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Introduction
The Infrastructure Investment and Jobs Act (IIJA), CHIPS and Science Act (CHIPS), and the Inflation Reduction Act (IRA) are making billions of dollars available to communities for their community and economic development. For rural places, the opportunities are significant. A recent report by some of the co-authors cataloged $464 billion in funding appropriated by the laws that either statutorily include rural places or address issues that are highly relevant to rural development.
You are viewing: Unlocking investment in distressed rural places
An important segment of this funding is focused on supporting new and existing physical infrastructure, an essential component of economic growth and productivity. One analysis of 68 studies from 1938 to 2008 suggests that a 10% increase in public infrastructure investment yields a 1.2% increase in national output in the long run.1 Federal investment in infrastructure is also associated with improvements in health outcomes and increases in employment.2 And, for every dollar the government puts into airfields, electric and gas facilities, and transportation, one estimate suggests the private sector will invest $2.38 in the long term.3 Importantly, the benefits of these investments are common across different forms of infrastructure—building, operating, and maintaining roads, electrical lines, and internet cables have all been shown to accelerate economic growth.4
The investments offered by the IIJA and other recent legislation thus represent a significant opportunity for advancing equitable rural community and economic development. Yet many rural communities face significant barriers to accessing available public resources. Often led by local governments with limited staff or volunteer elected officials, they struggle to identify appropriate federal funding opportunities and successfully secure and manage such investments.
Rural communities experiencing economic distress encounter additional obstacles. Their fiscal constraints often mean that match requirements can act as an immediate barrier to access. Competitive infrastructure grant and loan programs also generally require highly complex technical applications with specialized engineering requirements—and such technical expertise and assistance is both costly and difficult to find in rural communities.5 As a result, underinvestment in infrastructure and the use of outdated designs have been a long-standing issue in rural America that has led to numerous challenges for communities, such as high vehicle fatality rates, exposure to contaminated drinking water, failing wastewater management systems, and a lack of broadband internet.6
The federally chartered regional commissions offer unique models to address these challenges. The commissions receive federal funds but have governance structures that include partnerships between state governments and the federal government. They have a mandate to direct funding to and assist local communities experiencing economic distress.
To develop insights about the effective targeting of IIJA and other public infrastructure investments to vulnerable and underdeveloped rural communities, this policy brief compares the past infrastructure spending by three active, multi-state regional commissions—the Appalachian Regional Commission (ARC), the Delta Regional Authority (DRA), and the Northern Border Regional Commission (NBRC)—to the funding allocated to the same regions from selected federal infrastructure programs. This comparison, which analyzes the geographic targeting of investments from both sources, offers insights into opportunities for directing federal funds to economically distressed rural places.
Regional commissions
While Congress has chartered eight regional commissions (see Map 1), until recently only ARC, DRA, and NBRC have been actively providing funding to communities in multiple states. This analysis focuses on the funding activity of these three commissions. They all share a mandate to reduce poverty and address economic distress within their geographic areas, serve multiple states, and share common features of governance. However, it is important to recognize that each commission is a distinct institution with its own origin story and history and unique processes for program development, design, and deployment of resources. Collectively, they do not constitute a formally integrated “system,” nor do they cover the entirety of the country.
Map 1: National map of the regional commissions and authorities
Source: Congressional Research Service, Federal Regional Commissions and Authorities: Structural Features and Function, pg. 55.
In keeping with the idiosyncratic nature of their histories and coverage areas, each has a unique way of defining distress. Each also has different benchmarks for what level of funding must be directed to distressed communities and uses different requirements for matching funds, reporting, and project development. These differences can be quite consequential. The ARC, for example, uses a more restrictive threshold for counties it categorizes as “distressed” than either the NBRC or DRA, which is reflected in the proportion of its coverage population that falls into its “distressed” category. Table 1 summarizes some of these differences.7 Additionally, within the regional commissions, there may also be differences between states that add further complexity.
Table 1: Distress definitions for the three active, multi-state regional commissions
Source: Defining Distress
Roughly half of each commission’s population that lives in a distressed area (per each commission’s definition) also lives in a rural area. The overall proportion of its coverage area that is both rural and distressed equals 10% for the ARC, 39% for the DRA, and 35% for the NBRC.
Infrastructure investments in areas covered by active regional commissions
Given the increases in associated federal funding in the IIJA and associated pieces of legislation, we conducted an analysis comparing the targeting of infrastructure spending by the ARC, DRA, and NBRC, as well as selected federal infrastructure programs for fiscal years (FY) 2018-2020. While funding from the regional commissions and federal programming plays an important role in supporting communities, these are not the only resources available for infrastructure projects. State and local governments provide significant additional funding, as do revenues from utility companies.
