group (Attachment II). Work with Jimmy Lago.

© Legislative: Identify the most relevant legislators and establish regular commu-
nication, Special focus on legislative leadership and staff, relevant committee mem-
bers and staff, and legislators representing pilot areas.

‘* Opinion Leaders: Identify top 100 opinion leaders (excluding providers and leg-
islators) in field of human service reform and develop a strategy for enlisting their
support. This group would include journalists (print and electronic) and their edi-
torial boards, academics, philanthropic community, leaders of advocacy groups, pro-


13

There are a dozen or more federal departments and agencies which now admin-
ister hundreds of programs in the areas of housing, economic development and so-
cial services. According to the GAO, these agencies seldom, if ever, coordinate their
efforts because they have different statutory missions, a separate body of regula-
tions to follow, and worry about losing control over their own resources.

All local communities are different, but federal regulations treat them all the
same. Local governments are eligible for hundreds of separate categorical grants to
provide services and implement federal programs. These communities, however, are
stymied by regulatory handcuffs and red tape in their efforts to use these funds lo-

in the most effective manner.

‘The Administration ‘izes the problem.

A recent report of the National Performance Review stated: “The current system
of federal grantmaking fragments the ability of government at all levels to address

ple’s needs in an integrated manner. These problems have contributed to the
frustration of individuals and families that depend on federal assistance, and have
added to taxpayer and customer cynicism about government's ability to manage.”

‘The President’s National Urban Policy report Buy, 1995) also concluded: “Federal
agencies cannot possibly know what is best for each of America’s diverse regions and
communities. They cannot design a ‘one size fits all’ strategy. . .”

H.R. 2086 addresses this problem. It permits local variation in spending based on
local needs, freeing up dollars for services that might otherwise be drained away
by burdensome and high administrative costs, duplicate audits and paperwork,

Under the framework established by the bill, local governments would prepare a
“Local Flexibility Plan” for the integration of federal funds. Local governments
would identify all federal, state, local and private resources to be used as well as
regulations which would need to be waived. The plan would include input from the
community and would be approved by a federal “Flexibility Council.”

Flexibility is important. Even in a federal/state funding relationship dominated by
block grants, the Principle of local flexibility should be part of the permanent federal
statutory framework. Blocks grants come and go. Flexibility will always he needed.

This legislation will not increase federal spending and it will allow public money
to Fs farther in serving community needs.

am pleased to welcome all our witnesses here today. I particularly want to wel-
come our lead-off witness, Senator Mark Hatfield, sponsor of the Senate counterpart
of the Local Empowerment and Flexibility Act of 1995 (S.88). His bill has already
received favorable responses from the National Association of Counties, Nationai
League of Cities, and the U.S. Conference of Mayors.

fe look forward to working with the Senator, governors, mayors and community
groups to reach the goals of H.R. 2086.

PREPARED STATEMENT OF Hon. WILLIAM F. CLINGER, JR., A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF PENNSYLVANIA

I would like to thank Chairman Shays for scheduling this morning’s hearing, and
for introducing the bill before us today. As he knows, providing more flexibility for
Jocal governments to improve federal programs is near and dear to me; in fact, 1
int d legislation very similar to this in the last Congress. I thought it was a
good idea then, and it’s an even better idea now as the Federal Government strives
to make the most out of every doller spent. I am pleased to be an original cosponsor
of thie bill.

Aa the strong local government support for this legislation would indicate, the cur-
rent web of categorical grants is not working as well as it should. Services offered
are often crisis-oriented, and rarely designed to prevent problems. Access to the
myriad programs available is often confusing and difficult for individuals and fami-
lies. And the laws and regulations governing many categorical programs impede
community-based initiatives that wou
ing our local governments today.

elected officials have demonstrated time and again that they can be
innovators when given a chance, and the Local Flexibility and Empowerment Act
offers that opportunity. Mayors, county executives, community leaders, low income
citizens and their advocates will have the opportunity to work together to redesign
existing social service pi ms to meet the needs of the community better, faster,
and more effectively than before.
ink it is clear to us all that massive new social service spending is not in the
immediate future: Indeed, billions of dollars poured into social programs in the last
30 years have failed utterly to lift generations of families out of poverty. Obviously,

ld address the broad range of issues confront-


55

STATEMENTS OF HOWARD GLASER, DEPUTY ASSISTANT SEC-
RETARY FOR OPERATIONS, OFFICE OF COMMUNITY PLAN-
NING AND DEVELOPMENT, DEPARTMENT OF HOUSING AND
URBAN DEVELOPMENT; AND JOHN KOSKINEN, DEPUTY DI-
RECTOR FOR MANAGEMENT, OFFICE OF MANAGEMENT AND
BUDGET

Mr. GiaseR. Thank you, good morning. On behalf of Secretary
Henry Cisneros and Assistant Secretary Andrew Cuomo, thank you
for the opportunity to comment on H.R. 2086, the Local
Empowerment and Flexibility Act of 1995. Assistant Secretary
Cuomo, who is unable to be here this morning due to a conflict,
asked that I convey to you his appreciation for your efforts to em-
power local governments and your leadership in encouraging Fed-
eral, State and local partnerships.

By way of background, over the past 22 years, the Federal Gov-
ernment has undertaken a number of initiatives to promote Fed-
eral and local partnerships. You will be hearing about one of those
models, the Federal partnership with the State of Oregon, from
that State’s representative today.

In addition, the Vice President has been working with the U.S.
Conference of Mayors to encourage the creation of additional pe
formance partnerships between the Federal, State, and local gov-
ernments. These partnerships, based in concept on the Oregon op-
tion, will provide State and local governments with far more flexi-
bility in how they use Federal resources in exchange for measur-
able results. In fact, the State of Connecticut has entered into dis-
cussions with the Vice President's Community Empowerment
Board about creating a broad partnership between the Federal
Government and Connecticut’s neighborhood revitalization zones,
an initiative which aims to support the growth of distressed areas
by enhancing flexibility on a State and local level.

These efforts all complement the empowerment zone enterprise
community initiative, which is, as you know, a cornerstone of Presi-
dent Clinton’s urban revitalization strategy. At HUD, under Sec-
retary Cisneros’ leadership, we have been very aggressive in rede-
fining our relationships with local governments to reduce Federal
burdens and encourage local innovation. The Department has, for
example, entered into a partnership agreement with the city of
Dallas to coordinate Federal, State, and local resources for maxi-
mum impact in a time of limited funding.

Assistant Secretary Cuomo has reengineered the CDBG, Commu-
nity Development Block Grant, and HOME programs which are
both mainstays of many city economic development strategies to re-
duce the application and reporting requirements for those pro-
grams from 12 submissions into a single consolidated plan, replac-
ing thousands of pages of reports with an electronic mapping sys-
tem which provides actually a visual picture of how Federal funds
are spent, neighborhood by neighborhood, block by block.

ou know, the Secretary has proposed a sweeping reinvention
of HUD which would replace 60 different programs with just three
streamlined funds. We Qelieve that the Local Empowerment and
Flexibility Act would support these efforts, and in particular the
act would complement the objectives of the empowerment zone en-
terprise community initiative.



2

And I might say, Senator Hatfield, as someone who was younger
when you were first elected, I followed your career for many years
and consider it a blessing that you are a part of Congress and a
part of Senate. I thank you for honoring us today.

{The text of H.R. 2086 follows:]

H. R. 2086

To increase the overall economy and efficiency of Government operations and enable
more efficient use of Federal funding, by enabling local governments and private,
nonprofit organizations to use amounts available under certain Federal assistance
programs in accordance with approved local flexibility plans.

IN THE HOUSE OF REPRESENTATIVES

JULY 20, 1995.

Mr. Suays (for himse!f and Mr. CLINGER) introduced the following bill; which was
referred to the Committee on Government Reform and Oversight

A BILL

To increase the overall economy and efficiency of Government operations and enable
‘more efficient use of Federal funding, by enabling local governments and private,
nonprofit organizations to use amounts available under certain Federal assistance
programs in accordance with approved local flexibility plans

Be it enacted by the Senate and House of Representatives of the United States of
America in Congress assembled,

SECTION 1. SHORT TITLE.
This Act may be cited as the “Local Empowerment and Flexibility Act of 1995”.
SEC. 2. FINDINGS.
The Congress finds that—

(1) historically, Federal programs have addressed the Nation’s problems by
providing categorical financial assistance with detailed requirements relating to
the use of funds;

(2) while the assistance described in paragraph (1) has been directed at crit-
ical problems, some program requirements may inadvertently impede the effec-
tive delivery of services;

(3) the Nation’s local governments and private, nonprofit organizations are
dealing with increasingly complex problems which require the delivery of many
kinds of services;

(4) the Nation's communities are diverse, and different needs are present
in different communities;

(5) it is more important than ever to provide programs that—

{A) promote more effective and efficient local delivery of services to
meet the full range of needs of individuals, families, and society;

(B) respond Hexibly to the diverse needs of the Nation's communities;

(C) reduce the barriers between programs that impede local govern-
ments’ ability to effectively deliver services: and

(D) empower local governments and private, nonprofit organizations to
be innovative in creating programs that meet the unique needs of their
communities while continuing to address national policy goals: and

(6) many communities have innovative planning and community involve-
ment strategies for providing services, but Federal, State, and local regulations
often hamper full implementation of local plans.

SKC. 8, PURPOSES.
The purposes of this Act are to—

(1) enable more efficient use of Federal, State, and local resources;

(2) place less emphasis in Federal service programs on measuring resources
and procedures and more emphasis on achieving Federal, State, and Tocal policy
goals;


72

Mr. GLasER. On Davis-Bacon as a whole? Well, what we agree
with is, we want to help communities accomplish their end goal,
however we might be able to do that.

Mrs. MORELLA. Good answers. All right. Thank you, gentlemen,
very much.

And thank you, Mr. Chairman.

Mr. SoubeR. Thank you.

I appreciate the testimony from the first panel and the construc-
tive suggestions you gave; and with that, I think we will take a re-
cess, go vote, and if the second panel could come forward when we
get back, we will proceed.

Mr. KosKINEN. Thank you.

Mr. GLasER. Thank you, Mr. Chairman.

[Recess.]

Mr. SouvER. The committee is back in session. Mr. MacDougal
and Ms. Paulus, I need to swear you in. It is customary that we
do that with all of our witnesses.

[Witnesses sworn.]

Mr. SoupeER. For the record, I note that both witnesses re-
sponded in the affirmative.

Mr. MacDougal, who was at our hearing in Chicago and so rath-
er than have him testify there, we brought him all the way out
here to testify in Washington, appreciate you coming today.

STATEMENTS OF GARY MacDOUGAL, CHAIRMAN OF THE GOV-
ERNOR’S TASK FORCE ON HUMAN SERVICES REFORM FOR
THE STATE OF ILLINOIS; AND NORMA PAULUS, SUPER-
INTENDENT OF PUBLIC INSTRUCTION FOR THE STATE OF
OREGON

Mr. MacDoueat. This is obviously a lot easier.

I am Gary MacDougal, I am a former corporate CEO, McKinsey
Rartner, a foundation executive, and chairman of the Governor’s

‘ask Force on Human Services Reform in Illinois. I am an unpaid
volunteer, almost full time on this effort for the State of Illinois.

I applaud your efforts represented in H.R. 2086, the Local
Empowerment and Flexibility Act of 1995, in particular, the act’s
emphasis on listening to local communities” which we regard as the
absolute key to our effort in Illinois, which is a major reform of all
of the human service systems in Illinois.

Also, providing flexibility in use of funds, this couldn’t be more
important; and we too have horror stories—not the inch-thick orga-
nized book that you saw earlier, but many examples.

Reducing the resources tied up in red tape is also a crucial exam-
ple, and I will get to this—a crucial issue as we go forward. I think
you are right on track with long overdue legislation.

The Governor’s Task Force in Illinois is a blue ribbon group ap-
pointed by Jim Edgar in 1993. On the task force are representa-
tives of business, churches, academia, and the heads of all of the
human service departments in Illinois, representing $10 billion of
human services spending. These are departments that are almost
solely focused on human services.

There is other human services spending in Illinois. This $10 bil-
lion is spent largely on 1.1 million people in poverty; and if you go
back to your basic arithmetic, you will find it is about $9,000 per


27

funds that they were using to address similar problems, and that.
in creating these different accounting systems or reporting systems
that they would have multiple systems because they had to meet
certain system requirements depending on the grant or program
that they had finally gotten approval for.

But having said that in terms of complexity, we found that they
are highly dependent on Federal funds. In many cases, 30, 60 per-
cent of the funds that might be used at the community level were
from a multiple of public funding sources. And so, in many ways,
they couldn’t walk away from the complexity of working with the
Federal Government; they just had to live with working with the
Federal Government.

So I think there were a lot of things that we learned from this
case study approach that told us if we are really serious about try-
ing to address the complex problems of communities that the way
in which Federal programs are designed can, in fact, inhibit the
ability of effective outcomes or effective performance outcomes, and
that perhaps what we need are greater flexibility to allow commu-
nities to be able to marry various different program opportunities
together in order to solve their problems.

Now, the other thing that I have to offer deals with the
Empowerment Zone, Enterprise Community Program. And that is
to say that even though it is very new in its implementation, as
you know, it’s very few months only since these communities have

een selected to be a part of the EZ-EC program; however, I think
there are a couple things that we can provide you in terms of infor-
mation about the experience thus far.

The big thing I wanted to mention is that that program allowed
for communities, through the application process, to request waiv-
ers of Federal regulations, Federal statutes. And that’s very similar
to he design in the local flexibility act that you are discussing
today.

Now, what we learned was that there have been over 1,000 re-
quests for waivers, many of them, about 60 percent of them, are
statutory based. And I think what that tells us is that there are
a number of communities out there that see the need for some
flexibility outside of the design of the programs that exist today
and that in order for them to effectively address some of their prob-
lems, even through the empowerment zone program, they will need
the type of flexibility that perhaps you are envisioning in your leg-
islation.

The other thing that I think we can offer about the EZ-EC situa-
tion is that there too is a board made up of many different agen-
cies, not all the same agencies that are in the legislation we're dis-
cussing but certainly most of the agencies. It’s called the Commu-
nity Enterprise Board. And that board is intended also to be a fun-
nel and a conduit for understanding that if there are requests for
waivers to try to stimulate the Federal Government the various de-
partments to respond expeditiously in trying to approve those waiv-
ers.

I think what we would caution as you move forward with your
legislation is to understand that we already have a board that ex-
ists. It remains to be seen how effective it is. Clearly, it does not
have the statutory authority to actually approve the waivers that


70

we will protect against exclusion, while at the same time, becoming
much more efficient in the delivery of resources to solve problems.

Mr. BARRETT. Finally, you mentioned the waiver provision. Does
the administration have any specific concerns with the waiver pro-
vision in this legislation?

Mr. KOSKINEN. We are interested in waivers. We are concerned,
as noted earlier, that as stated now the bill would sweep in waivers
for any regulation. The bill probably is broader than I think any
of us intend. Conceivably you could come in and ask for waivers of
tax regulations or environmental regulations that are not what we
are really trying to focus on here.

We are really looking at the provision of services and financial
support to communities and are trying to make that streamlined
as best we can. We would be concerned, as I noted, if we didn’t
make it clear in the legislation what we are intending to cover and
what we are not intending to cover.

Mr. BARRETT. Do you think it would be better to say those things
for which a waiver could be obtained, or do you think it is better
to say these are areas where you cannot obtain a waiver? Or do
you think it is six of one and a half-dozen of the other?

Mr. KoSKINEN. I suspect it is probably six of one, half-dozen of
the other. You are probably always better off trying to look at what
you are trying to cover. It is clearer than having an_argument
about whether the exclusions are included or not. In other words,
I think you are probably better saying, much as we are looking at
the program areas, these are the areas we are concerned about,
this is where we want to start.

It is always possible to take a look after 2 or 3 years of experi-
ence and say, now there is another group of things we are not cov-
ering that we ought to. But my instinct is, we would do better to
be clear about what we are trying to solve rather than to work
backwards by process of elimination. to that core.

Mr. BARRETT. OK, thank you.

Mr. SoupER. Thank you. Congresswoman Morella from Maryland
has joined us. Welcome.

Mrs. MorELLA. Thank you. Delighted to be here, thank you. I
will make it brief. I was at the first hearing; I am glad there is
a continuation. I guess I just want to address a question to Mr.
Glaser of HUD.

You know, Baltimore, MD, in my State has been designated—I
guess they call it now an empowerment zone rather than an enter-
prise zone. I am just wondering about how do you see this legisla-
tion fitting in with these empowerment zones? Would you like to
comment on empowerment zones as they relate, as they have been
given waivers, et cetera?

Mr. GLASER. We think it is really an integral portion of the whole
empowerment zone program. We really said to cities and
empowerment zones, come up with a package, put first your whole
community together—the community groups, business sector, local
government and State government—and come up with a com-
prehensive, strategic plan as to where you want to be in 10 years.
The components of that would include private sector investment,
they would include the use of the government funds that come
through the empowerment zone program, and very importantly, it


63

consolidating over 200 programs as part of the 1996 Bu: and entered into an
ment with the State of Oregon to form a new partnership with increased flexi-
bility as well as increased accountability for results.

