FY 2005 Performance Budget Justification

III. Major Program: Area Development

The Federal Co-Chair requests $66 million for Area Development. This includes funding to support telecommunications and funding for specific intiatives in suppport of ARC's strategic goal. Table 7 illustrates the goals, measures, and benefits that will be realized from this investment.

FY 2005 Initiative: Improve Telecommunications Capacity--$5 million

Expand the telecommunications and broadband infrastructure within the Region and ensure its full utilization.

As local leaders assess the economic future of Appalachia, one clear message reverberates: Appalachia must have universal, affordable access to modern telecommunications and information technology, and the people and businesses of the Region must make this technology an integral component of their daily lives. With technological innovation driving the most remarkable revolution in business, industry and communications in a century—diminishing the relevance of geography—there has never been a better moment for Appalachia to participate fully in the nation's economic mainstream.

There are two primary aspects to achieving Appalachia's full participation in the telecommunications revolution: access and full utilization. Key 2005 strategies for addressing these issues are as follows.

Focus on small business access to the Internet. The first priority must be a concentrated effort to connect Appalachia to the Information Highway through a variety of telecommunication services, ranging from basic Internet to higher-speed, switched broadband access. Access to the infrastructure must be both universal and affordable. These technologies must bring voice, video, and data transmission within the practical reach of Appalachia's communities. Building the infrastructure will require public-private partnerships that encourage private investment and aggregate local demand. It will also require strategic planning to identify gaps, assess demand, and establish priorities. As a practical matter, this means addressing several key issues: expanding the telecommunications backbone to the smaller cities and towns and more remote communities; making the "last mile" connections to residential users; and, providing two-way advanced capabilities that can support widespread business-to-business commerce. Specific program activities related to ARC's focus on small business access to the Internet include the following:

• Develop telecommunications plans;
• Create aggregation of demand projects; and,
• Install necessary infrastructure in distressed areas.

Ensure full utilization of opportunities provided by Internet access. The investment in the infrastructure will be wasted unless the people, particularly the business people, have the appropriate skills to use the technology. Moving Appalachia's businesses into the digital world will require a broad array of technical assistance. Both existing businesses and aspiring entrepreneurs need guidance in how to migrate traditional face-to-face activities to an Internet world, craft strategies for marketing products over the Web, and plan for meeting production and shipping requirements in the Internet economy. Positioning Appalachia to thrive in the e-commerce/Internet environment demands powerful partnerships that link nonprofit organizations, the media, and local Appalachia. ARC serves as the catalyst to ensure the cooperation and commitment of these varied organizations. ARC also supplements the work of other federal programs by addressing barriers that are unique to Appalachia, thus ensuring full participation in programs, and by serving as a clearing house for federal telecommunications activities in Appalachia. Specific strategies related to ensuring full utilization of opportunities provided by Internet access include the following:

• Fund e-commerce training programs;
• Develop planning strategies jointly with the Small Business Administration, National Business Incubator Association, Industrial Development Authorities, Chambers of Commerce, Local Development Districts, Small Business Development Centers, and other organizations that promote IT sector development;
• Supplement work of other federal programs such as those at the U.S Department of Commerce's National Telecommunications and Information Administration, the U.S. Department of Agriculture's Rural Utilities Service, the U.S. Department of Transportation, and others
• Facilitate technology ownership in the home;
• Fund community learning/technology access centers; and,
• Assist in providing enhanced telecommunication services to facilitate smart parks and IT incubator development opportunities.

FY 2005 Initiative: Ensure that the Region Has Infrastructure and Services--$32 million

Inadequate water and sewer service is still a critical issue in Appalachia—particularly in smaller, poorer communities. Without basic services, business and industry is simply not interested in locating in the Region. ARC is working in partnership with others to:

• Support water resources management and cooperative solutions among providers;
• Promote multi-county approaches and partnerships with the private sector to manage solid waste disposal, water, and waste treatment;
• Support waste recycling and new disposal technologies; and,
• Ensure that the needs of remote rural areas are taken into account in infrastructure policy formulation and funding.