Infrastructure investments by the three multi-state, active regional commissions
To start, we examined the extent to which the regional commissions focus their funding on infrastructure. Prior to the passage of the IIJA, the ARC, DRA, and NBRC had received $495 million, $80 million, and $60 million, respectively, in total annual appropriations from FY2018 to FY2020.8 Of that amount, each commission dedicated a significant portion of its investments to infrastructure, representing approximately 57% of ARC, 75% of DRA, and 82% of NBRC annual spending during the time period studied.9 For the DRA, places that meet their definition of distress were given the highest priority for infrastructure investments.
The NBRC’s description seems to describe the thinking behind the commissions’ emphasis on supporting infrastructure. “Infrastructure … is modernized to better support business retention and expansion, and better position the region to compete in the global economy.”10
The regional commissions allocate these funds in the form of grants rather than loans or loan guarantees. This is especially important for rural and under-resourced areas, which often have limited tax bases and thus constraints on their ability to take on significant levels of debt. In general, grants are more accessible and manageable for such places.
To further understand the effectiveness of the investments by the regional commissions in reaching rural and distressed communities, we analyzed the extent to which this infrastructure funding went to rural distressed places. We used each regional commission’s definition of distress and included only projects that listed five or fewer counties as recipients to ensure we were focusing on funding that was precisely targeted. We also focus our analysis on funding from the regional commission to grantees for community facility and community infrastructure projects that include community development, telecommunications, energy, pre-disaster mitigation, and water and wastewater investments.11
As shown in Table 2, each of the commissions allocated the majority of their infrastructure funding to distressed rural areas. Both the ARC and DRA allocated more than two-thirds of their infrastructure funding to distressed rural communities—nearly seven times the proportion of the population in distressed rural communities for the ARC, and close to double for the DRA.
We also examine the types of infrastructure the commissions are funding. Within the broader category, the subset of priorities funded by the ARC, DRA, and NBRC includes community development, telecommunications, transportation, energy, and water and wastewater projects.12 The DRA also designates a small proportion of its funds toward disaster mitigation initiatives.13
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Excluding transportation funding, each commission directs the highest portion of its infrastructure funding for water and wastewater projects. The share of ARC infrastructure funding that goes toward water and wastewater projects is particularly high, more than triple the next largest category, sending just over three-fourths of the funding to rural and distressed areas.14 NBRC funds the lowest proportion of distressed rural places, with just over 60% of its funding going to water and wastewater.
The DRA and NBRC allocate large shares of their infrastructure budgets to community development, and both generally demonstrate success in targeting distressed rural places.15 During this period, the ARC allocated substantially more funding for telecommunications infrastructure than the other commissions, nearly 40% of which reached distressed rural communities.
Overall, the regional commissions show a high degree of effectiveness in targeting funds to reach rural distressed places. However, they differ in their infrastructure funding priorities, as measured by proportions of spending. These differences in spending levels and targeting may reflect their regions’ unique needs and capacity, as well as differences in climate and terrain.
Sources of matching funds in the Appalachian Region
The regional commissions require communities to provide matching funds from other sources when funding infrastructure projects. In reporting its infrastructure investments, the ARC reports the full project funding, including the match of various other sources, while the main analysis focuses on the direct investment by the ARC. The ARC’s matching fund requirement is lower for distressed places, which allows these communities to unlock larger investments since the need to come up with matching funds can place a significant burden on disadvantaged and distressed communities.
As shown in Table 4, the ARC provides about one-third of the total project funding to distressed rural communities, and more funding to non-distressed rural than to distressed urban communities, despite their match requirements depending largely on economic status (not on urban status).16 This may be in response to the capacity constraints that rural places face in grant application processes; the ARC dedicates significant resources to building capacity within the region. Successful infrastructure grants awarded by the ARC—themselves an indicator of some level of capacity—appear to pool funds from other sources. However, the composition of matching funds differs by rural and distress status as the share from other federal sources in rural distressed places is lower than from state or local sources. The relatively high amounts of state funding that projects in these counties attract suggests that the federal-state grantmaking structure of the ARC may be beneficial in packaging state funding with its own funding for distressed rural communities.
