McDowell County, W.Va.
McDowell County, W.Va., lies in the heart of impoverished Appalachia

Mountain money: Federal tax dollars miss the mark in core Appalachia

By Mark Ferenchik and Jill Riepenhoff
Dispatch Staff Reporters Sept. 26, 1999

Mercedes-Benz and BMW vehicles roll off assembly lines in thriving Alabama and South Carolina cities, thanks in part to $8.5 million in federal money designed to help poverty-stricken Appalachia.

In northeastern Pennsylvania, tourists arrive more quickly at Knoebel's amusement park because $500,000 in Appalachian funds helped expand a congested intersection.

In Alabama, a bronze statue memorializes Olympic track legend Jesse Owens - a monument paid for with $75,200 from the same pot.

While such spending seems out of bounds, the projects all meet congressional guidelines and fall within the government's boundaries of Appalachia - a region that slices through 13 states from New York to Mississippi.

Yet the heart of Appalachia still aches.

A six-month Dispatch investigation of spending by the Appalachian Regional Commission - established in 1965 to address the grinding poverty and hopelessness across the region - has found that the money often bypasses the neediest counties. Two-thirds of those counties are clustered in southeastern Ohio, eastern Kentucky and West Virginia. How could federal tax dollars earmarked to help struggling residents of Appalachia - an area made of equal parts rugged beauty and hard luck - find its way to projects with questionable impact on living conditions?

Ron Eller, a University of Kentucky professor who has studied Appalachia for three decades, has a simple answer: "The ARC is essentially a governors' slush fund."Eller is no firebrand against the agency. Indeed, he is on the payroll as the commission's resident scholar.

Since its creation, the commission has sprinkled $7.4 billion across the region - a figure that when adjusted for inflation translates into $16.4 billion. "Appalachia has no champion today - it has no one who speaks for it," he said. "Places with more political clout get the most money."

Places such as Tuscaloosa, Ala., where $5 million helped Mercedes-Benz in 1994 run water lines to a new factory in a county with 4 percent unemployment. Places such as Spartanburg, S.C., where $3.5 million for a BMW plant in the early 1990s bought sewer lines and worker training in an area that Money magazine described as one of the nation's "booming locales where you can find a job and live easy."

And places such as Birmingham, Ala.; Chattanooga, Tenn.; and Pittsburgh - large cities with diverse economies that collected a surprising share of commission money, a Dispatch analysis has found. "That money should be targeted to the most needy areas, to the most needy people," said the Rev. Jesse Jackson, who toured southeast Ohio and other struggling Appalachian communities last fall to focus national attention on their plight. "I don't understand those priorities."

Even the man tapped by President Clinton in 1994 to lead the agency agrees. "There's much more of a need to invest in the areas left behind," said Jesse L. White Jr., a Mississippi native who serves as federal co-chairman of the commission. Why hasn't the agency done that? Why hasn't it made more of a difference in the heart of Appalachia - the place where President Lyndon B. Johnson launched his War on Poverty in 1964? Observers cite two main reasons: pork-barrel politics and the design of the commission.

defining the region

Patchwork of projects

Whether prosperous or poor, any of the 406 counties that make up Appalachia qualifies for commission money. About a fourth of Appalachia's counties - 108 - are considered economically distressed, meaning they have unemployment rates of 8.6 percent or higher, poverty rates of 19.7 percent or higher and per-capita incomes of $12,934 or lower.

Nonprofit groups, colleges, local governments, school districts, health-care providers and other groups submit requests for funds. The governors of the 13 states and the agency's director in Washington decide which proposals win grants. Nothing requires them to award the bulk of the money to projects in the neediest counties.

Because each state gets a lump sum of Appalachian money that can be awarded regardless of need, a crazy-quilt pattern of spending has emerged.

The agency's operation and spending history underscore the federal government's record in core Appalachia: more talk than money, more promises than progress.

In an analysis one commission official called unprecedented, The Dispatch studied the 22,169 grants awarded from fiscal 1966 through fiscal 1998. The results show the consequences of politics and procedure:

"Those numbers really trouble me a lot," said Ohio Gov. Bob Taft, who took office in January.

"The state has a greater obligation in these underserved areas," he said. "The area has been neglected, and we have some opportunity to do things there."

Yet decades of promises ring hollow in the many communities still struggling with the most basic needs: decent jobs, safe drinking water, paved roads, adequate housing, qualified doctors.

For example, Owsley County, Ky. - the nation's fourth-poorest, with 65 percent of its children living in poverty - ranks No. 381 in commission spending. And No. 390, Gilmer County, W.Va., hasn't seen a dime from the commission since 1977 - even though nearly a third of its residents live in poverty.

More talk than action

Even with the difficulties of daily life, people are not fleeing Appalachia.

In fact, since 1970 the population of Ohio's nine distressed Appalachian counties has grown more than three times as fast as the state's as a whole. Distressed counties in Kentucky and West Virginia also have more residents today than in 1970.

Some 22 million people live in Appalachia, including 2.7 million in distressed counties.

Their needs remain the focus of the Appalachian Regional Commission, the only such agency left from the War on Poverty; the others charged with rejuvenating swaths of the country fell to the budget ax by the early 1980s.

Though not the only government agency that provides money for Appalachia, the commission is the only one with Appalachia on its door.

When the task force assigned to study the region by President John F. Kennedy issued its findings in 1964, the group noted that the federal government had published extensive reports on Appalachia in 1902 and 1935.

"The conditions described in each report are discouragingly similar," the 1964 report said. "Their recurrence in these studies is the chronicle of a region bypassed." The next year, the Appalachian Regional Commission was born.

Children playing.