In a time of declining availability of Federal resources, the granting of waivers
and the providing of flexible funding streams are two ways to increase the impact
of Federal programs. In September 1993, the National Performance Review )
recommended bottom-up grant consolidation to encourage innovation and create
flexibility in the face of grant proliferation. In the 103rd Congress, we proposed leg-
islation, as part of the EW/EC initiative, that would have given the Federal govern-
ment the authority to provide waivers in a one-stop process to local governments
who develop a comprehensive strategic plan. The Senate adopted similar legislation
as an amendment offered by Senator Hatfield to S.4 the “Competitiveness ", but
the bill was not enacted.

A few existing Federal programs are authorized to provide waivers to States in
administering programs within statutory and regulatory. Fridelines. The best known
are the demonstration authorities in AFDC and Medicaid. Those particular authori-
ties were designed to allow State experimentation with new ideas for research and
evaluation purposes, not as a vehicle for regulated State flexibility. This Administra-
tion has increased the use of the existing system of granting waivers and we are
proud of the fact that we have been able to reduce the time it takes to review waiver

ests. However, no matter how much we continue to streamline the existing
waiver process, there are statutory limits to our ability to reinvent the present waiv-
er system.

en this Administration first took office in 1993, we recognized two major im-
pediments to the empowerment of State and local governments. First was the bur-
geoning growth of unfunded mandates placed on State and local governments which
exploded in the 1980s. Before 1964, the number of explicit mandates from Congress
placed on State and local governments was zero. On the day President Clinton took
office, 172 pieces of legislation imposed requirements on State and local govern-
ments. According to the Congressional Budget Office, between 1983 and 1990, the
cost to States and localities of all the regulations imposed from the Federal govern-
ment reached $8.9 billion. Since his days as Governor of Arkansas, President Clin-
ton has spoken out on the need to address the burgeoning growth of Federal un-
funded mandates. Too often in the past, the Federal Government placed unfunded

irements on State, local, and tribal governments, taking important decision-
responsibilities out of the hands of Jocal elected officials and their commu-
nities. izing the need to move quickly, the President took action to control
the growth of unfunded mandates within the Executive Branch by issuing Executive
Order 12875, “Enhancing the Intergovernmental Partnership,” on October 26, 1993.
This Executive Order prevents the issuing of any new, non-statutory unfunded regu-
lations except in cases where the agency submits to OMB, prior to promulgation,
a justification supporting the need for the regulation and includes a description of
the extent of the agency’s prior consultation with State, local, and tribal govern-
ments. Equally as important, the Executive Order also set a deadline of 120 days
for the approval or notification of waiver requests. State and local governments
praised the signing of this Executive Order.

The President worked closely with Congress earlier this year to pass the Un-
funded Mandate Reform Act. This law, which the President signed on March 22,
1995, restricts Congress from passing on new mandates to State and local govern:
ments without providing funding for them. This law reflects the President’s commit-
ment to reinvent government and to create a government that works better and
costs less. The bill requires Congress to show how much each mandate over $50 mil-
lion will cost State and local governments, to require Congress to identify a specific
funding source for these mandates, and if it does not meet these criteria, Congress
must explicitly waive the requirement that there be no unfunded mandates.

The second major impediment to empowering State and local governments that
the Administration attempted to remove was the myriad of regulations, applica-
tions, and red tape, associated with the ever-growing number of grant programs.
‘This Administration has worked try to reduce these impediments, especially for
communities willing to develop partnership agreements.

One example of Administration efforts is the Oregon Option. The Oregon Option
is just one example of the benefits of “getting out of Washington”—that is, sitting
down with stakeholders and developing partnership agreements for reaching com-
mon goals quickly and less expensively” In the last two years, other examples have
been developed throughout the Federal Government. Many involve partnerships be-
tween Washington and the States designed to consolidate funding streams, elimi-
nate overlapping authorities, create incentives for achieving concrete results, and re-



20

Senator HATFIELD. From my colleagues?

Mr. Towns. Yes.

Senator HATFIELD. My colleagues—we did get support from my
colleagues on amending the President’s Goals 2000 for education to
build in the educational flex, so we have taken that action. I did

et support from the colleagues and we offered it in the Safe Water
ct. From the Senate version we built the flexibility factor into it.

So those have been two very, I think, significant demonstrations
of the support of my colleagues in the Senate.

May I add one further point? This is not a theory. Governor Rob-
erts of Oregon and Mayor Katz of the city of Portland and Commis-
sioner Stein of the Multnomah County in which Portland resides,
all work together to create this so-called flexibility factor in the
State government of Oregon.

So you have three levels of government in which we have had
what we call the Oregon Option, or the Oregon Benchmarks. They
went down to the White House, these three ladies, and believe me,
they were a force to reckon with wherever you meet Governor Rob-
erts and Mayor Katz and Commissioner Stein, all three Democrats.
And they attacked the White House, so to speak and really within
one morning sold the whole concept to the administration that it
was a valid one and it worked.

So that it’s, again, not only the colleagues, but we have it actu-
ally, functioning in one State today as a demonstration project.

ir. Towns. In terms of selling this idea, Senator, what do you
think in terms of the factors that have sort of moved your col-
leagues toward this? What do you think that sort of helped you to
move them toward the concept?

Senator HATFIELD. Congressman Towns, I don’t think that it’s
fully impacted as yet on what we did in the budget resolution. I
think there is still a view that somehow we can make these drastic
reductions in the dollars, resource dollars particularly—and I’m
talking now about the nondefense discretionary programs—and
still have the programs.

I think everybody thinks, well, they ought to cut somewhere else
and not in my area of interest. But in this cycle of the appropria-
tion cycle I am sure that it’s going to come home to every member
of our body that we can not keep our commitments in these various
programs without finding either new resources to take the place of
those we have eliminated—and we cannot at the same time sustain
those program commitments.

And I really feel that we have not yet fully awakened to the fact
that we have put the whole crunch on the nondefense discretionary
area. They want the programs in transportation, in housing, and
all these other needs of people in welfare, education, medical re-
search. But we are going to have to face the fact that we’re spend-
ing too much in overhead or we don’t have enough resources or a
combination thereof, and we are going to have to make some tough
decisions. I don’t think it has beceme fully a reality yet.

Mr. Towns. Senator, you made a comment about a national
health plan and I didn’t get the statement. You made a comment
about the national health plan. You were saying?

Senator HATFIELD. I was saying that I think one of the reasons
that we failed in the recent efforts to develop a national com-


37

The definition of “eligible local government” does not appear to include entities
other than a single government. It does not, for example, appear to include Councils
of Government, or other regional bodies that may be eligible to receive federal as-
sistance. For rural areas, these regional entities often serve groups of local govern-
ments in certain ic areas because they have a greater capacity to do so.

I believe that the term “eli al government” should be changed to “eligible
applicant”, and that the definition include local governments, councils of govern-
ments, qualified regional bodies, and states if my previous suggestion is included.

If regional bodies are not included, it may remain difficult if not impossible for
some smaller governmental bodies to participate (even with increased flexibility) be-
cause they lack the capacity or expertise.

One important benefit of having regional bodies listed as “eligible applicants,” is
that these entities could than prepare a single Flex Plan for two or more smaller

ities. As the bill is now written, if several local governments wished to co-
operate in a joint program endeavor, the bill would require separate flexibility plans
and assurances from each community. It would be much more cost-effective if a re-
ional body could develop a single plan, with assurances of participation and public
earings by the participating governments.
Application Review and Approval of Flexibility Plans

HR 2086 creates a Flexibility Council at the federal level to receive local flexibil-

ity plan proposals, to approve or disapprove applications, and to provide technical
i requested je. Th

assistance ind feasible. The bill gives agencies the authority to detail
personnel to the Council. Given the current fiscal situation, it is likely that detailed
personnel would be required.

have several suggestions related to this part of the bill which I believe would
be less expensive but more effective for the Federal Government, and which would
be more consistent with the Federalism reforms now underway,

First, I believe that the Federal role should be as minimal as possible. This can
be done by giving the states an optional coordinating role for processing loca] Flex
Plan proposals, and also for recommending approval actions to the Flexibility Coun-
cil, States are in a much stronger position to evaluate the circumstances and merits
of local proposals. This would reduce the workload (and cost) at the Federal level,
and the time required to make final decisions.

« In turn, states could opt to use sub-state regional bodies as the first level of
review and comment as a means to reduce their workloads. This would be particu-
larly relevant in rural areas, which are often served by regional planning agencies

as Rural Development Councils.

* As a means to offaet the costs of this state role, states could be allowed to in-
clude these costs as indirect costs under the Federal Cash Management Act. This
would amount to minor losses to the Federal Treasury, that would be more than
offset by the reduced Federal costs for reviewing local applications.

« ‘The direct role (and cost) for the Flexibility Counell would be lessened as more
states opt to serve this coordinating function.

One ther option to consider in this regard is to permit interstate bodies the op-
portunity to coordinate appropriate flex plan reviews and recommendations. An ex-
ample of an interstate body is the Appalachian Regional Commission, and there is
legislation today that would create similar regional Economic Development Commis-
sions to succeed the Department of Commerce. These interstate bodies consist of
federal and state representation, and are therefore ideal for this role.

ind, we can take the lesson of past experience with the IGA and Joint Fundin,
Simplification Act, by giving the Flexibility Council the authority to designate “lea
agency” responsibility for different types of Flex Plans. This would minimize the
need for detailing staff to the Council, and place review decisions in agencies with
Teleyant experience and program relationships.

* That would leave the Flexibility Council primarily with an oversight respon-
sibility, including reporting to the Congress and President about the issues and
achievements under the law.

‘© With respect to the Council, the current Community Empowerment Board
(CEB) would be an appropriate stracture to be assigned this responsibility.

Finally, this bill does not speak to a very important issue, which is the need to
simplify application requirements and costs. A major component of this need is to
make clear that the Flexibility Plan of an applicant will satisfy the application re-
quirements for all of the Federal programs included in the Plan.

If the Flexibility Plan is simply an additional layer on top of individual program
applications, the bill will fail to provide the cost and time savings intended under
the law. This provision would also help to stimulate greater inter-agency coordina-



57

Mr. GLASER. Sure. The bulk of this is obviously in the statement.

Actually, Mr. Chairman, I would like to say a couple of things.
First, we did find that many of the requests that came from com-
munities were statutory in nature. Almost 40 percent of all the re-
quests that we received were beyond the authority of the Federal

ernment right now to do, and a lot of those requests were some
of the most innovative things. We have created as one of the docu-
ments we have for you today is a compendium which is almost a
laboratory really of what these communities would like to do but
are unable to do. This is approximately 130 or so requests.

They are currently barred, but which would potentially be per-
mitted by the legislation in front of you. We also found that there
were numerous waiver requests which could be acted upon, and we
have also compiled those for you to take a look at today. That is
in the second document called Federal Barrier Removal Summary,
and this contains some of the best ideas from communities aroun:
the Nation that the Federal Government can take a position on.

A couple of quick lessons that we learned in the process. One is
that it is extremely time-intensive, staff-intensive. Many times
communities did not really know what it was they were asking for
and needed some substantial dialog between the various Federal
agencies and the communities to get where they wanted to go.

ey might think they needed a waiver, but, in fact, all they need-
ed to do was work through some Federal program areas, and so we
have set up a system that provides a lot of that to them. I would
make that note.

Second, the States are very important players in the process.
Many of the requests that we received involved not Federal waiver
authority, but State waiver authority under Federal programs that
flow to the States, and so we do need to incorporate a role for the
States and make the States eligible for the flexibility as well.

Finally, in place currently is the Community Empowerment
Board. It has proven to be a very effective tool for coordinating this
interagency effort and providing flexibility. Our recommendation is
that the local Flexibility Council, as proposed in the bill, be re-
placed with the CEB.

The agencies are very similar, the mission is similar, and the
powers are quite similar. As I say, it has proven to be effective. We
would like to work with you on the bill to make this a success. We
think that the Zone Program provides a number of lessons which
may be useful. It has been the largest effort to date by the Federal
Government to broadly invite communities to come in for flexibil-
ity, and we would like to help out. Thank you.

Mr. SoupeER. Thank you very much.

[The prepared statement o1 Mr. Glaser follows:]

PREPARED STATEMENT OF HOWARD GLASER, DEPUTY ASSISTANT SECRETARY FOR OP-
ERATIONS, OFFICE OF COMMUNITY PLANNING AND DEVELOPMENT, DEPARTMENT OF
HOUSING AND URBAN DEVELOPMENT

Good morning Mr. Chairman and members of the Subcommittee. | am Howard
Glaser, Acting Deputy Assistant Secretary for Operations at the Office of Commu-
ity Planning and Development at TLU.D. On behalf of Secretary Henry Cisneros
and Assistant Secretary Andrew Cuomo, thank you for the opportunity to comment
on H.R. 2086, the Local Empowerment and Flexibility Act of 1995. Assistant Sec-
retary Cuomo, who was unable to be here this morning due to a conflict, asked that


23

And then I would think that you ought to have some kind of a
trust fund to help subsidize some of those States to a higher
threshold where they can achieve, or to look at ways in which the
Federal Government can assist them in economic growth and eco-
nomic development. Again, I don’t believe there is a single formula.

Mr. SOUDER. May I ask one other brief question? Bob Woodson
for years—and we've experimented when I worked with Senator
Coats with the concept of a ZIP Code test. In other words, that a
certain percentage of a grant going into a community needs to go
to people who live in that area, because one of the problems we
have in a lot of this type of thing is you have the so-called beltway
bandits, or the State or a city variation of those, of people who are
not indigenous to that community.

How do you feel about something like that as far as actually re-
sulting in reality in community-based type of things, or is that in
itself too prescriptive?

Senator HATFIELD. Congressman Souder, I really hadn’t thought
about that. I hadn’t heard of that particular approach. I don’t think
you can separate the social and the economic of life. I think they
are interdependent. Maybe zip codes would get to an area of a city
or a State where there is a lower level of income where there is
greater poverty.

And I always believe that there should be two things that you
consider when you address those problems. One is how do you help
to get them on their own feet. Not how do you imprison them in
a welfare approach, but how do you help them to get on their own
feet. And, second, how do you create incentives at the same time
so that it’s not just a handout as a dole or as a piece of welfare
program.

I think that welfare has gone through an awful lot of criticism,
justifiably, but also I haven’t heard of anything that has been sug-

ested as a replacement for welfare other than just abandoning
those people, and I don’t think that’s a wise action either.

So I say help create the educational—special added educational
support to build their educational abilities, to build their skills, fo-
cusing on vocational education Perha s, in some of those areas, and
spending money at the Federal level to help in building up that,
but to build it toward an independence, not a dependence.

Mr. Suays. I thank the gentleman.

Mr. GREEN. Thank you, Mr. Chairman. Senator, I couldn’t help
but comment on what’s going on then on the budget, with your last
comment that we need to build that independence instead of that
dependence. But when we see what’s happening on labor and edu-
cation funding this session, I couldn’t help but make that comment.

Last session you—this provision of this bill and we heard hear-
ings last time on this, and it was put in the National Competitive
Act and it was taken out in conference committee.

Can you say—can you tell us why to some of us who weren’t on
that conference committee? Was there some big opposition from
Members at that time?

Senator HATFIELD. No, I can’t tell you. I wished I knew because
I think a lot of times in conference I have found over the past, par-
ticularly where we're dealing with money, is again what priority


90

interview a few people, and head back to the suburbs, rather than
the money actually getting into the community programs; and often
even our waivers are oriented toward units that don’t necessarily
involve that community participation from the most grass-roots
level.

How can we get at that, and do you see that as something we
should have a focus on as—being that you also have to have a level
of private sector involvement and a community base in addition to
State and Federal Government, if you are going to say it is a true
community project.

Ms. Pautus. Well, first of all, I would like to make the point that
the ed-flexibility that we have under the legislation passed and
amended, Goals 2000, fits in with what our local statutory school
improvement effort is, which is essentially to turn the system en-
tirely upside down in Oregon where the State department, prior to,
was a regulatory body and had many, many restrictions that the
school districts complained about that emanated from administra-
tive rules promulgated at the State board level, or by legislative ac-
tion.

So in Oregon what we are trying to do is tell school districts that
here are the high standards that we want all children to meet, not
just the ones that are going to college, but all children must meet
these standards. Here is the money and here are some ideas about
how you get there, but you may fashion your own program. But we
are going to come back with a statewide testing system that we are
developing and see if your methods are bringing these children to
the levels of proficiency that we expect. In other words, we in Or-
egon now for the last 5 years have been giving the locally elected
school boards maximum flexibility in how to reach these standards,
so ed-flex fits right in with that.

Mr. Souner. Do you have parents involved in that as well?