FY 2005 Initiative: Increase Workforce Employability--$14 million

Education: Business can neither start nor thrive without an educated, skilled workforce. Education is the driving force behind economic growth. ARC and the states in the Appalachian Region recognize this as is evidenced by the strategies proposed for the upcoming year. ARC and state strategies include upgrading the education climate of the Region, as a whole, to improve educational capabilities, to provide re-entry programs, school-to-work transition programs, and skills training for specific employers located in or moving into the Region. Because no one organization can achieve these goals alone, the strategies have required close coordination with businesses and local school districts, and, in some cases, with the non-profit sector as well as with federal and state education departments. Nurturing partnerships and coordinating efforts of diverse organizations is a one of ARC's key roles. ARC is not the traditional grant-making organization. Instead ARC works with its partners—and takes a "bottoms up" approach to take full advantage of the synergy generated when various partners, with the same goal, focus together on solving regional problems. Specific strategies related to work force employability issues are as follows:

• Work to increase the college-going rate in Appalachia
• Work with the states to start or expand programs which prepare workers for new jobs or to upgrade worker skills and abilities in current jobs;
• Participate in public-private, national, and regional collaborations to improve education and training practices;
• Continue the alliance with the U.S. Department of Energy to provide summer workshops in math, science, and technology;
• Partner with the Appalachian Rural Systemic Initiative, a National Science Foundation initiative that works to improve the math and science scores of students in distressed counties;
• Identify exemplary models of education improvement and devising strategies to duplicate them throughout the region; and
• Identify the need for school readiness, adult literacy, dropout prevention, GED, and school-to-work program and targeting resources to these areas.

Health Care Infrastructure: A healthy workforce and access to health care is also crucial, and Appalachians suffer from disproportionately high rates of chronic disease. Employee absences for medical reasons can be a major drain on productivity and good preventive health care inevitably means less chronic illness and fewer sick days. Also, access to affordable, quality health care can be a major consideration when considering where to locate a new business, a branch office, a new plant, etc., and therefore can impact the economic vitality of the Region. Although Appalachian communities have improved the health of their citizens through expanded access to quality health-care services, affordability remains a problem. Additionally, there are significant challenges related to manpower shortages and persistent health-care problems in isolated and distressed communities. Strategies listed below address these concerns.

• Increase the supply of health professionals in underserved communities through the J-1 Waiver program and by collaborating with the region's medical schools and other health profession institutions.
• Support telemedicine as a means of universal access to comprehensive health care;
• Identify gaps in the delivery of health services, particularly in the areas of oral health, mental health, and substance abuse, and working to eliminate those gaps; and,
• Continue partnerships with Centers of Disease Control and Prevention and various medical centers to institute screening, prevention, and control programs in distressed counties.

FY 2005 Initiative: Diversify the Appalachian Economy--$15 million

As described earlier, Appalachia's economic vitality and stability require a more diversified regional economy. In addition to attracting new industry and retaining and expanding existing businesses, the Region also needs to nurture home-grown firms and encourage innovation and risk taking, as well as foster greater private-sector investment. Appalachia's rich cultural heritage, which includes the Region's natural beauty, products, and crafts, must be better harnessed to provide local economic opportunities.

The Commission launched a regional entrepreneurship initiative in 1997 to foster homegrown businesses and more rural and small town Appalachia away from branch plant recruitment. The regional strategy involves educating current and future entrepreneurs, both youth and adults; improving access to investment capital for local businesses; strengthening local economies by capitalizing on strategic sectors including the Region's rich cultural heritage and nurturing new and existing businesses by creating and supporting rural business incubators. ARC has provided a forum for stakeholders and forged alliances with major financial institutions, national foundations, community colleges and local development organization to pursue this strategy. Specific strategies for 2005 include the following:

• Help communities to develop and implement strategies to cause entrepreneurs to start and expand local business;
• Encourage the transfer of new processes and product technologies that increase productivity and create new entrepreneurial opportunities;
• Support the development of industry networks and trade organizations that promote inter-firm collaborations, resource sharing, and the coordination of business-assistance services;
• Support leadership, marketing and planning efforts to enhance local strategies for economic development;
• Promote efforts to enhance export development by increasing numbers of firms engaged in exporting and increasing exported goods and services volume;
• Work with local chambers of commerce and other similar organizations to market Appalachian locations as good places to live and do business; and
• Make strategic investments in the region to take advantage of business opportunities and business development along the ADHS.