Federal infrastructure investments in areas covered by the three multi-state, active regional commissions
The federal government has long been an essential source of funding for infrastructure. Total spending by the IIJA will likely surpass $850 billion, much of which is new investment, including funding in the following categories:17
- $361 billion for roads and bridges
- $98 billion for energy investments
- $55 billion for drinking and clean water infrastructure
- $14 billion for environmental programs
- $64 billion for broadband expansion
Importantly for the purposes of this brief, the IIJA also appropriated nearly $1.4 billion in new funding to the five active regional commissions. This amount is relatively small in comparison to the totals for the aforementioned infrastructure priorities (with major portions of the funding going to state offices),
highlighting the specialized nature of the regional commissions and their focus on serving economically distressed communities. At the same time, the scale of funding represents a step-level increase over the annual appropriations the commissions had been receiving prior to the passage of the law, signaling that Congress sees an important role for the regional commissions aligned with the objectives of the IIJA.
To enable comparison between the infrastructure investments made by federal agencies and those deployed by the regional commissions, we analyzed a set of federal programs that provided infrastructure funding during FY2018-FY2020 that are similar in nature to those managed by the regional commissions and whose objectives have outsized importance to distressed rural communities. We also highlight additional funding to these programs from recent federal legislation, a potential indicator of their continued relevance from the perspective of Congress, in Table 5.18
Analysis of selected federal grant funding
While the regional commissions allocate their infrastructure funding exclusively via grants, some federal infrastructure programs extend loans as well. We first focus solely on the grants deployed through the select federal programs in the service areas covered by the regional commissions.
In the ARC and NBRC service areas, only 19% and 44%, respectively, of the grants from the federal programs we examined reach distressed rural places. These portions are significant, almost double the proportion of the rural distressed population in the ARC, and nearly 25% more than the proportion of the rural-distressed population in the NBRC. Yet they still fall short of the portions spent in the same areas by the regional commissions themselves. In contrast, over 70% of the selected federal grants in the DRA service area reached rural and distressed counties. This may be due to the widespread prevalence of rural and distressed counties within the DRA’s service area.19
We also analyzed the federal spending by infrastructure category and found mixed results.20 Some categories have very high rates of reaching distressed rural places—100% of the telecommunications projects in this data that occurred within the DRA service area went to such places—while others had very low rates, like the 1.2% of pre-disaster mitigation funding that reached distressed rural places in the DRA. In general, the regional commissions spent a higher proportion in these places, an unsurprising result given their mandate.
The scale of funding available from federal programs (relative to the regional commissions) again demonstrates the ability of federal programs to disburse more funds and reach more communities (see Table 8). In nearly every category, the amount of federal funding spent far outpaces the amount spent by the regional commissions. Yet, as mentioned above, these funds have a mixed record of reaching distressed rural communities and even reaching all regional commissions. While the sample size is small, this demonstrates one drawback of the federal programs: Communities must compete with a much larger pool of applicants for funds.
For example, funding from the BRIC program, the sole representative within the pre-disaster mitigation category, reached $41.5 million across the three regions. At the same time, the DRA spent just $873,800, and neither the ARC nor NBRC spent any money on the issue. The lion’s share of the BRIC funding, approximately 64%, was spent within the DRA service area, though just 1.2% of that funding went to distressed rural places. No community within the NBRC received grant funding from any of these federal telecommunications programs in this time period.
Generally speaking, the regional commissions target higher rates of funding to distressed rural places, although federal agencies often fund such places at rates higher than their relevant population proportions as well. The distress mandate for the commissions is one obvious explanation for such findings, though it is challenging to identify a single driving factor for the federal programs’ mixed results. Among other potential reasons, federal programs are often very specific in their objectives and eligibility requirements; leadership of a particular agency may drive differences in programming; and staffing levels and capacity within agencies to support eligible entities may vary.
Definitions of distress matter too. The distinction in spending percentages is particularly striking within the ARC region. Despite operating with a significantly smaller budget than the federal programs in question, the ARC targeted more federal infrastructure spending to rural and distressed areas within its jurisdiction. ARC’s definition of distress (bottom 10% of counties nationally), which is much stricter than the other regional commissions, highlights the difficulty of federally managed programs in reaching the most vulnerable communities.21
Overall, this analysis suggests that the regional commissions may be filling both a gap in funding and a gap in mission left by other federal infrastructure programming. In other words, their mandate to target distressed communities results in their excellent track records in reaching communities that federal programs often do not. In some categories, the proportion of their infrastructure funding reaching these areas is significantly more than the federally managed programs we analyzed. Each of the regional commissions also spends more per award than the federal programs within their service areas. The difference is most pronounced in the ARC, as the average ARC award is 1.9 times greater than the average federal award in the region.