Ms. PAULUS. Yes, as a matter of fact, the law specifically requires
that every school building, not a school district, but every school
building have a site council made up of parents and teachers.

When the law was initially passed in 1991, the teachers union
was successful in keeping parental involvement at a minimum.
This last session of the legislature expanded that, so it is 50-50,
and the site councils with teachers and parents are critical to the
success of this.

In addition, the legislature has passed a law—and this has been
a very bipartisan effort; all of what I have described to you in our
State has been very bipartisan. We have—just this last session sig-
nificant amounts of money were taken from the State Human Re-
sources Department that were designated for children and given to
a commission. In turn, the commission has channeled the money
down to locally selected groups of the Commission on Children and
Families to decide how to spend the human resource moneys to
shore up families, reduce teenage pregnancy, reduce abuse of chil-
dren, that sort of thing, and it works hand in hand with our school
improvement efforts.

Mr. SoupER. The Chairman would like to ask one question before
we break to vote.

Mr. SHAYs. I would just like to say that when I come back I want
to ask this basic question:


44

- Mr. Suays. I thank all three of you, and I will start with Mr.
‘owns.

Mr. Towns. Thank you very much, Mr. Chairman. Let me thank
all three of you for your testimony. Let me begin with you, Ms. Jo-
seph. Followin; GAO's study of community organizations, what
specific Federal statutes or regulations were most commonly cited
as most burdensome in providing services to the community? What
was in their way?

Ms. ENGLAND-JOSEPH. I would say it was more process-oriented
restrictions that stood in their way, typically design of programs,
not so much statutes driving certain requirements like public
health and safety or environmental, although environmental issues
tended to be raised as a concern especially with brownfields in try-
ing to redevelop urban areas.

jut it typically was design in terms of application, timing, com-
plexity of trying to match different sources of funds. The ability to
try to deal with a problem by using Federal sources of funds was
difficult because they were forced sometimes to design their effort
based on the funding stream rather than to say I have this prob-
lem, let me figure out exactly how I’m going to solve it.

Mr. Towns. If your testimony—in your testimony, I should say,
you indicated that over 1,000 waivers were requested in the
empowerment zone or enterprise zones, enterprise communities, I
should say.

What were the nature of those and why were they requested? I
mean, were most based on regulations of a certain sort? Could you
sort of be more specific?

Ms. ENGLAND-JOSEPH. Sure. Of the 1,000 or so, and we have just
a little bit of information. I can’t give you a lot of details, but about
60 percent of them, according to HUD, are statutorily based. Many
of those actually are in HUD.

I believe about almost 40 percent of those waivers are directed
at the Housing and Urban Development requirements, anything
from one-for-one replacement in public housing to issues dealing
with rent restrictions, rent reform, many of the things that tend to
inhibit local communities when they are trying to address either
public housing or low income housing.

The second largest area I think was in HHS and I think there
too there were some restrictions in terms of eligibility require-
ments, issues associated with program design, again limiting com-
munities when they were trying to apply these different sources of
funds and implementing them at the local level.

Now, even though 60 percent of those were statutorily based,
again if you were to categorize them they tended to be requests in
general to try to streamline application processes, streamline re-
porting requirements or documentation requirements, the ability to
be able to waive matching—dollar matching requirements, the abil-
ity to try to pull together or pool funds from different sources of
Federal programs in order to apply them for a particular type of
need.

Mr. Towns. Mr. Chairman, may I make a request here at this
point? That if she could sort of give us a list of some of those and
that we could sort of look at them and maybe include some of that


85

Date Responsibsity
Review modules developed by Task Force and and identity initial rede- OA/OL/95._GBF/Assistant to Governot/
Ployment and capacity building possiblities consistent with prior- MacDougaV/Barbell
ties,
Identity providers in the community and establish appropriate links, OS/OL/95 Executive Director/Assistant to Gov-
including possible advisory committee, ernor/SBF

Develop and commence implementation of community relations effort. OS/OL/S _GBF/Executive Director

Develop 2 plan where GBF and the Task Force MIS Subcommittee can 06/01/95 MIS Subcommittee/Emecutive Direc-
‘obtain in a single location all relevant information about commu- tor/Assistant to Governor
nity clients together with a referral capability to local resources.

Working with Craig Kennedy and athers, develop and commence im- 06/01/95 Executive Director/Assistant to Gov-

plementation of plan to link GBF efforts with the City of Chicago. ernor/MacDougel

Establish formal links with local businesses and obtain a major cor- 7/1/95 Executive Director/Assistant to Gov-
porate sponsor (business advisory council?) ernor/MacDougel

Using Woodstock Institute data, evaluate funds flowing into the com- 08/01/95 Budget Subcommittee/GBF/Executive
munity for resident job potential and develop a plan to capture this Director oodstock
potenti.

Implement initial (perhaps temporary) local MIS capability... 12/01/95 _MIS Subcommittee/Executive Direc-

torAssistant to Governor

Reach agreement on outcome measurement plan utilizing budget sub- 12/15/95 Walters/BarbelVGBF/Assistant to
committee information and outcome matrix contained in the pro- Governor
posal (Attachment tt), Work with Casey to agree on an evaluation
process.

The tasks above have many components, and can be elaborated upon if desired.
All of the above tasks and dates are subject to revision as the community group gets
underway and assumes greater responsibility for this effort.

Mr. SoupDER. Ms. Paulus.

Ms. PauLus. Thank you very much. For the record, I am Norma
Paulus, the elected superintendent of public instruction in the
State of Oregon. I was elected in 1990, and in the course of my
election, I heard from teachers, parents, administrators, and school
boards about the restrictive requirements that categorize Federal
education grants and that they were seeking freedom from some of
those restrictions.

But I really became very, very aware of the necessity of changing
the system once I started administering the program. I was con-
vinced that we were not getting as much as we could out of our
Federal dollars because of the rigid restrictions that came with the
Federal dollars and the accounting processes. At the same time
that I was elected, Oregon passed the most comprehensive school
improvement effort in the history of this country, at least in the
last 50 years, and that brought the then-Secretary of Education
Lamar Alexander to Oregon to view what we were doing, and he
pronounced that every State should be trying to follow that lead
which was to set higher standards and develop a testing system to
see if we were getting there; and to involve more parents, site
councils, a lot of things.

In the course of that visit to Oregon, Secretary Alexander turned
to me and said Norma, how would you like to be the first State in
the Nation to have a waiver for Federal funds, flexibility for Fed-
eral funds, the use of them? And I said, which bridge do you want
me to jump off? This was a real priority with me.

So he and I set a date 3 months hence for us to come back to
his Department and explain to his people how we would change
schools, what we would do if we had that kind of flexibility; and
when we presented that evidence—and it was December 4, I re-
member it because it was a very important day for us—they said,


62

critical to the effectiveness of your legislation. These issues include:
Improving ways to review applications for waivers, such as estab-
lishing an appropriate time for reviewing them. The 45-day review
period provided by the legislation in its present form does not pro-
vide, we think, sufficient time to ensure that strategic plans are of
high quality.

Also, we need to ensure that the legislation does not make the
process so complex and difficult to administer that it unnecessarily
delays community efforts. We also need to make sure that we are
making approval of plans by the flexibility council contingent upon
the submission of a strategic plan containing specific goals and
measurable performance criteria.

We need to make the States, as noted, as well as local govern-
ments eligible for waivers and expand the involvement of States in
the review of proposed waivers. We need to provide additional ex-
clusions for certain important areas such as tax policy, worker safe-
ty, environmental protection, financial management, and_ public
health. We think we need to provide appropriate authority for Fed-
eral agency heads to approve waiver requests and sufficient admin-
istrative support for the interagency mechanism to efficiently re-
spond to local strategic plans and waiver requests in a timely man-
ner.

We need to replace, as noted earlier, the flexibility council pro-
vided in the legislation with the already existing Community
Empowerment Board which performs, many of the same functions.
We need to tie the continuation of waivers to the performance
measures provided under related strategic plans, and we need to
narrow the criteria of those who can apply or provide some priority
consideration to communities with greater need or distress so that
the departments at the Federal level can process requests in rea-
sonable timeframes.

We look forward to working with you to address these concerns,
and we thank you for your leadership in sponsoring this bill and
the hearings. I would be happy to answer any questions any mem-
bers of the subcommittee might have.

[The prepared statement of Mr. Koskinen follows:]

PREPARED STATEMENT OF JOHN KoSKINEN, DEPUTY DIRECTOR FOR MANAGEMENT,
OFFICE OF MANAGEMENT AND BUDGET

Mr. Chairman, I am pleased to have the opportunity today to testify before the
Subcommittee on Human Resources and Intergovernmental Relations on H.R. 2086,
the “Local Empowerment and Flexibility Act of 1995.” Your leadership in the efforts
to encourage innovation and entrepreneurship at the State and local levels has been
exemplary. The Administration commends you for your dedication to improving
State and local flexi ty The Administration believes H.R. 2086 is focused on an
important issue, especially the question of how to assist our distressed rural and
urban communities empower themselves, and we appreciate the chance to express
our views and concerns about this legislation.

The President has consistently supported efforts to empower communities to take
charge of their own destinies and to remove Federal impediments that constrain in-
novation, experimentation, and entrepreneurship at the local level. The President
and his Administration have worked hard to restore balance to the intergovern-
mental partnership between the Federal government and State, local and tribal gov-
ernments, to promote bottom-up solutions to our nation’s problems, and to curtail
the imposition of unfunded Federal mandates. The President submitted and signed
legislation to create 105 Empowerment Zones and Enterprise Communities (EZ/EC),
signed the Unfunded Mandate Reform Act, approved welfare reform waivers for 34
States and 11 Statewide Medicaid waivers, proposed “Performance Partnerships”



86

This is just wonderful, this is really going to help us, and we will
give you an administrative waiver.

In another office, 1 was Oregon’s auditor for 8 years, and I knew
from that experience that an administrative waiver would not give
me what I needed. And I will emphasize that point because shortly
before I took office in a school district south of Seattle in a very
impoverished area, a young woman was named principal and with-
out being given the authority to do so, she used what she thought
was common sense and her educational talents and ignored Federal
restrictions that came with the dollars, kept all the children to-
gether.

As a result, she improved test scores, made it into a very vibrant,
high-performance, successful school which had parents from the
more affluent neighborhoods trying to get in the school, it was
Jauded as a very successful effort. However, 2 years later, the Gen-
eral Accounting Office came into the Seattle School District and
said, now you will pay us back the $2 million because your prin-
cipal did not abide by these restrictions. The upshot of that was
that made me even more leery about accepting an administrative
waiver to do some of the things that we felt needed to be done.

I then took my case to Senator Mark Hatfield, and he responded
by eventually successfully amending the Goals 2000 legislation to
give us that flex factor in the use of Federal funds for six dem-
onstration States, and last February Secretary Riley gave me, as
Superintendent, the first “ed-flex” status. And I will just give you
three quick examples of changes, but there are many:

Federal dollars for math and science education that restrict
teacher training to school workshops. We have a very energetic
school-to-work program to take our teachers and students out into
the workplace. We have 4,000 partnerships with the Oregon Busi-
ness Council Associated Oregon Industries, because that is where
technology is, that is where laser, robotic, and computational equip-
ment is that we can’t put in our high schools. And we could not
use that Federal math and science money to take our teachers out
of those traditional school workshops into the business community
and industries where they could see how math and science and
technology were used and integrated in the workplace. With this
new flexibility, we can do that.

And we have partnerships within Tektronix, Sequent, and others
to bring our teachers up to snuff on this but also to make math
and science much more relevant and exciting for children. Oregon
has a K-14 system, and we are developing our school improvement
effort as a K~14 system.

The Oregon Offtce of Professional Technical Education urged the
forming of regional consortiums, because our school effort, school
improvement effort and school-to-work initiatives tend to be region-
ally focused. This is a totally different configuration than is sug-

ested in the Carl Perkins Act, so without ed-flex, we would not

ave been able to do that; which also brought us into a partnership
with a lot of other State agencies, and that flexibility allowed us
to do that.

Title I regulations require money to be targeted to schools most.
in need. With ed-flex, administrators can distribute the grant
throughout the district and, in turn, help all children.


31

Certainly Federal money was appreciated in its ability to tackle
many State and local problems, but State and local officials have
always, as long as I can recall, been frustrated with the number
of barriers, overlaps, duplication, and simply cost-ineffectiveness in
solving specific needs at the local level.

Over the years—and I point this out because I think it’s impor-
tant. Over the years there have been a lot of Federal attempts to
reform this system, going back to the 1960’s. You could probably
count a dozen or more different varieties of reform measures. Some
were successful in whole and part; some failed.

But I believe that the ones that did succeed in whole or part
have a common characteristic, and that was there was a commit-
ment to success. And by that I would point out three characteris-
tics. One is the long-term outlook that these reforms had. In other
words, it was a resolve to make them work. Flexibility that per-
mitted the reform to adapt and be refined when problems arose,
and they always arose. And, finally, to avoid excessive complexity.
Any reform that becomes too complex is almost, by nature, doomed
to fail. It has to be truly cost-effective and it has to be time-saving,
or else State and local officials just won’t participate.

I believe that H.R. 2086 embodies the first two of those charac-
teristics, certainly the resolve of this Congress and the President
to reform this system I believe is long-term and I believe is sincere.
It is flexible. The very heart of this bill is flexibility and I think
that’s a major objective. It focuses on outcomes and it focuses on
adaptation.

Most of my comments are going to pertain to the last characteris-
tic, that of complexity. My hope is that some of my comments
will—my suggestions will help to lessen the complexity and per-
haps make the end result more cost-effective and time-efficient.

In my statement, which I am not going to read, but in my state-
ment I discuss two of the historical reforms that I think are very
relevant to H.R. 2086. Part of my remarks will be based upon les-
sons of those experiences, but I will not discuss them here and I
will not try to elaborate on all these points. I am going to go
through it in outline fashion because I know that red light comes
on very quickly.

On the governmental focus, H.R. 2086 focuses on local govern-
ments, obviously, and local governments are, indeed, a very impor-
tant et of the intergovernmental system. They are on the front
line for achieving most Federal policy objectives. Nonetheless, I be-
lieve the purposes of H.R. 2086 are as worthy for State and tribal
governments as they are for local governments. I can’t think of a
good reason not to include them.

The other part of this is that we’re in the period now of rather
dramatic intergovernmental reform in the Congress and the Presi-
dent. And I believe that States, when the dust settles, are going
to come out much stronger, but also State-local relationships are

‘oing to be much stronger. A new dynamic is going to occur if we
Seva lve these responsibilities and provide more flexibility. Not to
include States in this legislation, therefore, I believes leaves out a
very critical component which is not only important to this act but
important to intergovernmental reform.


7

(iii) title IX of the Education Amendments of 1972 (86 Stat. 373 et

8eq.);
(iv) the Age Discrimination Act of 1975 (42 U.S.C. 6101 et seq.); or
(v) the Americans with Disabilities Act of 1990;
(B) for payment of a non-Federal share of funding of an activity under a
covered Federal financial assistance program; or
:) for grants received on a maintenance of effort basis.

(c) SPECIAL ASSISTANCE.—To the extent permitted by law, the head of each Fed-
eral agency shall seek to provide special assistance to a local government or quali-
fied organization to support implementation of an approved local flexibility plan, in-
cluding ‘expedited processing, priority funding, and technical assistance.

(d) EVALUATION AND TERMINATION.—(1) A local government, in accordance with
regulations issued by the Flexibility Council, shall—

(A) submit such reports on and cooperate in such audits of the implementa-
tion of its approved local flexibility plan; and
(B) perfodically evaluate the effect implementation of the plan has had on—
i) individuals who receive benefits under the plan;
}) communities in which those individuals live; and
costs of administering covered Federal financial assistance pro-
ams included in the plan.

(2) No later than 90 days after the end of the 1-year period beginning on the date
of the approval by the Flexibility Council of an approved local flexibility plan of a
local government, and annually thereafter, the local government shall submit to the
Flexibility Council a report on the principal activities and achievements under the
plan during the period covered by the report, comparing those achievements to the
goals and performance criteria included in the plan under section 6(c)(3).

(3)(A) The Flexibility Council may terminate the effectiveness of an approved local
flexibility plan, if the Flexibility Council, after consultation with the head of each
Federal agency responsible for administering a covered Federal financial assistance
program included in such, determines—

(i) that the goals and performance criteria included in the plan under sec-
tion 6(cX3) have not been met; and

(ii) after considering any experiences gained in implementation of the plan,
that those goals and criteria are sound.

(B) In terminating the effectiveness of an approved local flexibility plan under this
paragraph, the Flexibility Council shall allow a reasonable period of time for appro-
priate Federal, State, and loca] agencies and qualified organizations to resume ad-
ministration of Federal programs that are covered Federal financial assistance pro-
grams included in the plan.

(e) Fivat Report; EXTENSION OF PLANS.—(1) No later than 45 days after the end
of the effective period of an approved local flexibility plan of a local government, or
at any time that the local government determines that the plan has demonstrated
its worth, the local government shall submit to the Flexibility Council a final report
on its implementation of the plan, including a full evaluation of the successes and
shortcomings of the plan and the effects of that implementation on individuals who
receive benefits under those programs.