(Above) After a day of cleaning houses for $7 an hour, Angie Stevens, left, winds down in the rustic hollow in Adams County, Ohio, where her family lives in an 18-foot camper. Stevens' elder son, 7-year-old Garrett, challenges her to a game of checkers. Because they have food, shelter and jobs, she and her husband, Matthew, count themselves among the more fortunate in Adams County, where unemployment and poverty rates remain high.

Critics of the agency contend that no amount of tax dollars can solve the persistent problems in the region. "Most of these communities have had money thrown at them," said former U.S. Rep. Scott Klug, a Wisconsin Republican who fought unsuccessfully in the mid-1990s to kill the commission. "Do they need another 35 years?" Others, such as Jesse Jackson and the University of Kentucky's Eller, say a larger commitment from the federal government is the only hope for communities too poor to help themselves. "This is a part of the country that's worth saving," Eller said, "a part of the country that's good."

Money maze

At its inception, the commission had a twofold mission: to build highways to ease the isolation that was suffocating Appalachian residents and to boost their education, health and standard of living. The Appalachian Development Highway System quickly became the cornerstone of the agency's strategy. The commission has spent nearly two-thirds of its money - $10.4 billion, after accounting for inflation - on the 3,025-mile network of roads. About 600 miles remain to be completed during the next 20 years. The other $6 billion in agency money went to a hodgepodge of projects.

Because the commission operates in relative obscurity with little oversight, few Americans - residents of Appalachia included - have heard of it. Federal auditors last took a comprehensive look at the agency in 1979, when the General Accounting Office reported that too much money was going to Maryland and South Carolina and too little to economically ailing communities. South Carolina wasn't part of the area defined as Appalachia by the Kennedy task force. The original boundaries encompassed West Virginia and parts of nine other states: Pennsylvania, Maryland, Ohio, Kentucky, Virginia, North Carolina, Tennessee, Georgia and Alabama.

By the time the commission was created, however, lawmakers and governors from South Carolina and New York, eyeing the pot of federal cash, had persuaded Congress to make their states eligible for assistance. Mississippi was added two years later. In the early years, the commission targeted social ills, building health clinics and day-care centers, teaching illiterate workers to read and setting up programs to nurture children.

By the mid-1970s, however, the 13 governors were taking issue with the social-program priorities. To prime the pump of economic development, they insisted on a new strategy - one focusing on access roads, water lines, sewer pipes and other infrastructure. When it stopped targeting money to the problems of people, the commission lost its way, said Amy Glasmeier, a Penn State University professor who has studied the agency and worked as its resident scholar. "For 20 years," she said, "they didn't do anything heroic."

Renewed attention

For the first time since the 1960s, Appalachia finds itself on the political front burner. Congress made an increased financial commitment to the agency last October, setting aside $2.3 billion to continue work on Appalachian highways and $207 million for economic and social-development programs. In July, Clinton became the first president since Johnson to visit southeastern Kentucky. "We know that government can't solve these problems alone," he told a crowd of 4,000 in downtown Hazard. "But we know that we'll never get anywhere by leaving people alone, either."

Accompanying Clinton on the trip was Jackson, who believes that even many of those directly serving the region - the 13 governors and 26 senators from the Appalachian states - care little about the region because it's poor in votes and campaign cash. "Most poor people...are low on the totem pole of national politicians," Jackson said. "Resources must prioritize the poorest counties, the neediest people."

That's the newest challenge for the federal commission, according to its director. "We've continually gotten better and better at spending our money," White said. Before White's appointment, 20 percent of the money not earmarked for highways was channeled to distressed counties. That figure now is 30 percent. Among the 20 counties receiving the most commission aid since fiscal 1994, however, 11 are not considered distressed. Three of the top 10 counties have never been declared distressed and historically have reaped millions in agency money: Allegany, Md.; Spartanburg, S.C.; and Tuscaloosa, Ala.

But other nondistressed counties that have cashed in previously - such as Allegheny County, Pa., home to Pittsburgh - have received nothing from the commission since White took the helm. Eller believes that millions of dollars should be pumped into the remaining distressed counties. "We need to design a federal program to get the money to the people who need it the most." Without assistance, he said, those counties likely will be forgotten. White vows to keep working to reduce the number of counties in distress, depicted on agency maps in bright red.

"The test that our job will be done," he said, "is when you look at a map of America and you don't see a clump of red."

Copyright 1999, The Columbus Dispatch

How the agency works:

Congress approves a budget for the Appalachian Regional Commission.

The agency uses a formula to determine how much each of the 13 states receives.

Governors weed through proposals submitted by nonprofit groups, colleges, local governments, school districts, health-care providers and others seeking grants.

State leaders weigh those requests against their own initiatives, then submit a list of recommended projects to the commission.

Once a year, the governors collectively approve or deny grants. Most often, governors sign off on projects in other states in exchange for political support for their own state's proposals. One of the governors serves as states' co-chairman, representing their interests.

Agency program analysts review each project, making sure the requests meet broad guidelines set by Congress. A project gets money only when a grant is signed by the federal co-chairman, who is appointed by the president to head the agency.

ARC mission statement

"To be an advocate for and partner with the people of Appalachia to create opportunities for self-sustaining economic development and improved quality of life."

GOAL 1 - Appalachian residents will have the skills and knowledge necessary to compete in the world economy in the 21st century.

GOAL 2 - Appalachian communities will have the physical infrastructure necessary for self-sustaining economic development and improved quality of life.

GOAL 3 - The people and organizations of Appalachia will have the vision and capacity to mobilize and work together for sustained economic progress and improvement of their communities.

GOAL 4 - Appalachian residents will have access to financial and technical resources to help build dynamic and self-sustaining local economies.

GOAL 5 - Appalachian residents will have access to affordable, quality health care.