Taken as a whole, these comparisons highlight the regional commissions’ role in bridging the infrastructure gaps in historically underserved areas. However, the strategies employed by the commissions differ. The ARC, equipped with comparatively substantial appropriations and extensive operational history, has identified water and wastewater projects as a priority, and significantly outpaces the share of federal funding to rural and distressed communities in this domain. In the DRA region, while other federal infrastructure programs have been more effective in getting funding to distressed and rural places, the DRA is making complementary investments to help address the needs of its region.
Notably, the map reveals that due to the substantial resources of our selected federal programs, they can extend many relatively small grants within these service areas. This results in a greater number of counties receiving infrastructure funding when contrasted with projects funded by the regional commissions.
Analysis of selected federal loans
In contrast to the regional commissions, some of the selected federal infrastructure programs use loans as a key funding tool. These loans are often much larger in size than the grants provided. However, the fiscal constraints associated with servicing a loan can create a barrier for distressed rural communities. In the geographic region of the ARC, which has the strictest definition of distress among the three regional commissions, it is unsurprising that only 15% of the overall loan capital from these federal programs flows to rural distressed places, which are likely to be circumspect in taking on additional debt if their budgets are fiscally constrained.22
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In the DRA region, a higher portion of the loan funding from federal programs is directed to places that the DRA classifies as rural and distressed. However, the proportion of loans to rural and distressed is almost equal to the proportion of loans to rural reflecting the fact that nearly all of the rural places in DRA’s coverage area are classified as distressed.
The community development, telecommunications, energy, and water and wastewater infrastructure programs that we analyzed include a substantial amount of loans. Thus, we examine the loans in these categories and their allocation to rural and distressed places. The targeted funding share from our selected federal loan programs is relatively stable across the three service areas, ranging from 44.6% to 52.8%, while the comparable proportion of federal grant programs is more variable, with as low as 19.2% in the ARC service area and as high as 73.1% in the DRA service area.23
Conclusions
The analysis suggests that the regional commissions had an excellent track record during the time period we examined in targeting their funds to distressed rural places in their regions. Despite their smaller budgets, within the confines of our analysis, they are also generally providing larger grants for infrastructure to those communities than the federally managed programs that we examined. The ARC analysis in particular suggests that it is getting infrastructure funding to the most distressed rural places.
The analysis does not definitively establish the reasons behind the regional commissions’ effectiveness in targeting funding to distressed rural communities. Factors may include the exclusive use of grants; the physical presence, local relationships, and expertise of staff; the ability to provide technical assistance and flexibility on match requirements; facilitation of partnerships among local stakeholders; and program responsiveness to locally determined needs. Involvement of state governments in funding strategies may also be a factor. Additional research is needed to separate the most consequential factors that are important to the success of the regional commissions in getting resources to rural distressed communities.
Recommendations
a. Systemizing the regional commissions: As mentioned previously, each regional commission is a distinct entity with particularities in their origins, definitions, strategies, and capacity. At the same time, they represent a model that is distinctive within the landscape of deploying federal funds, and each is showing success in reaching the most distressed rural communities in their coverage areas. While the regional commissions have engaged with each other on an ad-hoc basis, establishing a process for bringing the regional commissions together regularly would provide the basis to exchange knowledge, practices, successes, and challenges; support further data collection and analysis regarding the success of their models; capture the key elements of the success of their models; and provide an opportunity to create a collective voice and sensibility when engaging with federal departments and agencies. This would allow the commissions to collectively leverage their experiences and identify best practices for sharpening their impact. The Domestic Policy Council could facilitate such a group.
b. Formal and regular engagement with federal agencies: The regional commissions have also engaged with other federal agencies on specific programs, but the process is not institutionalized. Formalizing such efforts, making engagement more direct and regular, would provide the opportunity for federal agencies to learn more about the key elements of the approaches regional commissions are taking to reach rural distressed communities and enable more sustained collaboration to support such places. The Domestic Policy Council or National Economic Council might provide a platform for collective engagement and exchange. In the absence of formally creating a collective organized effort, individual federal departments and offices tasked with deploying infrastructure funds should view the regional commissions as important resources and seek to exchange experiences, data, and challenges. For example, federal agencies might consider engagements with regional commissions to provide technical assistance and lower match requirements to rural and distressed communities that are eligible to apply for funding.
c. Elevated role in IIJA, IRA, and CHIPs implementation: Given the time constraints and scope of the resources afforded by the IIJA and IRA as relates to infrastructure, many rural distressed communities will find it difficult to identify, access, secure and manage funds available for their infrastructure needs. To maximize the public benefit of these investments by getting this funding to the communities that need it most, federal programs, state offices, and other intermediaries tasked with deploying this funding should consider formally partnering with the regional commissions to enable targeting to the most distressed places.