(2) The Flexibility Council may extend the effective period of an approved local
flexibility plan for such period as may be appropriate, based on the report of a local
government under paragraph (1).

SEC. 9. COMMUNITY ADVISORY COMMITTEES.

(a) ESTABLISHMENT.—A local government that applies for approval of a local flexi-
bility plan under this Act shall establish a community advisory committee in accord-
ance with this section.

(b) FUNCTIONS.—A community advisory committee shall advise a local government
in the development and implementation of its local flexibility plan, including advice
with respect to—

(1) conducting public hearings; and

(2) reviewing and commenting on all community policies, programs, and ac-
tions under the plan which affect low income individuals and families, with the
purpose of ensuring maximum coordination and responsiveness of the plan in
providing benefits under the plan to those individuals and families.

(c) MEMBERSHIP.—The membership of a community advisory committee shall—

(1) consist of—
(A) persons with leadership experience in the private and voluntary

78;
(B) local elected officials;
(C) representatives of participating qualified organizations; and



46

So there were good feelings, at least in the communities we
spoke with, that for the first time they felt more were at the table
and more input was received from communities and neighborhoods
and organizations than may have traditionally been sought, you
know, input had been sought in the past.

So I think the way in which you articulate either the plan devel-
opment, or if it’s an application for something, the application de-
sign, I think clearly would articulate the intent that you have that

ou want representatives and organizations that represent neigh-
Borhoods and communities throughout the area that you are Se.
scribing or needing input from is critical.

Mr. Towns. Thank you very much, all of you. Thank you, Mr.
Chairman. I yield back.

Mr. Suays. Thank you. Any questions on this, Mrs. Morella?

Mrs. MoRELLA. Thank you very much. This is a very interestin;
idea. I guess it ties in with the passage of such things as unfunde
mandates and all the block grants that we’re giving to the States.

But my State of Maryland, for instance, I have helped to inter-
cede for the kinds of waivers that deal with Medicare, Medicaid,
thinking of, for instance, our all payer system which has been so
effective in Maryland.

Would these kinds of waivers be part of this bill? I mean, would
it mean that that would be something that the board would be
looking at?

Ms. ENGLAND-JOSEPH. The way I interpret the description in the
bill, it’s not terribly restrictive. The legislation for the
empowerment zone was a bit more restrictive in terms of the kinds
of things that could be requested in terms of waivers, but this bill
is much broader.

Mrs. MoRELLA. Or even public housing, a waiver of the voucher
system or whatever. It means the State or locality then—and I
haven’t studied the bill, Mr. Shays, but it looks like it’s a very ap-
propriate one.

But it would mean then that a jurisdiction, whether it’s a State
or even a county, would prepare a plan and say we want to have
an exemption, this is our flexibility plan. What are we going to
save by that? I mean, are we going to save time or is it going to
be longer? Are we going to save cost? Tell me what the benefit is.

I know that all sizes are all sizes, not just one, and so I can see
merit in that. But I’m just wondering what is the bottom line bene-
fit of this bill.

Mr. GRIFFITHS. I believe the benefit is that it is—I think_it is
cost-effective and I think it is time-saving. If a community or State,
but if a community were able to tailor the programs, State and
Federal, to meet the specific needs and circumstances of that com-
munity, the opposite would be to have to take programs that don’t
fit well and spend a lot of time trying to jerry-rig them so that they
meet the circumstances and needs of your community, which be-
comes a more time-consuming and costly endeavor.

I have administered programs, I have granted money, and I have
seen this from all sides. The only program I ever saw work well
was one back in the late 1970’s before—actually this was an oddit)
in Pennsylvania, but I was actually given the authority by a Fed.
eral agency to create a small communities program. And I was


6

fied organization does not consent in writing to the receipt of that assistance
in accordance with the plan.

(3) The Flexibility Council shall disapprove a part of a local flexibility plan if a
majority of the Council disapproves that part of the plan based on a failure of the
part to comply with paragraph (1).

(4) In approving any part of a local flexibility plan, the Flexibility Council shall
specify the period during which the part is effective. An approved local flexibility
plan shall not be effective after the date of the termination of effectiveness of this
Act under section 13.

(5) Disapproval by the Flexibility Council of any part of a local flexibility plan
submitted by a local government under this Act shall not affect the el ty of a
local government, a qualified organization, or any individual for benefits under any
Federal program.

(c) MEMORANDA OF UNDERSTANDING.—(1) The Flexibility Council may not approve
a part of a local flexibility plan unless each local government and each qualified or-
ganization that would receive financial assistance under the plan enters into a
memorandum of understanding under this subsection with the Flexibility Council.

(2) A memorandum of understanding under this subsection shall specify all unde:
standings that have been reached by the Flexibility Council, the local government,
and each qualified organization that is subject to a local flexibility plan, regarding
the approval and implementation of all parts of a local flexibility plan that are the
subject of the memorandum, including understandings with respect to—

(A) all requirements under covered Federal financial assistance programs
that are to be waived by the Flexibility Council under section &(b);

(BXi) the total amount of Federal funds that shall be provided as benefits
under or used to administer covered Federal financial assistance programs in-
cluded in those parts; or

(ii) a mechanism for determining that amount, including specification of the
total amount of Federal funds that shall be provided or ‘used under each covered
Federal financial assistance program included in those parts;

(C) the sources of all non-Federal funds that shall be provided as benefits
under or used to administer those parts;

(D) measurable performance criteria that shall be used during the term of
those parts to determine the extent to which the goals and performance levels
of the parts are achieved: and

(E) the data to be collected to make that determination.

(d) LIMITATION ON CONFIDENTIALITY REQUIREMENTS.—The Flexibility Council may
not, as a condition of approval of any part of a local flexibility plan or with respect
to the implementation of any part of an approved local flexibility plan, establish any
confidentiality requirement that would—

(1) impede the exchange of information needed for the design or provision
of benefits under the parts; or

(2) conflict with law.

SEC. & IMPLEMENTATION OF APPROVED LOCAL FLEXIBILITY PLANS; WAIVER OF REQUIRE-
MENTS.

(a) PAYMENTS AND ADMINISTRATION IN ACCORDANCE WITH PLAN.—Notwithstand-
ing any other law, any benefit that is provided under a covered Federal financial
assistance program included in an approved local flexibility plan shall be paid and
administered in the manner specified in the approved local flexibility plan.

(b) WaIvER OF REQUIREMENTS.—(1) Notwithstanding any other law and subject to
paragraphs (2) and (3), the Flexibility Council may waive any requirement applica-

le under Federal law to the administration of, or provision of benefits under, any
covered Federal assistance program included in an approved local flexibility plan,
if that waiver is—

(A) reasonably necessary for the implementation of the plan; and
(B) approved by a majority of members of the Flexibility Council.

(2) The Flexibility Council may not waive a requirement under this subsection un-
less the Council finds that waiver of the requirement shall not result in a quali-
tative reduction in services or benefits for any individual or family that is eligible
for benefits under a covered Federal financial assistance program.

& The Flexibility Council may not waive any requirement under this sub-
section—

(A) that enforces any constitutional or statutory right of an individual, in-

cluding any right under—
Rights Act of 1964 (42 U.S.C. 2000d et seq.);

(i) title V1 of the
(ii) section 504 of the Rehabilitation Act of 1973 (29 U.S.C. 701 et seq.);



40
It is a very difficult balancing act, and the block grants that have

already been enacted have not done a very good 2 historically in
doing that. Historically, as block grants w_older they become
more like categorical programs and less like Congress envisioned
them at the outset. And so for those who propose to give greater
flexibility at the local level through this or other legislative propos-
als, it is a very challenging task, because the balancing act between
accountability to the Congress and discretion at the local level has
been historically very difficult to achieve, as Mr. Griffiths has men-
‘ioned.

But we commend the subcommittee for taking on this challenge
at this time when greater flexibility and greater incentives for cre-
ativity and initiative at the local level are imperative.

In reviewing the legislation, we have identified a number of
areas where the excellent departure that it represents bears some
fine-tuning, if you will. And I would like to just highlight a couple
of those for the subcommittee’s consideration.

First, with respect to the local flexibility plans, I think these are
powerful incentives to encourage innovation at the local level, un-
questionably, and they do place great responsibility on local offi-
cials to come up with creative ways to mesh Federal pre ams.

Mr. Griffiths has mentioned the concern about the States, and
having spent 6 years as executive director of the Council of State
Governments, I would share those. I would urge the subcommittee
to take another look at the role the Governors play in reviewing
the local flexibility plans and signing-off of them.

From one standpoint, most of the Federal aid programs at this
point, including the block grants, are Federal to State, not Federal
to local, and so there is a substantial State financial stake and, as
Senator Hatfield has mentioned, a very significant State regulato:
responsibility that will come into play in ensuring that the flexibil-
ity intended by Congress ultimately is provided to the local govern-
ments.

The Governors play a key role in this process, as do the legisla-
tures, and I would urge the committee to reconsider the process
and consider more than just a gubernatorial review because that
may prove to be inadequate.

econd, calling local governments to identify goals and measur-
able performance criteria, as well as to monitor the performance
against the criteria and to evaluate progress, are all commendable.

ese things are extremely difficult, for reasons indicated in my
statement. The data are inadequate in terms of baselines. The as-
sistance that local governments may well need oftentimes is un-
available. Basically, we feel that more attention should be given to
ensuring that the flexibility plans have an opportunity to be fine-
tuned by the Flexibility Council, as well as the implementors.
There are some suggestions in the statement along those lines.

Third, we have talked today about the regulatory process and, in
closing, the legislation does identify, rather uniquely, a kind of
feedback system, by requiring reports on Federal regulations that
are most frequently waived under the new authority that would be
given to the Flexibility Council.

_ Perhaps the subcommittee should consider going further than
just simply identifying those regulations that are subject to the



19

Do you think though that there are any savings in terms of ad-
ministrative costs? One of the things that our committee has set
out to do, we are concerned—we oversee five government agencies
and one of them, HHS, which has Social Security—its budget is
larger than the gross domestic product of Canada.

jut we also have the whole issue of federalism, And one of the
issues that we want to look at is how much money gets siphoned
off in the administrative process before it gets to the person on the
street.

So my last question to you is do you think there is any savings
in administrative costs, or do you think basically it’s a wash?

Senator HATFIELD. Well, let me speak as appropriator. When I
see the budget resolution that is attempting, basically, to balance
the budget on what is today about an 18 percent baseline to the
total bud et, namely the nondefense discretionary programs, and I
see that by the year 2000 we are going to squeeze that down to 13
percent, of the total budget expenditures, we are going to see not
only that in the discretionary programs but, by contrast, military
is going to continue to level an increase and have blips, as well as
the entitlements are going to increase by 44 percent, the indebted-
ness that we pay our interest will only stay at 15 percent.

Mr. Chairman, I am convinced that we cannot balance the budg-
et on a 17 or 18 percent baseline, but as an appropriator dealing
with 1996 and 1997—that is all I have left on this term, who
knows about the future—I have to say this to you. It’s not only a
matter of saving the overhead, but it’s a matter of survival for
some of our programs that we have commitments to.

We just marked up the transportation bill. Let me give you an
illustration. We had to reduce the support to airport facilities from
$1.4 billion down to $1.2 billion. I proposed, and I told the author-
izers, let us make it voluntary but let us give the local airports an
opportunity to raise the passenger fee from $3 to $5. Well, you can
imagine what happened. The airline industry came out of their
hive like a swarm of bees and they were all over the Senate side.

Now, my point is simply this: We cannot maintain the needs of
our airport facilities by squeezing that budget down without com-
pensating somewhere else or by saving overhead. And, really, at
this point it’s going to be a combination of both.

Now, to me, that is the illustration. We have to have a better
system of doing business and save every penny we can save. And
I am convinced that they can make more of those creative ideas at
the local level than we can at the Federal level writing a national
prescription. Here United Airlines charges $40 in Denver.

I can’t imagine why in the world that they object to perhaps
going up to $5 in Portland or some other city, but that’s the in-
equity we see within our system today. We don’t have an equitable
system.

Mr. SHAys. Thank you. At this time I would like to ask Mr.
Towns if he would like to ask the Senator some questions.

Mr. Towns. Thank you very much, Mr. Chairman. Let me begin
by first thanking you very much, Senator. We have been following
your legislation on the Senate side.

5 What type of feedback have you received from your colleagues on
. 88?


14

Washington’s way is not working—but the opportunities created through the Local
Empowerment and Flexibility Act present a viable, desirable alternative.

e legislation provides communities with the flexibility to direct resources where
needs are greatest, without requiring new spending by the Federal Government. In-
deed, a locality may not implement a plan to integrate services if it would require
additional federa) dollars. This allows us to neet the challenges facing our commu-
nities in a fiscally responsible way.

Mr. Chairman, I applaud you and the gentleman from Oregon, our colleague in
the Senate, Mr. Hatfield, for introducing this legislation. I hope we can move this
legislation forward as soon as possible, so our communities can start serving their
low income citizens as they can and should—with more federal cooperation, and less
federal intervention.

Thank you, Mr. Chairman.

PREPARED STATEMENT OF HON. EDOLPHUS TOWNS, A REPRESENTATIVE IN CONGRESS
FRoM THE STATE OF NEW YORK

Mr. Chairman, thank you for convening this hearing today on H.R. 2086, the
“Local Empowerment and Flexibility Act.” During my chairmanship of this sub-
committee, I worked very diligently on a similar piece of legislation that would have
enabled local governments, and private, non-profit organizations to have greater
flexibility to use Federal funds to achieve local policy goals. 1 therefore commend
you Mr. Chairman for continuing work in this area.

When this subcommittee last held hearings on this issue, we learned from our
witnesses that the requirements of Federal grant programs are often far too narrow,
duplicative, and are overly prescriptive. I recall hearing testimony from a local offi-
ciel in Prince George’s County, Maryland, who complained that the rigidity of HUD
waiting list requirements hindered the county from providing housing to low income
individuals, Mr. Chairman, this is exactly the type of situation that I want to see
remedied, and ! am pleased that your bill secks to do so.

This bill would allow local governments greater flexibility to tailor programs to
local needs, through the development of local flexibility plans. It would also allow
local governments to waive Federal regulations that are often conflicting, or other-
wise hinder them from providing services to the target communities. Most impor-
tantly, in times of increasing fiscal austerity, this bill would cut back on bureau-
cratic red tape and allow Federal funds to be used most efficiently and productively.

Mr. Chairman, | wholeheartedly embrace the concept of this legislation. As a
former local elected official, | am aware of, and can appreciate the concerns that,
many localities have about the administration of Federal programs. I recall my
former ma: David Dinkins, testifying before this subcommittee about the need for
local flexibility. I do want to ensure however, that we do not allow localities to waive
important Federal regulations. I also want to ensure that low income communities
have the opportunity to participate in the formulation of the flexibility plans, and
to benefit Kom Federal grants. As usual, Mr. Chairman, I look forward to working
with you to address these concerns, and to craft legislation that will enable localities
to more efficiently use Federal funds.

PREPARED STATEMENT OF HON, GENE GREEN, A REPRESENTATIVE IN CONGRESS.
FROM THE STATE OF TEXAS

Thank you, Mr. Chairman, for holding this hearing on ways we can help local
communities use Federal resources in a more efficient way. I believe you have point-
ed out a problem that has plagued our efforts in the past to help local communities
solve social and economic problems: that too much money is spent on overhead and
administration of the program and too little is spent on the actual problem.

‘As a new member of this subcommittee 1 would like to use this hearing as a
learning opportunity. I have questions about how the waiver process would work
and what sort of rules would be waived. Furthermore, I understand that this bill
does not include assurances as the Conyers-Clinger bill did previously that the local
programs would have to help low income residents. Still, I am intrigued by the
Chairman's ideas and | will keep an open mind.

I veleome Senator Hatfield this inérning well es our other panelists and I look
forward to today’s hearing.


3

(3) enable local governments and private, nonprofit organizations to adapt
Programs of Federal financial assistance to the particular needs of their commu-
nities, by—
(A) drawing upon appropriations available from more than one Federal
program; and
(B) integrating programs and program funds across existing Federal fi-
nancial assistance categories; and
(4) enable local governments and private, nonprofit organizations to work
together and build stronger cooperative partnerships to address critical service
problems.

SEC. 4, DEFINITIONS.

