Testimony Before the Committee on Environment and Public Works
Subcommittee on Transportation and Infrastructure
Regarding Oversight of the Appalachian Regional Commission
Prepared and Presented by Leslie Lilly, President and Chief Executive Officer
The Foundation for Appalachian Ohio
Nelsonville, OH
Tuesday, August 8, 2000

Several weeks ago I attended a town meeting organized by the Appalachian Regional Commission on strengths and strategies in economically distressed communities of the region. Of all the things said that day, I was most stunned by a remark made in passing by Governor Paul Patton of Kentucky. He said, simply, that the future of coal is dead.

You are here today in a community and part of the region where the future of coal and by its extension, exportation of resources, was presumed to be forever. Think minerals, timber, clay, oil, gas, and river networks. Think agriculture, manufacturing, mining, construction, transportation, and trade. The region is blessed with an abundance of natural resources around which eternal enterprise and expansion of industry seemed not to be an unreasoned or unwarranted expectation. That strong note of optimism built this town square, raised this beautiful opera house, and gave flower to what turned out to be, on the lifetime scale of people and places, a short lived era of prosperity.

Times changed. The economy changed. Assets left and were exported from our region that never came back. It didn't happen all at once. It didn't occur in the absence of community leaders that recognized that a sea-change was coming. They struggled to find alternatives. That challenge has always been formidable in the face of rural. Rural is not your one-size-fits all kind of place. Singular dependencies are hard to break precisely because it takes a great deal of ingenuity and sustained investment to take something in its natural state and to transform and add to its value, pursue markets, and supply demand when demand, by definition is so far away and fickle. You get something done one time and you tend to think you have accomplished your goal in a rural area and rightly so. Every economic benchmark achieved by this region has been hard won. So it isn't surprising that this combination of enterprise and success never mind the durability of it all still live on in this century. Quick fixes and short-term political memory go a long way in the face of long-term obstacles to diversified development.

The remains of development-past linger on in Appalachian Ohio. This is commerce whose vestige is based in industries that have since been transformed by globalization and innovations in technology and communications. The region has the same old problem, but it has an updated and more modern look. Same dance, new shoes: not enough jobs, and not enough quality jobs in Appalachian Ohio that ensure a decent standard of living for those who would make and have made the choice to live here. But it doesn't stop there: the lack of jobs begat a lack of many other things that are needed to form the basis of a healthy cycle of community development:

When the pace of development faltered in Appalachian Ohio or didn't occur with some cumulative measure or succession of positive effects, it meant that roads were neglected or never built or never completed; that transportation systems were not put in place or strategically positioned to attract and support commerce; that public investments were not made that ensured better government, better public facilities, better schools and better schooling; that access to health and medical services were limited at best, or, at their worse, nonexistent; that basic infrastructure water, sewer, and phone service, developed like a patch work quilt. Some communities have it all while in others, feasibility and construction costs are still an issue; and that the pattern of this underdevelopment extended itself into present circumstance and is now manifest in the digital era as the digital divide. Appalachian Ohio is not ready and not wired for the 21st Century. If the marketplace solely drives the creation of that capacity, there is healthy reason to suspect that the region will never be connected in ways comparable to urban communities unless the public interest prevails.

Put all these things together and the conditions of economic context and geographic place together fostered a condition and culture of poverty for many of Appalachian Ohio's people. It is not just an attitude or a problematic mindset; or, as some would accuse, having an absence of resolve to do better or differently. It is a new verse, to the same song, sung in a present reality, that jobs in Appalachian Ohio have continued to vanish. While the state's metro areas have been scrambling to find workers, Appalachian Ohio suffered a series of devastating job losses in 1999 and more are predicted to follow as the region's traditional base of manufacturing and mining continue to shrink.

In a rural market, the magnitude of the loss of 1,200 jobs ripples out into the region in countless ways, leaving behind a wake of economic decline and despair that penetrates deep into ancillary businesses and services. Were he to ask, Governor Patton would only find agreement in Meigs County that coal is, indeed, dead, at least for the 800 miners that will be the last to turn out the lights as they leave their jobs, many after over 20 years of labor in the mines. No one yet knows where next they may turn to work or even if there will be work.