This could take many possible forms: One approach might be to funnel other federal programs’ funding through the regional commissions, and another might entail joint funding opportunities from the regional commissions with other federal programs.
Regional commissions might also provide dedicated complementary grant funding opportunities that could serve as matching funds for federal infrastructure assistance. To get the necessary infrastructure money to the most vulnerable communities, creative packaging of the resources of the regional commissions with other federal agencies could enable access to expanded technical assistance, grants, and other capabilities that enable greater success rates for rural distressed communities.
d. Legislative action: Congress can take action to elevate the role of the federal chartered regional commissions, strengthen peer exchange of knowledge and a collective approach to locally led development, and improve coordination with other federal agencies. The reauthorization of the Economic Development Administration and the federally chartered regional commissions passed with bipartisan support in Congress and signed by President Biden on January 4, 2025 takes a major step forward by calling for a regular meeting of the regional commissions convened by the Secretary of Commerce through the Assistant Secretary for Economic Development. To enable infrastructure investments in the places where they are most needed, our analysis suggests that legislative action to enhance and formalize collaboration between the regional commissions and other federal agencies could increase the extent to which the most distressed rural places nationally are able to access infrastructure funding.
Appendix I: Breakdown of IIJA investments in regional commissions
Appendix II: Methodology
We used the following data sources in this piece:
- County-level urban and rural classifications are from the 2013 Office of Management and Budget delineation of metropolitan statistical areas, in which counties in metropolitan statistical areas are considered urban and all others are considered rural.24
- County distress status is based on annual definitions produced by the regional commissions.25
- Funding levels from the regional commissions from 2018-2020 are produced from administrative data provided by each of the commissions.
- Federal funding data from 2018-2020 are from USAspending.gov.
Regional commission awards
While the details provided by each of the commission’s administrative data differ, all provided grant-level information on funding, the county (or counties) that was targeted, the year of performance, the project type, and a project description. A subset of infrastructure projects was created by filtering project types. For the ARC, we include community facility, community infrastructure, and transportation projects. We include Basic Public Infrastructure and Transportation for the DRA, while the NBRC uses a binary infrastructure definition in their reporting.
Geographic targeting was determined by the county listed for each grant. For multi-county projects, funding was split uniformly across counties. Any grant that went to more than five counties was dropped from the data. We then merged county-level project data with county-level rural status.
Any county that was considered distressed or included an isolated area of distress during the year of grant performance was coded as distressed for the analysis. The type of infrastructure project was classified based on the project description for the DRA and NBRC. The project subtype was used to do so for the ARC. Funding levels were aggregated by rural and distress status in total and by project type.
Federal awards
Federal infrastructure awards were downloaded from USAspending.gov. We gathered any award with a place of performance in a state that includes a county within the ARC, DRA, or NBRC in the set of selected infrastructure programs (see Table 5). From this set of projects, we kept any county-wide, city-wide, or zip code-wide project that went to a regional commission county based on the county of performance for the award.
For state-wide projects, we used text analysis on the project description to determine the counties that the award reached. For these projects, funding to multi-county projects were split uniformly across each county, and any project that went to more than five counties was dropped.
The funding for each grant came from the total federal obligation, while the loan values came from the total loan amount. We used the fiscal year of the award base action date to determine the project’s year. After determining the county and year of performance, we merged the distress status for that county during the award year. Like the regional commission analysis, any federal award that went to an ARC or NBRC county that included an isolated area of distress was considered as an award to a distressed county. Funding levels were aggregated by rural and distress status in total and by project type (see the footnote of Table 7 for the programs included in each project type).
While the data used for this study represent the most complete sources of funding from the regional commissions and the select federal programs, several concerns around data quality do exist. Funding totals toward infrastructure from administrative data provided by the regional commissions generally have a small degree of error when compared to the publicly released figures. The differences are small; however, we were unable to exactly recreate the totals listed in their annual reports. Data from USAspending.gov also has data quality issues. While these data have improved in recent years, issues related to data accuracy arising from incomplete data and deficiencies in business process controls exist during the period we analyzed.26
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