For purposes of this Act—

(1) the term “approved local flexibility plan” means a local flexibility plan
that combines funds from Federal, State, local government or private sources
to address the service needs of a community (or any part of such a plan) that
is approved by the Flexibility Council under section 5;

(2) the term “community advisory committee” means such a committee es-
tablished by a local government under section 9;

(3) the term “Flexibility Council” means the council composed of the—

(A) Assistant to the President for Domestic Policy;

(B) Assistant to the President for Economic Policy;

(C) Secretary of the Treasury;

(D) Attorney General;

(E) Secretary of the Interior;

(F) Secretary of Agriculture;

(G) Secretary of Commerce;

(H) Secretary of Labor;

(I) Secretary of Health and Human Services;

(J) Secretary of Housing and Urban Development;

(K) Secretary of Transportation;

(L) Secretary of Education;

(M) Secretary of Energy;

(N) Secretary of Veterans Affairs;

(0) Secretary of Defense;

(P) Director of Federal Emergency Management Agency;

(Q) Administrator of the Environmental Protection Agency;

(R) Director of National Drug Control Policy;

(S) Administrator of the Small Business Administration;

(T) Director of the Office of Management and Budget; and

(U) Chair of the Council of Economic Advisers.

(4) the term “covered Federal financial assistance program” means an eligi-
ble Federal financial assistance program that is included in a local flexibility
plan of a local government;

(5) the term “eligible Federal financial assistance program”—

(A) means a Federal program under which financial assistance is avail-
able, directly or indirectly, to a local government or a qualified organization
to carry out the specified program; and

(B) does not include a Federal program under which financial assist-
ance is provided by the Federal Government directly to a beneficiary of that
financial assistance or to a State as a direct payment to an individual;

(6) the term “eligible local government” means a local government that is
eligible to receive financial assistance under 1 or more covered Federal pro-
grams;

(7 the term “local flexibility plan” means a comprehensive plan for the in-
tegration and administration by a local government of financial assistance pro-
vided by the Federal Government under 2 or more eligible Federal financial as-
sistance programs;

(8) the term “local government” means a subdivision of a State that is a
unit of general local government (as defined under section 6501 of title 31, Unit-
ed States Code); fund high luding b

(9) the term “priority funding” means giving higher priority (includi
the assignment of xtra points, Fappicasts) ‘0 applications for Federal finan.
cial assistance submitted by a local government having an approved local flexi-
bility program, by—

(A) a person located in the jurisdiction of such a government; or
(B) a qualified organization eligible for assistance under a covered Fed-
eral financial assistance program included in such a plan;


110

to address that separately. I think the issues are very, very dif-
erent.

Mrs. MOoRELLA. Interesting point. Thank you, thank you very
much,

Thank you, Mr. Chairman.

Mr. SHAYS [presiding] |. Thank you, Mrs. Morella.

Mr. Green, why don’t you go next? Then I will go.

Mr. GREEN. I will be real brief.

I generally am supportive of the idea of the waivers, particularly
like you said for “the ladder out.” But I have a level of concern, and
I think Mr. Barrett talked about it, that it would be cheaper for
Minnesota to dump their waste in the Mississippi River and let
somebody down the river do it, clean it up. I mean, you know, so
we don’t want to grant waivers for that.

Prevailing wage, we are in a fight here on the floor or in commit-
tee, in my other committee and on the floor on Davis-Bacon provi-
sions. There are things that I don’t think need to be waived—mini-
mum wage requirements, 40-hour week. I would like to be a co-
sponsor of the bill, and I am hesitating to do it because of that con-
cern. If we could address that, I would—because I like the idea of
taking in local conditions, but again not with some of the basic
things. That is why we have a national government, you know;
again, some of the benefits that we have learned for the last 50 or
60 years.

With that, Mr. Chairman, I don’t have any particular questions.
I am glad these individuals are here because they point up the con-
cerns, and if we can address those concerns, I think we will see
some real bipartisan support. Like I said, I would like to be a co-
sponsor if we can address those.

Mr. Suays. I do have some questions. We have a series of votes,
so we will—Mr. Baker, I want to accept very eagerly your invita-
tion to work with the committee.

And, Mr. Lehner, I am probably more sensitive to the environ-
mental side than I would be with the labor side. However, I have
to say to you I would not want this legislation to be used to go
around Davis-Bacon. If Davis-Bacon is the law, I would want that
to be there.

What we are trying to get at is the stupidity of a Bridgeport, CT,
having declared bankruptcy and attempting to have it be recog-
nized by the courts, shutting down all its parks and then finding
that they, in all their categorical grants—one that they got was one
to beautify a park they had closed down, and so they fixed up a
park that is closed down and not used. I mean, it is that kind of
stupidity; and I could just go on with a lot of other kinds of exam-
ples.

I would think you would be more inclined to support this legisla-
tion than block grants, because with this legislation, you have to
come up with a flexibility plan and it ultimately has to be accepted
by the central government. Don’t you think that is enough of a pro-
tection, that the central government would basically have to say,
your plan works here, but it doesn’t work here?

Mr. BAKER. We have a couple of concerns about that, Mr. Chair-
man. One, I don’t know the answer to your question specifically,


69

there was a complaint. We have taken it to HUD in Indianapolis
that HUD said that they can’t protest or they can’t discuss the
issue, and it is a question of a gag question, it is not directly relat-
ed to where the group home is going to be.

But I would like to talk about whether that is in a civil rights
question here as it relates to group homes or that type of thing.

Mr. GLASER. We would be glad to address that.

Mr. SoupeER. Mr. Barrett.

Mr. BarreETT. Thank you. Just a couple of questions.

The last time this subcommittee considered similar legislation, it
was limited to 30 communities. I am just curious, Mr. Koskinen,
based on your experience, whether we should be taking that ap-
proach here or opening it up. It was 30 communities, it was more
limited.

Mr. KOSKINEN. We are concerned about the process. Back to the
question we didn’t really answer about the 45 days, we are trying
to make sure that we don’t create a new process that itself gets
flooded with applications and becomes as aggravating as the
present process. So one of the advantages of working with the
States is you might be able to screen these programs and projects
as they came from localities, so they began to fit together. As
noted, there are 19,000 potential applicable local communities. We
are concerned that if we just say anybody can apply for any waiv-
ers from anywhere in any format, we are going to get deluged.

We need to try to deal with this either by looking at specific cat-
egories, as Mr. Glaser has described, or by looking at some rela-
tionships between the States and localities to screen and coordinate
applications. Perhaps a potential first step, would be to look at geo-
graphic limitations, so we don’t kill what is really a terrific idea by
swamping it.

Mr. Barrett. OK. One of the concerns that has been raised to
me is that by giving more local flexibility, that you have a potential
for shutting out low-income groups. Is that a concern you have, or
maybe with the States’ rights mentality, it is something that we
shouldn't worry about at all. Has the administration Tooked at
that?

Mr. KOoSKINEN. It is a good point. Again, one of the best things
about this legislation is that you don’t get waivers automatically.
You have to come in with a strategic plan and a set of performance
measures as to what you are trying to accomplish and what the
waivers will allow you to do. Therefore, localities will not be able
to take funds directed toward any particular group and design the
program away from that group.

For example, whether it is low-income communities or individ-
uals, if the funds are ultimately meant to benefit them, the strate-
gic plans and the performance measures will have to relate to what
the goals of the program are. I think as long as we stick to that
principle we will do well.

When you start more broadly, with block grants, when you say
here is the money, go do something with it, you don’t have account-
ability. You don’t have the dialog about what it is we are trying
to accomplish, when the dialog is between the locality, the States
and the Federal Government. fr we move in that direction, I think


24

prevails within that conference and what has to be sacrificed in
that conference.

Today I think we are at a point where we are sacrificing some
of our favorite children, our favorite things, because we have got
a higher favoritism with some others. It’s not that we think what
is bad and what is good. It’s now all based on, well, can we afford
it. Well, there you get into a real philosophical dilemma because,
to me, I think sometimes we can afford—we can’t afford not to do
something that’s going to cost more money at the moment.

But at the same time, I am faced with the dilemma that when
they wanted to cut $7.7 billion in our budget resolution out of the
National Institutes of Health of an $11.3 billion budget, in that
same budget resolution they wanted to increase nuclear research
for nuclear weaponry by $100 million. Now, Congressman Green,
to me that is just an upside-down priority, but I have been fighting
that battle for 28 years in this body and I haven’t won much except
in underground test bans.

Mr. GREEN. I can relate to that. I’ve only been here 3 years.

Senator HATFIELD. I would just like to trade that military budget
just for 1 year, just for 1 year, for some of these social programs
that we really have not been able to conquer or to solve at this
point.

Mr. GREEN. What are the—and I understand the need because,
for example, coming from Texas we don’t need to test for radon
very often in Texas, although I know it’s a problem in other States.
So I understand the need to have local flexibility.

One of the concerns I have though is there are policy statements
that we make, and some of them are controversial. For example,
with the local flexibility allowed for the waiving of Davis Bacon
rules or OSHA requirements or something like that.

Senator HATFIELD. Well, I don’t think in those Federal laws that
we have—I think we have to address them. I’ve been working with
both contractors, as your example, and labor on getting a reform
of Davis Bacon at the Federal level. I think some of those things
that are so definitively involved in interstate, I think we could have
regional differences because of regional characteristics.

jut I do think some of those national commitments—that’s why
we don’t lift civil rights legislation, why we don’t lift health and
safety regulations. Some of those are truly national that we have
to maintain,

Mr. GREEN. Thank you, Senator. We appreciate you coming over.

Mr. SHays. Thank you, Senator. We really appreciate you spend-
ing so much time with us today, and have a great day.

jenator HATFIELD. It’s been a great privilege. I haven’t been over
here to testify for a number of years and, believe me, I prefer to
testify in here than on the other side.

Mr. Suays. I hope that’s not because we’re too easy on you.
Thank you.

We have a second panel and at this time I would call them for-
ward. Judy A. England-Joseph, Director, Housing and Community
Development Issues, General Accounting Office, GAO; Charles
Griffiths, director, intergovernmental liaison, Advisory Commission
on Intergovernmental Relations (ACIR); and Carl W. Stenberg, di-


10

We know that our history of this country was, in part, based
upon a concept of pluralism, of diversity, not only geographic diver-
sity that we had and we still have, only to a greater extent, but
the idea that we could have people that lived in a system of govern-
ment that held different viewpoints and that we have ways to re-
solve those differences and to develop consensus. And that is one
of the great strengths of our country. Some people look at diversit;
as a weakness. | think that we have proven as a nation that plural-
ism, diversity, is a strength.

But we have had a tendency to demand conformity with the Fed-
eral level, and this has happened particularly since 1933 when we
began to take over more and more responsibilities that heretofore
had been at the State, local, and the private sector levels. And in
doing so, we were writing prescriptions at the national level. In
writing those prescriptions, it was a universal requirement, not rec-
ognizing but rather trying to, in effect, at least fuzz over the diver-
sity and the pluralism of this country.

And it came to a point of being in conformity to Federal regula-
tions that were being set forth in an ever-increasing number and
dealing with every aspect of human life. We now have over 202 vol-
umes of Federai regulations that number over 130,000. We have 16
volumes on environmenta! regulations. We have 20 volumes on ag-
ricultural regulations, and on and on we could go.

And so it seems to me that in order to really maximize the Fed-
eral tax dollar, which is not our dollar, but certainly as stewards
of these dollars being paid in by our citizens, we have to look at
the way we're doing business.

I can remember in the days that I served in the Oregon legisla-
ture—and I came from, basically, a dairy county. And as a dairy
county, we didn’t like the idea of letting the housewife buy colored
oleo. She was given a little packet of color as she bought a pound
of white margarine, then she had to take it home and mix the
coloring in it in order to make it look yellow, as a butter spread.

Well, from our county's point of view, the dairyman said God
made butter yellow, he made oleo white, so that we should never
try to violate the laws of God. It got down to that kind of a matter.
Whereas, in the urban centers, particularly Portland and so forth,
the housewives didn’t want to go through that process and they
were demanding lifting the law against selling colored oleo.

Now, that to sounds very ridiculous but, nevertheless, it illus-
trated the diversity that we had within a State. Later, as a Gov-
ernor, I got a lesson every day on the diversity of my State. We
have coastal areas, we have mountainous areas, we have valley
areas, we have desert areas, just within one State.

And I think that when we try to write prescriptions without rec-

izing the role of diversity, we are not only violating the concept
of pluralism in this country, but we are legislating to the lowest
common denominator. Rather than stimulating creativity and ex-
cellence, we are settling for the mediocre.

Now, I think also we have to recognize that all echelons of gov-
ernment and the private sector bring certain strengths to the table.
There are things that county, city, municipal, township, whatever
the State local governments may be called, have certain strengths.
The State governments have certain strengths and the Federal


29

have been concerned about losing control over their own resources. In addition, the
federal efforts to coordinate that have been undertaken have had few successes,
leaving community o1 jizations—such as the ones we reviewed—with the burden
of trying to piece together programs to serve their communities.

BACKGROUND

Despite overall economic growth in the United States during the 1980s, the eco-
nomic and social health of many cities declined. While crime, poverty, and the phys-
ical and social deterioration of urban neighborhoods increased, intergovernmental
aid to cities declined between 1980 and 1993 by about 19.4 percent in constant dol-
lars. Meanwhile, the out-migration of many middle-income residents and businesses
has caused city tax bases to shrink, hampering the ability of local governments to
aasiat economically and socially distressed areas suffering from a mix of interrelated
problems.

Over the past several decades, the public and private sectors have tried different
ptrategies to aasist people living in distressed communities. Some of these efforts
have focused on improving the chances for individuals in these areas to obtain the
education, social services, and other support that they need in order to leave their
neighborhoods. Others have focused on improving the neighborhoods’ physical envi-
ronment through affordable housing or economic development. Still others have
combined aspects of both approaches by addressing the needs of residents and their
environment. These latter efforts are referred to as comprehensive by ‘community

lopment experts because they consider the housing, economic development, and
social service needs of communities and are considered community-based because
they focus on specific geographic areas and involve the residents in the planning
and implementation. Comprehensive community-based efforts have often begun
within communities in response to nei conditions—rather than in re-

thi ities in response to neighborhood conditi ther than i
sponse to a federal program—and are operated by local nonprofit organizations.

COMPLEX PROBLEMS CALL FOR COMPREHENSIVE APPROACHES

According to the experts we consulted, comprehensive approaches enhance the
chances of improving conditions in distressed neighborhoods because the problems
in these areas are complex and interrelated. Addressing these problems in tandem,
the experts believe, makes long-term resulta possible, fn addition, the experts said
that comprehensive approaches are more viable now than they were in the past be-
cause community organizations have gained experience and an infrastructure has
evolved to provide funding and technical assistance. However, the experts cautioned
that conditions in distressed neighborhoods cannot be quickly reversed and that the
outcome of much of the work these groups do—community outreach, counseling, and
referral services—is hard to quantify, making evaluation of the results difficult. The
comprehensive approach was endorsed by HUD in March 1994 in a publication in
which the Secretary wrote, “We believe the best strategy to community
empowerment is a community-driven comprehensive approach which coordinates
economic, physical, environmental, community, and human needs.” Dissatisfied with
the results of previous single-focused approaches to community revitalization, na-
tional organizations and foundations have begun funding organizations that are tak-
ing a comprehensive approach.

COMPREHENSIVE APPROACHES ARE DIFFICULT TO IMPLEMENT

Multiple challenges confronted the four organizations we studied. All experienced
substantial difficulty organizing residents, gaining their trust, and mainteining
their involvement. All four ongenizations eaid that residents needed to see a tan
gible reault—rehebilitated housing or @ cleaner neighborhood before they wanted
& participate, Obtaining financial support and managing « diverse sot of coneyrrent
programs also presented significant challenges. The four organizations relied on &
Inynied of public and private funding sources, such as federal block grant and pro-
gram-specific funding, foundation grante, and carporate donations. Overall, the orga-
Hizations relied on public funding--often with conditions and/or restrictions on ats
use—for 30 to 60 percent of their budgets. After obtaining funds, the organizations
faced the challenge of concurrently managing multiple programs, each with several
separate funding sources, application requirements, and reporting expectations.

The four orpanizalions we studied responded to the challenges confronting them
in a variety of waya. They obtained residents’ support by including residents tn their

isnning and decision-making. They also used the muliple funding sourees and co
faborations to leverage resources that could then be applied over a wide range of
needs in the communities. In addition, each organization had access to some rel-
atively flexible funding-either public block grants or private foundation funds—



98

And, again, we tried to balance it last year; and I agree with
what you say, because we wanted to take away a lot of those re-
quirements that were just absolutely silly, although with a little
hindsight—I talked to an elementary school principal in my district
the other day who is receiving Title I money. She lost $100,000 of
Title I money in an elementary school in Houston this year because
of the rescission cutbacks that we did, so that pot is reducing even
what we did last year.

How did you address that, you know, when you——

Ms. Pautus. I could give you an example. Just a very short time
ago in our State most of our migrant population was centered
around the capital city because that is the heart of the Willamette
Valley where the food processing industry is paramount and where
most of our agricultural products that needed migrant labor for
harvest centered. So the migrant population that we had, and have
had now for two generations, was centered in that area, so the mi-
grant money was kind of ingrained in the systems there.

With the demise of the timber industry, that changed our situa-
tion overnight and the schools bore the brunt more than any other
in that the timber industry, that industry, when it took a nose-
dive, there were other industries that began to spring up very rap-
idly, but all around the State, to use our natural resources.