You are thus in a region that stands straddled across a threshold, with one foot deeply rooted in past social and economic history; and the other extended, tentatively poised, ready to strike out and step onto new ground and enter into a new era. Because of this, you are in a place of stunning contradictions: where 40% of the children ages 3-4 in Athens County live below the federally-defined poverty level, and live out this devastation in the shadow of a world class university; where all the resources of the world can be accessed on the internet highway, but if you want to drive somewhere in the region you mostly can't get there from here (or if you can, you'd better have plenty of time) because there isn't a modern road system; where young people and adults will soon have access to the latest and best in training on e-commerce at Hocking College but if you own a small or medium size business, you can't get a high speed connection to the Internet in most communities; and where the rise between 1984 to 1996 in real per capita income based on 1992 dollars isn't enough cash today for you to go out and pay the book value on a used car made in '92. Appalachian Ohio is like a house that is being remodeled while you live in it: you know it is going to be so great when the job is finished but, in the meantime, there's the devil to pay. So do we need the Appalachian Regional Commission? Is its job done so we can all go home and spend these federal dollars more wisely, or on something or somewhere else, or perhaps not at all? Based on unemployment, average per capita income, and poverty rates, Appalachian Ohio is the fourth poorest among Appalachian states. Federal money, as in all things characterized as "big government", is declining and spending by the state in Appalachian Ohio averages $3 per capita. Kentucky by comparison spent more than $18 per capita last year in its Appalachian communities. The paucity of both state and federal resources being targeted to Ohio's rural areas of greatest need is an issue of both public and private proportion, but neither sector is capable or able to alone shoulder the leadership required to transform the region's shrinking economy. This is the crux of an important issue: who are and will be the future partners to accomplish what remains to be finished? The Foundation for Appalachian Ohio is unique among grantees of the Appalachian Regional Commission (ARC). In 1998, the Foundation was the recipient of a three-year grant from the agency in the amount of approximately $400,000. The grant made by ARC to the Foundation is, to my knowledge, a type of grant for purposes unprecedented in the agency's history. The Foundation for Appalachian Ohio is one of the more recently created foundations among all those that exist that represent an important network of community funds that are established in and across Appalachian Ohio. The Foundation for Appalachian Ohio was created in 1998 by a broad based group of community leaders concerned for the future of Appalachian Ohio. Appalachian Ohio continues to suffer from high rates of poverty, unemployment, and under-employment. In 1995, approximately 1.4 million people or about 12% of all Ohioans resided in the Appalachian region of the state. Yet less than 2% of the state's foundations assets were held in the region. Philanthropy is thus another of the ingredients that is incomplete or missing that together form an infrastructure for community development in Appalachian Ohio. When the region is compared to the rest of the state and nation, permanent philanthropic assets and institutions are now largely absent or undercapitalized in Appalachian Ohio. This is an issue and an opportunity: Appalachian Ohio's capacity for self-help depends in large measure on having the means through which the region can invest in itself. There has never been a more promising era within which to grow and promote charitable giving in the region. The nation is experiencing the greatest expansion in its economy in modern history; and a vast, inter-generational transfer of wealth representing trillions of dollars will occur over the next ten years. Appalachian Ohio deserves to benefit from this abundance. The region, if it is to successfully tap and leverage this expansion of charitable wealth, must have home-grown capacity. In the state of Ohio, of the top ten independent foundations by assets, of the top ten community foundations by assets, of the top ten corporate givers by giving, none are located in Appalachian Ohio. The corollary to where permanent assets are held is "as to where grants are made" and by that measure, Appalachian Ohio is regrettably no where high on the priorities of the "Big Ten" in Ohio no matter what the brand or the origin of the philanthropic wealth may be. The continued growth and expansion of community foundations and other forms of organized philanthropy in the region is fundamental if the region is to attract and build the permanent assets that can be used to help communities in the region do the work of helping themselves. The philanthropy gap in Appalachian Ohio is an issue that is of concern to all our communities. It affects the extent to which a strong nonprofit community can exist and flourish in Appalachian Ohio; it affects the present and future sustainability of the organizations that public and private grantmakers seed and grow; and it affects the capacity of our communities to effectively network, collaborate, and together work in relationships and with the array of resources needed to accomplish results that are in the context of deeply rooted and formidable barriers to change.

As a new form of venture philanthropy, the Foundation for Appalachian Ohio is a convergence of public, private and community resources focused on increasing the entire constellation of resources with which to promote charitable giving toward the development of communities throughout the region. Clearly, the scale and breadth of what must be accomplished is the work of many hands and many institutions in many places if the region is to reverse an historic pattern of decline.