For instance, Christmas tree farming is one of our largest ex-
ports now, and nursery stock was not, but it is one of our largest
exports; and vineyards, which is a new, burgeoning industry; and
all three of those industries that are now just growing by leaps and
bounds—and they are in all regions of the State, rather than just
in the central part of Oregon—they all use migrant labor.

This has had an immediate impact on schools all over, which is
totally different than the experience that we have had before. So
I think that statement about the migrant class, we might have a
few migrant children, but they have the same needs as the larger
concentration of them had in the valley, and this ed-flex legislation
we have now allows us to try to serve those children in different
ways. So that is one example.

Mr. GREEN. I guess that is—and I agree with that, because hav-
ing seen those hoops and been frustrated with a lot of teachers and
administrators over the years and seeing that happening the last
couple of years, and I know it started before I got here in 1993,
so—because you are right about the bipartisan effort of it. I guess
particularly on education the Federal grant program comes with its
own set of paperwork and mandates.

Again, we have tried through elementary/secondary education
and other programs, you know, School-To-Work, to make sure that
there are not those—or the Goals 2000; and this legislation is, I
think, an overall effort to build on that success that we have seen.

Ms. PauLus. We greatly appreciate that. We have worked very,
very closely with Senator Hatfield and the other members of our
delegation and followed that very closely and appreciated the ef-
forts.

Mr. GREEN. I guess if I can follow up on Congressman Barrett’s
question, there are some particular concerns that I guess—that
maybe local waivers, you know, you can look at them, whether the
environmental or using the example, prevailing wage, minimum


91

First, I am very excited about this bill. The Federal Government
always takes a one size fits all approach, and that is crazy. What
we need to do is document where there is waste. I mean, I can give
you examples of where I see waste, but if during the course of my
going to vote if you both would give me examples of where you see
categorical grants, not maximizing their benefit or just plain down-
right being wasteful, I would love to be able to ask you to put that
on the record.

Mr. SouDER. We stand in recess.

{Recess.]

Mrs. MorRELLA [presiding]. I am going to reconvene the meeting
in the interests of time. I know other Members will be joining us.
The last vote was totally unexpected, as was the one previous to
the last vote, so people will certainly be coming in.

But I wanted to thank Panel Two for being with us here, and di-
rect a few questions to them. We will keep the record open also for
others who may want to ask questions.

I wanted to ask Ms. Paulus, you are Superintendent of Public In-
struction for the State of Oregon. Can you tell us how education
enters into this equation with regard to the bill that we are looking
at, maybe the complexities of it? How do you see the role of edu-
cation?

Ms. PauLus. Thank you.

From the very beginning of my tenure, I have been working to
get more flexibility and to be freed up from the onerous restrictions
that come with every Federal dollar to our State, and the account-
ing procedures that come with each stream of money. And your col-
league asked about examples of waste or inefficiency, and I can
suggest two to you.

Inder ed-flex, prior to ed-flexibility, each money stream that
came to us, whether it was Title I, Carl Perkins money, Eisen-
hower math money, each money stream came with its own account-
ing restrictions and procedures, and that meant people at the Fed-
eral level, regional level, State level, and local level were meeting
in these silos, accounting for dollars and tracking dollars. That is
not only very time consuming, but it is very, very wasteful. That
has been changed.

One of the things that I wish you could change, and it is a good
example of waste that flexibility would—this is an answer to his
precise question, so maybe I should wait until he is seated.

Mrs. MORELLA. Talk about timing, Mr. Chairman, she is now re-
sponding to the question you asked, and you came in the door at
just the right moment.

Ms. Pautus. About flexibility. Two examples that I can think of
right off the top of my head about waste in the present system, and
I was just giving Congressman Morella an example of flexibility,
not only in the curriculum, in the delivery of instruction, but every
Federal money stream comes with its own accounting procedures
and requirements, and that means that people at the Federal level,
regional level, State level, and local level then are meeting in these
silos of potivity to make certain that the accounting procedures are
followed and that the monitoring system is.

Now, with ed-flex, we are able to meld those Federal money
streams together and have one comprehensive accounting system.


11

Government has certain strengths, and it shouldn’t be a competi-
tive relationship of either/or or concentration or deconcentration of
power for the sake of concentration of power or deconcentration. It
should be using each government level’s strengths to achieve the
whole.

So what does flexibility really boil down to? I am convinced that
we should have learned that lesson in this session. In failing to be
able to adopt a comprehensive national health reform, Mr. Chair-
man, I am convinced it will never happen. It can’t happen. We
don’t know enough about what will work and what won’t work.

For instance, in the State of Oregon we were the first State to
develop a comprehensive health care reform. And we want to try
that. We want to experiment. The State of Washington, next-door
neighbor, adopted a comprehensive health care reform. They want
a single payer plan. We don’t have a single payer plan program.

Let us each try to see what really works and let’s stimulate and
help give financial assistance to those other States to likewise try
a comprehensive health care reform and then let’s distill that expe-
rience and determine what the Federal role should be. That’s flexi-
bility. It is not a matter of ignoring an issue. It’s trying to create
the best method that’s going to suit that particular area of our
country in this great diverse country of ours.

Therefore, we adopted in the Goals 2000 an amendment that I
offered on flexibility. We call it ed-flex. There are more regulations,
on the average, at the State level of government governing edu-
cation than at the Federal level, and yet we know the multiplicity
of these regulations within the Department of Education here, as
even demonstrated by their hierarchy, the hierarchy of having
more Assistant Secretaries of Education, all the small grant pro-
gram, each categorical grant with its own bureaucracy, leveling up
the whole—or leveling down the value of that dollar that’s going to
a Head Start child because of the overhead.

So, consequently, we could show that there is probably about
$500 billion a year that is costing the American public today to do
the business in the manner in which we are doing it.

What is the goal? Conformity. What is the goal? Conformity and
compliance. Compliance with what? The goals of a program? No.
Compliance with the bureaucracy and the rules and the regulations
that are suffocating the programs that we have carefully crafted
with great care in a way of trying to target certain persons in our
demographics.

I believe that we can prove that in the field of education. Oregon
is proving it. Secretary Riley designated Oregon as one of the first
States to engage in the educational flexibility program. That means
the Federal Department of Education, Secretary Riley, Norma Pau-
lus, the State Superintendent of Schools, have joined together in
saying these are the goals we want to achieve—lifting all the rules
and regulations in certain test cases of school districts or different
kinds of school districts within our State, lifting all but the rules
on civil rights and health in education. We don’t set them aside
under any condition in terms of health and safety and civil rights.

But lift all the other regulations, both at the State level and at
the Federal level, and free up these school districts to be creative
and innovative complying with the goals that we have agreed to,


97

children benefit. I can give you many examples of our poorest
schools in impoverished areas that were able to use Federal dollars
in different ways and raise reading scores that were jumping right
off the page.

So it is not our intent to take money given to us by the Federal
Government for migrant children, special ed kids, Title I kids from
impoverished circumstances and use it for middle-class, white, sub-
urban kids. That is not our purpose.

Our purpose is to be able to, through innovative methods and
being freed up, take that extra money and help those children in
a much more comprehensive way; and we have demonstrated that
it works. And two Secretaries of Education have agreed with me,
one Democrat and one Republican, so I would encourage you to do
a couple of things.

No. 1, expand t this, give all States the flexibility you have given
me. They all want it.

Two, on the—you were questioning my colleague from Ilinois
about job training, and this is something I feel very strongly about
and we are changing in Oregon in a bipartisan way. Most Fob train-
ing in this country has been dealt with connected to the human re-
sources department and area, and it has not worked. We are urg-
ing Congress and our States to take job training money and pro-
grams and connect it to the educational community instead, and
that is what we are doing in Oregon. Secretary Riley and Secretary
Reich just hired away from me the woman that was making that
such a success in Oregon, so this is a very bipartisan effort.

The time has come to change the way in which you give us
money and the laws to account for it. Set the standards in your
goals and hold us to it, but give us the flexibility we need.

Mr. BARRETT. Thank you.

Mr. Suays, Mr. Green.

Mr. GREEN. Thank you, Mr. Chairman.

Ms. Paulus, my other committee I serve on in Congress is the
Economic and Educational Opportunities, and I served a lot of
years in the Texas legislature and was on the education committee
there, so I know where you come from; and last year we reauthor-
ized elementary/secondary education that granted a lot of flexibility
that is built into this bill.

One of the concerns I have is that I also remember in 1965, when
it was provided for, the original intent was to try and target that
funding to those harder-to-educate children; and I notice in your
statement where you said the ed-flex can distribute grant money
throughout the district, in turn, helping all children.

I know last year, during reauthorization, we tried to address that
by lowering the percentages in a given school over the next few
years, and I think it is going to be 50 percent—5O percent of the
children in the school—to eliminate the take-out program and the
setting-these-children-aside issue.

I guess the problem I have is, we have so limited Federal re-
sources to go to States and the local communities, if we serve—if
we divide that Money among all the students, not just eligible stu-
dents, then we don’t have that impact of those students that are
the original intent and we talk about.


4

102

The language of the bill, however, is broad enough to potentially
cover environmental programs, perhaps in a ver lramatic fashion;
and if it does cover environmental programs, the resulting poten-
tial waivers could have very si Reant and very negative con-
sequences which I think would distress many of the members of
this committee and many Americans.

To the extent the bill could allow local governments to trade en-
vironmental protections against welfare payments, schools or police
enhancement, we would oppose it. Moreover, to the extent the bill
would allow waivers of substantive environmental and health pro-

ams and standards, we would oppose it. And finally, to the extent
it would allow waivers of important procedural requirements, we
would oppose it.

I said, we don’t believe this bill was meant to cover these pro-
grams, and we urge you to reexamine the bill carefully and limit
its scope to exclude environmental programs and clarify its effect.

We would be happy to work with you in this effort, and I will
be happy to answer any questions you may have.

Mrs. MoRELLA [presiding]. I really appreciate the fact that you
gave us a synopsis of the written testimony, Mr. Lehner.

{The prepared statement of Mr. Lehner follows:]

PREPARED STATEMENT OF PETER LEHNER, SENIOR ATTORNEY, NATURAL RESOURCES
DEFENSE COUNCIL

Thank you for inviting me to offer the comments of the Natural Resources De-
fense Council on H.R. 2086, the Local Empowerment and Flexibility Act of 1995.
The Natural Resources Defense Council is national not-for-profit organization with
over 170,000 members.

My name is Peter Lehner and I’m a Senior Attorney with NRDC in its New York
office focusing on clean water and coastal issues. | am particularly pleased to be
commenting on this proposal because prior to working for NRDC I worked for the
Law Department of the City of New York for sight years. There, I had the oppor
tunity to learn about both the need for and benefits of local flexibility and the need
for limits on that flexibility. also came to have great respect for municipal govern-
ment personnel and the many difficulties they face.

The Natural Resources Defense Council supports the concept of local input into
the establishment of federal spending priorities at the local level. More particularly,
we support an enhanced municipal role in the establishment of local environmental
priorities. There is a substantial body of local knowledge about environmental,

ealth and social issues that could never be replicated at the state or federal level
that could improve spending decisions. There is also an important incentive that can
motivate municipal officials and local residents to spur on environmental improve-
ments: local officials drink the water, breathe the air, and enjoy the natural re-
sources protected by environmental laws. The challenge of this iy is to tap into this
knowledge and energy without hindering the attainment of the important baseline
national environmental health and safety safeguards that America’s desire and de-

serve.

We believe, however, that this enhanced role must be guided and bounded by
three key principles. First, trade-offs between programs must be limited to those
groups of programs where the benefits of the trade-offs can be understood and bal-
ather than based on the vagaries of political power and media hype. Second,
ity should not jeopardize fundamental health, safety and environmental pro-
tections. Third, important procedural requirements that now exist, Particularly
those relating to public input to decisions and access to information and data, need
not and should not be waived. Finally, the flexibility should relate to the establish-
ment of relative schedules for funding environmental improvements; it should not
allow environment requirements to be weakened.

Upon review, it would appear that H.R. 2086 fails to conform to these principles.

To be candid, it appears that H.R. 2086 was not written with environmental pro-
grams in mind. The language of the bill suggests it was aimed primarily at federal
social welfare programs under which the federal government provides funds to local



65

waivers, then, I guess, but the 40 percent, were they ones like
waiving Davis-Bacon or minimum wage or something like that,
overtime provisions?

Mr. GLASER. They fell into a number of categories. Davis-Bacon
was a popular item, certainly it was.

Mr. GREEN. Even though probably some of those States also have
prevailing wage statutes, too?

Mr. GLASER. Correct. There were a number of those. But there
were other areas also that were very interesting.

For example, I think it was Philadelphia came in with a request,
they wanted to build an intermodal transportation center. The idea
is to link various transit together, including rail transit, into a
commercial hub; and they would like to use some Federal transit
dollars for part of the commercial development because it is an in-
tegrated, all one integrated unit. They could not do that under the
current law. Therefore, at this point, they cannot go ahead with the
project because they can only spend a dollar on the rails and not
on the associated commercial development. That is one example.

Another might be, we had a request from a number of commu-
nities to restructure the payment on health—student health loans
for health professionals who would locate in the zones, the idea
being that these are underserved neighborhoods—bring in health
care professionals, but give them a little bit of a break on the loans.
Innovative idea, maybe worth considering, couldn’t do it currently,
take a small change to do it.

Mr. GREEN. OK. I guess that is what—and I know we will hear
from other panels, and I was with our mayor of Houston when our
empowerment zone was announced, and one of the benefits were
waivers that were provided for that empowerment zone, and part
of my district is part of that empowerment zone in the waivers.
But, again, I know there is a certain level where we say, well,
there are some things you just can’t waiver.

But I agree that—and that is why I am generally supporting this
legislation—that there are some things we can do, but again, there
are basic laws that cover everyone.

Let me talk about or ask you, the large number of waivers under
the empowerment zone request and which are the ones that the
Community Empowerment Board are not waiving—that 60 percent
that are regulatory in nature or agency generated—do you have a
percentage on those that you have the authority now to grant the
waivers on?

Mr. GLASER. Of the ones that are within—there are really only
two categories, There are ones that are beyond executive authority
and the ones that are within executive authority; and at this point,
the process has worked well, I think, because we have not denied
any request for a waiver for flexibility, which is in executive au-
thority to accomplish. So you always have these two completely
polar opposites, the ones we can do, we did all of them; the ones
we can’t do, we are barred from doing.

Mr. GREEN. And you are barred by statute?

Mr. GLASER. We are barred by statute from doing them or, same
thing, in many cases the State may have a role to play.

For example, in some of the HHS waivers that were requested
concerning raising income thresholds, for example, under various


71

would include ideas about what Federal impediments exist right
now to the things that you want to get done. And within that appli-
cation they included not just funding requests, but regulatory bar-
rier removal requests as well; and I think we see it as essential.
A primary mission of the Community Empowerment Board as de-
fined by the President is to work on those waivers.

Mrs. MORELLA. So, frankly, you see the empowerment zone as
the epitome of what could be accomplished with legislation like this
in terms of pulling back regulatory impediments or obstacles, al-
lowing flexibility in partnerships?

Mr. GuasERr. It provides, we think, a model that is well worth
looking at.

I mean, there are other models out there. You will hear a little
bit about the Oregon performance rtnership idea today.
Empowerment zones is a more focused effort. Empowerment zones
says, you have more limited goals, take a specific area of the com-
munity, literally, you know, maybe a multiblock neighborhood.
Under this legislation, the whole city is eligible, and that way we
would expect an expanded interest by communities, but also it will
take an expanded response by the Federal Government.

Mr. KOSKINEN. I would note that this legislation would, in effect,
increase the impact of the empowerment zone program. As noted
earlier, there are statutory waivers that are requested that are not
allowed under the empowerment zone program that would be al-
lowed under this legislation, so we would be able to provide more
flexibility in those areas.

Mrs. More... And you think that would be beneficial; you both
agree?

Mr. KOSKINEN. Yes.

Mr. GLASER. Yes.

Mrs. MoRELLA. Just one final point about Davis-Bacon, since
that may well be part of reconciliation, and some of us think it
shouldn't be totally repealed but maybe the threshold increased.
Mr. Glaser, you commented on the fact that Davis-Bacon is a prob-
lem for local governments and States. Do they tell you that?

Mr. GLASER. They do.

Mrs. MorELLA. Could you elucidate a little bit more on that?

Mr. GLASER. You will see within the analysis that we provided
to the subcommittee, there are a number of Davis-Bacon issues
raised. It is really a barometer of what is on communities’ minds
and how they want to get to where they go.

I talked in depth about one issue. Another idea is just the—if a
project is under a certain dollar value, that certain requirements
of Davis-Bacon be modified. But communities are really struggling
with a lot of those issues. We’ve got vague requests in some cases.

I know one city came in, and their waiver request on Davis-
Bacon was modified Davis-Bacon, that is all it said, it is really
hard for us to respond to that. You have to sit down with the com-
munity and say, what do you really want to accomplish here. But
clearly that is one of the issues that is on their mind.

Mrs. MORELLA. Do you work with the administration on this?

Mr. GLASER. Yes.

Mrs. MorRELLA. Do they agree with you?


16

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99

wage, you know, 40-hour-week requirements, overtime require-

ments. Of course, my wife is a public school teacher, and she is not

subjected to the 40-hour week, because she works many more
ours.

But do you have any level that you would say that there is some
programs that really ought to apply to Oregon as well as they do
to California or Washington?

Ms. Pau.us. I think I can answer your question and be very
blunt with you about it.

I have a very strong environmental voting record, and that
doesn’t set very well in some Republican circles, but in the State
of Oregon it does. I am very proud of it.

On the other hand, labor has never been my friend. I voted
against the collective bargaining law when I was in the legislature,
and I just led an effort in the senate and the house to narrow the
scope of bargaining so that the teachers union would not try to con-
trol our site councils. So, yes, I do have limits.

Mr. GREEN. OK.

Thank you, Mr. Chairman.

Mr. Suays. I thank the gentleman. I think we will get you out
of here shortly after 15 after. Is your meeting in the Capitol or on
the Senate side?

f Ms. PAULUS. It is in the Senate office building, Senator Dole’s of-
fice.

Mr. SHays. OK. Not in his Capitol office building? It is another
5 minutes. OK, we will get you out of here in a few minutes.

This bill attempts to establish the flexibility plan that the cat-
egorical grant still has to be spent in the area of focus. My under-
standing is, it has to achieve the very goals of that categorical
grant. Is that your general understanding?

Ms. PAULUS. Yes.

Mr. Says. In terms of your efforts, when you were iving waiv-
ers did labor oppose what was happening or were they, for the
most part, accepting?

Ms. PaULUs, Flexibility provisions?

Mr. Suays. Yes.

Ms. PauLus. We had the full support of the school community,
the administrators, the teachers union. The school community sup-
ported it in toto, as did the Governor and legislative leaders, so it

as been a very bipartisan effort.

Mr. SHAYS. And they all participated in the process, I imagine,
or not?

Ms. PAULUS. The case that we laid out for then-Secretary Alex-
ander to get our first foot in the door on flexibility, no, that was
done in house with the Department of Education, outlining how we
presently were restricted in the use of Federal funds and what we
would do and some actual examples of schools that because of the
configuration of their clientele, had been able to raise test scores
by new methods. But we kept the legislature and other people fully
apprised of what we were doing.

We have had absolutely no opposition. We had some questions
from parents of special education children. They are very protective
of them; they fought very hard for special ed money, so they want
to be assured that we are not going to take money meant for their


21

rehensive health program, we were trying to write a prescription
Base and then superimpose it upon the existing areas of the
country with different bases, different baselines, or different areas
of. ogress,

'e feel that we are a very progressive State in most areas—envi-
ronment, health, education, et cetera—and that we would find our
efforts that we have moved ahead with, restricted backwards, not
to advance. We would be penalized in a sense by national prescrip-
tions because they have a tendency to reach to at least a lower de-
nominator to get uniformity than some of us who were ahead of the

game.

And I think you are going to have to stimulate States to go out
and experiment like we are in our State with a comprehensive
health care. And nine other States are doing the same today. We've
got to expand that to some of the poorer States with Federal sup-
port, in my view, to get a national uniform idea of where we are
and what we should be doing at the Federal level.

Mr. Towns. Senator, I agree with you. I agree with you whole-
heartedly. On that note, I yield back.

Mr. SHays. I thank the gentleman. Mr. Souder, you have the
floor, vice chairman of this committee.

Mr. SouDER. One of the things that one of my Democratic friends
back in Fort Wayne said in the Reagan era, and I’m sure he feels
that way now with the freshman Republicans in the congressional
Republican era again, and that is that the one food thing, because
he wasn’t happy about the cutbacks, but he said the one good thing
is it’s forcing agencies to cooperate in ways that they hadn't before

ause there was so much sensitivity.

And as long as you had money you could do that, but when the
money goes down, all of a sudden you have to try to manage the
caseload and try to cut out anything you can. He doesn’t support
the Republican agenda, but that is one of the side benefits that
happens in this type of thing.

'o make this very practical, one of the things in the Education
Committee we’re going through right now is the careers bill. And
a lot of this relates to the question of block Granting versus revenue
sharing. How much flexibility do we do? Do we do just one block
grant? Do we do multiple block grants?

We spent the last couple days on the phone battling back and
forth with the Governors who basically want us to raise the reve-
nue and give them no guidelines and able to do whatever they
want with the money, which raises a question of why don’t we just
transfer the taxing authority and let them raise it, unless there is
some balancing between the States in the revenue. Why collect it,
take some out, and send it right back?

How do you balance that? Do you believe as the Federal Govern-
ment we shouldn’t even be setting goals as far as this flexibility?
Do you believe that we should have minimum goals and then let
them figure out how to execute those goals?

Where do you see this act and your general principles fitting into
what is going to be a big debate over the next—this term of Con-
gress?

Senator HATFIELD. Congressman Souder, I believe we should ap-
proach that in the same way as the philosophy of flexibility. I don’t


50

sions, taxation, banking standards, and eligibility and benefit pro-
visions for the Social Security Act and the Food Stamp Act.

So those are off the table in terms of opportunities for waivers
by the applicants in the EZ-EC program. Some of those may touch
a chord with you. I think it’s really a public policy call as to which
of these areas you really want to have as hands-off, which of them
do you really want to have on the table and to see some debate as-
sociated with whether they are too intrusive or too burdensome for
communities.

Mr. Towns. Thank you.

Mr. GRIFFITHS. This debate really harkens back to when I was
sitting looking at the debate on the unfunded mandates act. There
were very few exclusions initially and they spent days debating ad-
ditional exclusions.

The theory, of course, was that let’s not load it up with exclu-
sions but let it stand or fall on its merits and there will be wise
people that will make those judgments and that good will prevail.
I happen to be one that believes that’s probably the better way to

go.

Some of the things that she mentioned there as exclusions I have
a hard time believing that you are going to be able to satisfy the
intent of this law if you exclude everything there. I know exclu-
sions is a very sensitive area.

I think though, in fact, in my testimony which I did not include,
we had heads get together and decided maybe I shouldn’t, but I
thought about this problem of they are going to try to load this bill
up with a lot more exclusions and maybe one thing to look at, and
I only suggest it, is some type of Congressional review that’s in-
cluded in the mandates legislation when it comes to what the Fed-
eral agencies do on regulatory to give Congress 60 days to take a
look at some of the stuff.

The reason why I didn’t include it is because when you try to
think of the logistics of that it starts to become a nightmare tut,
nonetheless, I mean, if that’s what saves the bill from getting load-
ed up with exclusions it may be an acceptable tradeoff.

Mr. STENBERG. I think the legislation identifies a handful of reg-
ulations—civil rights, the Americans With Disabilities Act, a few
others—which are excluded. I am very comfortable personally with
that. As a policy matter, I think that it makes sense to keep those
exclusions to the absolute minimum number with which the Con-

ress is comfortable. But I think that the legislation makes a good
irst step identifying those that should be taken off the table.

Mr. Towns. Let me—Congresswoman, do you have any other
questions?

Mrs. MoRELLA. No, thanks.

Mr. Towns. Let me thank all three of you for your testimony. I
think you have been extremely helpful, and I would like to leave
the record open for 5 days for additional comments and information
that has been requested.

At this time, without any further comments, this hearing is ad-
journed.

[Whereupon, at 10:30 a.m., the subcommittee was adjourned.]

[Additional material submitted for the record follows:]


95

How do you think we should deal with it?

Mr. MacDoucat. I think the States will tend to take corrective
action themselves. There are 50 States looking out for their people
and their State interest. I don’t think the kind of problem you de-
scribe should govern the overall principle of getting closer to the
communities and getting the communities involved in how the
money is spent.

Mr. BaRRETT. But don’t you think that there are some areas, if
I may mix metaphors and use an example outside human services,
where it may be in the best interest for the State of Minnesota for
example, to put its waste in the Mississippi River and send it
south,

Mr. MacDoueat. If you are getting into the environment, I don’t
assume this has really much ofan hing—

Mr. BARRETT. But Yam saying, I think there might be some anal-
ogous things, it might be in the best interests of the people in a
community to put all the poor people in the community on a bus
and send them out of State. That is a rational—

Mr. MacDoucat. I don’t see that as a realistic—something to
worry about in human services.

Mr. BarRRETT. But it is something we have seen.

Mr. MacDouGaL. It is certainly not a major factor in what we
are talking about here. To have any semblance of the perpetuation
of the rules and regulations—and by the way, a random sample
walking through these offices, which I have done; I have spent the
last several years of my life as a volunteer learning about this sys-
tem. You ask the people where the paperwork goes, and they say,
I need a quarter of it or less to serve the client.

Mr. BARRETT. I am not arguing with that at all. I agree with you.

Again, my question is, are there basic fundamental safeguards
that £, beyond paperwork that you see as being something where
the Federal Government should say, “This is not something as a
Nation that we think is good public policy.”

I am not going to be sitting here defending bureaucrats or paper,
but I am concerned about how far we go.

Mr. MacDouceat. OK. I would like to think more about that. I
am sure there are some areas in the health area where we need
to have some national input, but as far as supporting the commu-
nities to create a ladder out of poverty, I see that as a very local
thing.

Mr. BarReETT. OK.

Ms. Paulus, I think of public instruction or public education as
being pretty much——

Mr. Suays. Could I interrupt the gentleman just a second?

If we keep you 5 more minutes, you can make that 12:30 flight.
It is at National?

Mr. MacDOuGAL. Yes, it is. You are very considerate.

Mr. Says. You can just go out the door and get a taxi.

Mr. MacDoueat. It is a legal proceeding; otherwise, I would re-
schedule it.

Mr. BARRETT. Maybe I should yield to Mr. Green to see if he has
any, questions.

Ir, GREEN. I don’t have any of Mr. MacDougal. I have some for
Ms. Paulus.


33

be that the Federal role be as minimal as possible. Again, I believe
States can play a role in this.

I would like to suggest States be given an optional role for not
only reviewing proposals, which the legislation already provides
for, but recommending approval to the flexibility council. States are
obviously in a better position to evaluate the circumstances and
merits of local government proposals.

This would reduce the workload at the Federal level and, I might
add, the cost, and save time. The States, at the same time, could
then opt to use substate regional bodies to help them and, thereby,
reduce their costs. Again, this is particularly important for rural
areas and small governments which I have talked to already.

As a means to offset this cost to the State, the State, of course—
I said optional but there is still a cost involved, I would recommend
that the cost at the State level be included as indirect costs in the
Federal Cash Management Act. That is already in place. This
would be a minimal loss to the Treasury. It would be more than
offset, I believe, by the cost savings at the Federal level by the re-
duced workload.

I also would like to suggest you consider interstate bodies be-
cause there may be situations where projects cross over boundaries,
something like the Appalachian Regional Commission made up of
Federal and State representation would be an ideal body, I think,
to handle something along these lines.

I would also like to suggest that the Flexibility Council be given
the authority to delegate or designate lead agencies which would
take away the need to detail a lot of staff, would put the respon-
sibility in agencies that have a lot of experience in program rela-
tionships and, I think again, would be a more cost-effective ap-
proach. This would leave the Flexibility Council primarily with an
oversight responsibility. It wouldn’t have to be a large bureaucracy
to do that.

I also would like to support the idea of the community
empowerment board as perhaps the structure for that Flexibility
Council.

I also would like to suegest, and again this goes back to problems
that I know occur at the local level, and that is that the flexibility
plan that they have to submit satisfy all Federal application re-
quirements. In other words, this should not be an overlay on top
of other requirements. If they submit a flexibility plan they should
not have to submit six other applications to separate Federal agen-
cies in addition to that. This should satisfy everything. That’s not
clear in this particular legislation.

Mr. SHays. Let me ask you, are you almost concluding? This is
very helpful.

Mr. GriFFITHs. I can conclude.

Mr. SHays. Why don’t you just summarize your last point be-
cause the staff is going to take—by the way, your suggestions are
very helpful, but the staff is going to take these suggestions and
we're going to discuss them as a full committee.

Mr. GRIFFITHS. OK.

(The prepared statement of Mr. Griffiths follows:]


17

grants to Provide services and implement federal programs. The number of these
categorical grants has skyrocketed ‘in the last decades. In 1972 there were 422 dif-
ferent types of categorical grants compared with 1993 in which there were a total
578. These grants often encumber local government with burdensome stipulations
and requirements.

Secondly, the Local Empowerment and Flexibility Act will not only permit vari-
ation in how local governments meet national goals, but it will encou: solutions
that best fit the local context. Federal laws and regulations have tended to treat
every area of the county the same. Universal requirements force Congress to legis-
late to the lowest common denominator, and consequently, few governments perform
to their full capability. We all strive to meet the average instead of to excel. Politi-
cally, socially, structurally, local and state governments are very different from one
another. Adding flexibility to the federaVstate relationship will encourage local gov-
ernments to find solutions that fit the local context. In addition, providing flexibility
will eliminate regulations that force local governments to “solve” problems that they
do not have. Many programs are narrowly designed which means dollars end up
mired in audits and record-keeping rather than directed to meet community needs.
While the well-intentioned of the New Deal and the Great Society put
safety nets in place for those who are in greatest need, these nets now strangle the

federal government by tying up precious funding in a knot of regulations and poor
management.

Thirdly, this legislation will create a new system of accountability. Currently, the
federal government holds state and local | governments accountable through regula-
tion, procedures and paperwork. The existing accountability structure is very good
at determining where federal money is spent, but it tells us very little about wheth-
er we are actually achieving results, Hundreds of hours and scarce dollars are in-
vested in complying with these regulations, and the investment in bureaucratic
Processes does nothing to improve the quality of services that we deliver to citizens.

loreover, our current structure of accountability has made us very responsive to
each other, rather than to the people we serve We need to re-orient our system of
government to view taxpayers as investors and our citizens as customers of the

siness of government.

Finally, we must also help re-tool all governments for this new relationship, We
need to re-equip our nation’s governments to function in a new cooperative environ-
ment. The federal bureaucracies need to re-create the ability to listen to local gov-
ernments. In the 1980s, we witnessed the destruction of the “intergovernmental” af-
fairs offices at most federal agencies. The federal government must actively solicit
and use the ideas and experience of state and local governments.

My bill, S. 88, and H.R. 2086 are designed to create a new spirit of cooperation
among federal, state, and local governments. It will lead to strategic and realistic
decentralization and deconcentration of power throughout the government. Govern-
ments will be allowed to combine their different strengths to achieve their objec-
tives. It will also permit variation in how local governments meet national goals,
encouraging solutions that best fit the local context.

The Repablican-controlled Congress has committed itself to a more efficient, cost-
effective approach to governing. Thie commitment is highlighted in a letter sent to
the President in December of last year signed by Senate Majority Leader Bob Dole,
and Speaker of the House, Newt Gingrich. The letter suggests that the President,
“recommend actions to give state, local, or tribal governments more flexibility to
meet federally-imposed responsibilities.” Providing local flexibility has also enjoyed
a wide array of bipartisan support. In February of 1994, the Senate voted 97-0 in
favor of a demonstration project for education flexibility along the same lines as this
legislation. While that project provided for 6 test sites throughout the country, due
to its effectiveness, all 50 states have expressed interest in the program.

1 would like to thank the Committee again for the opportunity to testify. I look
forward to seeing the Local Empowerment and Flexibility of 1995 become the
launching point for this country’s greatest innovators, the state and local govern-
ment of this nation.

Mr. SHays. And so we have taken care of our housekeeping.

Senator, I believe government has a definite role and I have al-
ways taken the view that there are things the Federal Government
should do and there are things the State government should do and
there are things the local governments should do.

But I have come to conclude that in the Federal Government in
particular, if people have shoe sizes from 8 to 16 or more, we say



61

lation. The President has consistently supported efforts to empower
communities to take charge of their own destinies and to remove
Federal impediments that can strain innovation, experimentation
and entrepreneurship at the local level. We have worked hard to
restore the balance to the intergovernmental artnership between
the Federal Government and State and local and tribal govern-
ments to promote bottom-up solutions to our Nation’s problems and
to curtail the imposition of unfunded Federal mandates.

The President submitted and signed legislation to create 105
Empowerment Zones and Enterprise Communities, signed the Un-
funded Mandates Reform Act, approved welfare reform waivers for
34 States and 11 Statewide Medicaid waivers, proposed perform-
ance partnerships consolidating over 200 programs as part of the
1996 budget, and entered into an agreement with the State of Or-
egon to form a new partnership with increased flexibility as well
as increased accountability for results.

In a time of declining availability of Federal resources, the grant-
ing of waivers and the providing of flexible funding streams are
two ways to increase the impact of Federal programs. A few exist-
ing Federal programs are authorized to provide waivers to States
in administering programs within statutory and regulatory guide-
lines. The best known are the demonstration authorities in AFDC
and Medicare. Those particular authorities were designed to allow
State experimentation with new ideas for research and evaluation
purposes, not as a vehicle for regulated State flexibility.

This administration has increased the use of the existing system
of granting waivers, and we are proud of the fact that we have
been able to reduce the time it takes to review waiver requests.
However, no matter how much we continue to streamline the exist-
ing waiver process, there are statutory limits to our ability to
reinvent the present waiver system.

In his 1996 budget therefore, President Clinton has proposed, as
I noted earlier, that 271 separate programs be consolidated into 27
performance partnerships. Each of these would consolidate funding
streams and eliminate overlapping authorities, create financial in-
centives and reward results consistent with broad national pur-
poses, and reduce micromanagement and wasteful paperwork.

The distinctive feature of the performance partnerships model, in
contrast to the traditional block grant approach to consolidation is
the combination of greatly increased flexibility with accountability
and rewards for performance. This model empowers States and
communities who can use Federal resources flexibility to construct
the best local solutions to problems and rewards them for their suc-
cess.

While these efforts have proven to be a strong beginning to de-
volving power to the local level, they are not complete answers to
the problem. For Federal grant programs to work, we believe
strongly that the executive branch agencies must have the flexibil-
ity to waive statutes and remove barriers that interfere with com-
munities trying to improve their economic and social conditions.
Your legislation, with some key changes, we think, would help to
address this issue.

The administration would like to support legislation such as
yours if we can reach agreement on the issues that we believe are


4

(10) the term “qualified organization” means a private, nonprofit organiza-
tion described in section 601(c)(3) of the Internal Revenue Code of 1986 that is
exempt from taxation under section 501(a) of the Internal Revenue Code of

5 an

(11) the term “State” means the 60 States, the District of Columbia, Puerto
Rico, American Samoa, Guam, and the Virgin Islands.

SEC. 5. PROVISION OF FEDERAL FINANCIAL ASSISTANCE IN ACCORDANCE WITH APPROVED
LOCAL FLEXIBILITY PLAN.

(a) PAYMENTS TO LocAL GOVERNMENTS.—Notwithstanding any other provision of
law, amounts available to a local government or a qualified organization under a
covered Federal financial assistance progr 1m included in an approved local flexibil-
ity plan shall be provided to and used by the local government or organization in
accordance with the approved local flexi uy plan.

(b) ELiciBiuiry FoR BENEFITS.—An indi al or family that is eligible for benefits
or services under a covered Federal financial assistance program included in an ap-
proved local flexibility plan may receive those benefits only in accordance with the
approved local flexibility plan.

SEC. 6 APPLICATION FOR APPROVAL OF LOCAL FLEXIBILITY PLAN.

(a) IN GENERAL.—A local government may submit to the Flexibility Council in ac-
cordance with this section an application for approval of a local flexibility plan.

. ©) Contents OF APPLICATION.—An application submitted under this section shall
include—

(1A) a proposed local flexibility plan that complies with subsection (c); or

(B) a strategic plan submitted in application for designation as an enter-

rise community or an empowerment zone under section 1391 of the Internal
Revenue Code of 1986;

(2) certification by the chief executive of the local government, and such ad-
ditional assurances as may be required by the Flexibility Council, that—

(A) the local government has the ability and authority to implement the
proposed plan, directly or through contractual or other arrangements,
throughout the geographic area in which the proposed plan is intended to
apply; anc

(B) amounts are available from non-Federal sources to pay the non-
Federal share of all covered Federal financial assistance programs included
in the proposed plan; and
(3) any comments on the proposed plan submitted under subsection (d) by

the Governor of the State in which the local government is located;

(4) public comments on the plan including the transcript of at least 1 public
hearing and comments of the appropriate community advisory committee estab-
lished under section 9; and

(5) other relevant information the Flexibility Council may require to ap-
prove the proposed plan.

(c) CONTENTS OF PLAN.—A local flexibility plan submitted by a local government
under this section shall include—

(1) the geographic area to which the plan applies and the rationale for de-
fining the area;

by the particular groups of individuals, by service needs, economic cir-
cumstances, or other defining factors, who shall receive services and benefits
under the plan;

(3\(A) specific goals and measurable performance criteria, a description of
how the plan is expected to attain those goals and criteria;

(B) a description of how performance shall be measured; and

(C) a system for the comprehensive evaluation of the impact of the plan on
participants, the community, and program costs;

(4) the eligible Federal financial assistance programs to be included in the
plan as covered Federal financial assistance programs and the specific benefits
that shall be provided under the plan under such programs, including—

(A) criteria for determining eligibility for benefits under the Slan;

(B) the services available;

(C) the amounts and form (such as cash, in-kind contributions, or finan-
cial instruments) of nonservice benefit ind

(D) any other descriptive information the Flexibility Council considera
necessary to approve the plan;

(5) except for the requirements under section 8(bX3), any Federal statutory
or regulatory requirement applicable under a covered Federal financial assist-
ance program included in the plan, the waiver of which is necessary to imple-
ment the plan;



93

Oregon—and give more flexibility from the State department to
local school districts. So my first recommendation would be that
you expand the present program from the six demonstration sites.

It was very difficult to Bet six demonstration sites past the spe-
cial interests that guard those categorical grants at the State level,
at the national level. So I would urge you to give the Secretary of
Education more flexibility to expand it and to offer the same thin;
that Oregon has to other States. They are all clamoring for it, an
they certainly should have the opportunity to do it.

T also think, as you proceed with the block grant provisions, that
you explore ways in which you can give us the money and tell us
what you want the money to be used for, if it is to benefit migrant
children or for the instruction of math, but hold us to meeting the
standards and give us maximum flexibility. Because we come—I
come from the most diverse State in the Nation. It is a very large
State geographically, but sparsely populated; and what fits in Fed-
eral regulations, that works in inner cities, does not work in Or-
egon. We need maximum flexibility to accomplish the goals that
you set for us.

Mrs. MORELLA. That makes sense. I thank you. It was nice meet-
ing you, too.

ir. MacDougal, I want to give him one chance—

Mr. Suays. If I could just ask the gentlelady to yield for a second.

Mr. MacDougal, if we get you out at 12:20 or so, and you make
al fight, is that going to be all right for you?

Mr. MacDouGat. If the plane is on time, that will work, so I am
willing to take the risk.

Mr. Suays. We can get you out in 10 minutes and you might
make a 12:30. Would yu prefer that?

Mr. MacDoucat. I prefer the 12:30, but having come here, I
don’t want to—

Mr. Says. Why don’t we ask any Members here to focus on you
for the next 10 minutes.

Do you have a little more time, ma’am?

Ms. Pautus, I have an appointment, I had one at noon, but I
could delay that.

Mr. Suays. If you don’t mind just delaying it, if you are able to.

Mrs. MoRELLA. I just wanted to give you an opportunity, Mr.
MacDougal, since Phage showed me your various silos with regard to
human services, do you want to make any comments about how
this bill is a first step toward alleviating that kind of morass?

Mr. MacDouca . I think it is definitely a step in the right direc-
tion, but I think we are talking about large-scale organizational
change here, and most States have categorized departments that go
down to the basic—all the way through with their own accounting,
just as my colleague here has said; and somebody is going to have
to take a deeper look at how all this mass of programs have been
put together over many, many years, all with good intentions, but
which work in conflict one with another.

You know, I believe you are Gettin a start here, but you are not
really grabbing it. 1 think my Wall Street Journal article a couple
of weeks ago gets at it ma: a little bit more closely. Examples
of waste that you asked for, Mr. Chairman, Project Chance is a
welfare-to-work program in Illinois, and in going to take a look at


38

tion and cooperation at the Federal level with respect to the standardization of proc-
esses and requirements.
Program Waivers

Program waivers are a critical aspect of H.R 2086. In order to give applicants suf-
ficient flexibility to accomplish the objectives set out in the Flex Plan, it may be nec-
essary to waive certain statutory or regulatory requirements that would otherwise
inhibit success. This provision recognizes that “one-size” public laws and regulations
cannot be expected to fit all local needs and circumstances, and hence the need for
exceptions by waiver.

T would like to make a few observations and suggestions related to this waiver
provision.

First, the bill prohibits waivers that would qualitatively reduce the level of serv-
ices or benefits to any individual or family that are eligible for benefits under one
or more of the covered programs.

I would suggest that the language in Section 8 (bX2) be revised to read as
follows: “The Flexibility Council may not waive a requirement . . . unless the
Council finds that (waiver) shall not result in a net qualitative reduction in
services or benefits for any individual or family, within available federal fund-
ing levels, that is cligible for benefits. . . .”

1 propose this change because the major thrust of H.R 2086 is its focus on achiev-
ing desired outcomes. In some circumstances, recipients of program benefits may
prefer and be better off if the Flex Plan includes certain “trade-offs” that may re-
duce some benefit levels in favor of raising other types of benefits. This could in-
volve, for example, a reduction in housing assistance in favor of increased health
or child-care benefits.

In this example, the level of specific benefits may be altered, but the net level of
qualitative benefits would remain the same,

Given that the bill prohibits any increases of funding other than what would oth-
erwise be available, it might be necessary to alter the “mix” of the money available
to achieve the most beneficial outcomes.

The addition of the language, “. . . within available federal funding levels . . -
is intended only to clarify that net qualitative benefit levels are to measured
within the context of actual Congressional appropriations.

Finally, the bill prohibits waivers of Federal matching requirements. I would like
to suggest that there may be instances when a waiver of matching requirements
may be appropriate, either in whole or part, for communities experiencing financial
distress, or for very small communities that have very limited fiscal capacities. The
situation in Washington, DC is instructive in this regard, related to the City’s prob-
lems in matching transportation funding.

For these types of communities, their ability to make use of federal assistance
may depend on a lower matching ratio or, in some cases, no matching requirements.

'o be truly flexible, the bill should recognize the special fiscal circumstances
of distressed or small communities (perhaps within some population param-
eters), and allow for negotiated matching ratios if justified by fiscal consider-
ations, and the objectives being sought.

Community Advisory Committees

Most federal programs require that an applicant for assistance establish some
type of special advisory body for review and comment on the program design, oper-
ation, and accomplishments.

Such requirements are intended to ensure adequate public participation and
input. For larger governments, such requirements are not a significant problem.
They already have and regularly sue many such mechanisms. If anything, the issue
for them will be avoiding redundancy.

But, for smaller communities, the added cost can be significant given the probable
size of the assistance and the program objectives being sought. The point that 1
would like to make here is that applicants should be given the option of using exist-
ing citizen participation mechanisms that are in place, provided that they are rea-
sonably representative of the stakeholders targeted by the Flex Plan. This is likely
to be the case if the government or organization is already administering an existing
federal program.

Reports

I would like to conclude by commenting briefly on Section 12 of the legislation.

This section requires GAO to conduct a study of the law’s implementation, and
report to the Congress within 54 months of the date of enactment. The study is to
Jook at the extent of local government use of the law, the effectiveness of federal



100

children and spend it on those that are not within that purview.
But those have been——

Mr. SHays. Just as Mr. Green has spent a good deal of time in
the State legislature, as well as being here, I have as well, and I
have seen it from the State level and the Federal level. I have to
come to the conclusion that the Federal Government creates a shoe
and instead of getting people the size shoe that fits them, it just
gets a size 8 and says everybody has to fit that size.

So when you provide the flexibility, my view of it is that you are
creating a shoe; you are going to have a lot of different shoes that
are going to fit different people and meet different needs. That is
the intent of it.

What it doesn’t get at in some cases is the paperwork problem
of a categorical grant, and it doesn’t necessarily even get, unfortu-
nately, at the pass-through costs. Block grants get at pass-through
costs because you can eliminate the bureaucracy. I served on a
Federal panel that had to look at categorical grant applications.
And you know, candidly, when you got down to the final 50, and
we had to choose 10, I mean, you could almost toss a paper in the
air and grab it. It is difficult at that point; it becomes obviously
quite subjective.

But we are going to try to make sure this bill stays on focus, that
it approaches and deals with the issue that the categorical grant
was provided for.

I don’t have any other questions, given your time requirements.
Does any other Member want to have a follow-up?

I would like to thank you for being here, and I know you receive
high marks for the job you do from Republicans and Democrats
alike, and it was nice that you took the time to come down here.

Ms. PAULUS. Well, thank you for the invitation.

Mr. Suays. Thank you very much.

We are going to conclude with our next two panelists, which are
Peter Lehner, a senior attorney, Natural Resources Defense Coun-
cil; and David Baker, director of the public division of the Service
Employees International Union.

ntlemen, I should have asked you to stay standing because we
are going to swear you in. We swear in all of our witnesses, being
this is an investigative committee, even though this is legislative
hearing.

[Witnesses sworn.]

Mr. Suays. Both responded in the affirmative for the record. We
welcome your testimony and thank you for your patience, and we
are happy that you are here.

Shall we start with you, Mr. Lehner?

STATEMENT OF PETER LEHNER, SENIOR ATTORNEY, NATU-
RAL RESOURCES DEFENSE COUNCIL; AND DAVID BAKER, DI-
RECTOR OF THE PUBLIC DIVISION OF THE SERVICE EM-
PLOYEES INTERNATIONAL UNION

Mr. LEHNER. Thank you. Good afternoon. Thank you for invitin,
me to offer the comments of the Natural Resources Befense Council
on H.R. 2086.

As you may know, the Natural Resources Defense Council is a
national not-for-profit environmental organization with over


41

common waivers. Other organizations, including ACIR, have identi-
fied lists of the most onerous and intrusive Federal regulations for
years. GAO has done likewise. But they still exist.

And I would suggest that this committee, and perhaps in tandem
with some other pending regulatory reform legislation, look at mov-
ing beyond just identifying these troublesome recommendations but

roviding a means to eliminate them or at least reduce their bur-
lens.

There are other specifics in my statement, Mr. Chairman. In the
interest of time, though, I would like conclude. And on behalf of the
National Academy of Public Administration, thank you for the op-
portunity to appear before you.

(The prepared statement of Mr. Stenberg follows:]

PREPARED STATEMENT OF CARL W. STENBERG, DIRECTOR, CENTER FOR PUBLIC SERV-
ICE AT THE UNIVERSITY OF VIRGINIA, REPRESENTING THE NATIONAL ACADEMY OF
PUBLIC ADMINISTRATION

Good morning Mr. Chairman, Representative Towns, and members of the Sub-
committee. I am Carl Stenberg, director of the Center for Public Service in Char-
lottesville, Virginia and a Fellow of the National Academy of Public Administration.
1 appear before x today in my capacity as chair of the Academy’s Standing Panel
‘on the Federal System. The Academy is delighted with the opportunity to supply
input for your consideration of important reforms to federal categorical grants and
the intergovernmental systems for administering them.

The Academy is an independent, nonpartisan, nonprofit organization chartered by
Congress to identify emergi ig issues of governance and to provide practical assist-
ance to federal, state, an al governments to improve their performance. The
Academy’s unique resource is its membership—more than 400 current and former
members of Congress, cabinet secretaries, senior federal executives, state and local
officals, businesspersons, diplomats, journalists, and civic activists who are elected

y their peers.

‘The Alliance for Redesigning Government was created in 1993 as part of the
Academy. The Alliance’s mission is to help generate a dramatically more effective
system of governance by connecting and supporting people at the federal, state, and
local levels who are developing new and better ways to make government work.
Through the Alliance’s bimonthly newsletter, The Public innovator, this network is
up-to-date on cutting-edge practices and reforms being implemented. As always, the
Academy stands ready to share its resources with this subcommittee and the rest
of Congress.

First, we want to express our appreciation to the bill’s sponsor and this sub-
committee for 1 rking liscussion on a series of issues that are vital to our nation’s
future. H.R. (and its companion S.B. 88) propose important steps toward up-
holding the golden rule and challenging the wisdom of the golden rule of public ad-
ministration.

The golden rule, of course, is “Do unto others as you would have them do unto
you.” If federal officials who enact and administer categorical programs were re-
quired to rotate jobs from time to time with those on the front line of developing
and implementing programs, we would no doubt see less “doing unto” and some sig-
nificant “undoing® of restrictions and red tape.

‘The federal categorical grants system has grown like topsy. A 1995 study by the
Advisory Commission on Intergovernmental Relations (ACIR) reports that there
were 618 categorical programs available to state and local fovernmenta in the fed-
eral system as of January 1, 1995. The count included 110 education programs,
more than 100 health care grant programs, 82 social service grant rograms, an
close to 30 grant programs dealing with community and regional development.

‘As the number and variety of categorical grants has grown, so too has the list
of requirements and restrictions imposed through both statute and regulation. Born
of good intentions, in practice they can hinder or frustrate effective efforts to achieve
the ambitious goals these programs have established. Negotiating the maze of man-
dates related to planning, applying for, and administering some of these programs
would test the patience of Job and the wisdom of Solomon.

It also imposes significant compliance costs. Scarce resources are diverted from
the intended recipients to administration and overhead. In his statement introduc-
ing S.B. 88, Senator Mark Hatfield starkly stated the problem: “Many of these pro-