Implicit in the Foundation's vision is the value of partnerships and collaborations in helping the region to do better by working together. And while there are many old deficits with which the region must reckon, it is the region's opportunities for positive change that stimulated the Foundation's creation. There has never been, in our estimation, a climate more favorable or the timing more fortuitous to help Appalachian Ohio reach higher ground on a litany of old issues that have troubled the region's economy; and for all time, to help the region claim its equitable share in the prosperity of the state and the nation. There are strengths on which the region can build. Appalachian Ohio is fortunate to have the committed presence of the approximately twenty community foundations and the additional private sources of charitable funds that now exist in and/or serve Appalachian Ohio. Other communities are working hard to accomplish a similar charitable presence in their areas. Seldom is there a need to convince community leaders of the incalculable worth of a strong philanthropic partner in helping to increase the bottom-line needed to attract and grow a community's assets. At the Foundation, we believe philanthropic resources need to be grown at two levels in Appalachian Ohio: regionally, to help the region do better by working together; and locally, to help local communities capitalize on their own individual and unique opportunities. But building up a treasure chest for the sake of the size of the treasure is a hollow pursuit if, at the end of the day, that is all there is. At the heart of this enterprise is the love of the region and the gift of giving. It is the people, the communities and the relationships that foster improvement in the lives of families and children in the region that is the embodiment of the spirit of philanthropy. Philanthropy is, above all else, about creating partnerships. Sustainable development in poor and underserved communities requires at its core a process involving the breadth and commitment of diverse community partners public, private, and philanthropic. It takes communities that work like a community together, with each other, for each other, and for the long haul. The Foundation's presence is witness to what can happen when the public sector works to leverage for all time, the assets every community has hidden, waiting like diamonds to be unearthed if the right people, the right partners, the right ideas, and come together at the right time to make a difference.

Appalachian Ohio has had its fair share of palliatives that cured nothing but remedied the symptoms. We believe the investment made in the Foundation by the Appalachian Regional Commission is its signature upon a crucial and timely recognition: indigenous, philanthropic institutions are a crucial and needed partner if communities are to have the capacity to build on and successfully leverage the comparatively shorter term investments enabled by the ARC and the public and private sectors. It is within the power and resources of every community to invite and promote acts of charitable giving that, in time, become permanent sources of regional endowment. We think the region is on the precipice of something new, something exciting, and something that will work. For our purposes today, it would be impossible to consider the likelihood of continued progress in making positive change without the committed presence of and partnership with the Appalachian Regional Commission. There are many places where it is making a deeply felt and genuine difference in the lives of our region's citizens. The federal commitment to focus on the unique challenges of Appalachia gives substance to the idea that federal citizenship means something. Appalachia's fortunes are indivisible from the fortunes of the nation. The State of Ohio's unprecedented public investment of $1 million in the Foundation signals a broad-based, public recognition that, for the state of Ohio to truly prosper, prosperity must be broadly shared. It is a principle and action that sets a new standard of engagement for those who claim to be serious about the business of building community no matter where they or the community might be. At its core are a philosophy of abundance and a commitment of responsibility. The Foundation supports the mission of the Appalachian Regional Commission. The agency is a knowledgeable and seasoned practitioner in the craft of what has and hasn't worked well in Appalachia. The focus and benefit of that experience is beginning to bear fruit that has been a long time in the making in Appalachian Ohio. This region and many of its sister communities may have, for the first time, a genuine opportunity to get their feet anchored and wholly planted in today's modern economy. The Appalachian Regional Commission deserves much credit for the opportunity that now illuminates the region's future possibilities. It should be allowed to finish the job.

Attachments

"Resources for the Region: A Model for Building and Sustaining Permanent Investment Capital in Appalachia" By Dean Schooler, Schooler Family Foundation and Leslie Lilly, Foundation for Appalachian Ohio

Data on the philanthropy gap in Appalachian Ohio Resources for the Region: A Model for Building and Sustaining Permanent Investment Capital in Appalachia

Dean Schooler, Schooler Family Foundation, 4414 Apple Way, Boulder, Colorado 80301 Leslie Lilly, Foundation for Appalachian Ohio, P.O. Box 456, Nelsonville, Ohio 45764 March 2000

Decades have passed since the original groundswell of interest in Appalachia, more than a generation in fact. But, what has come about once usually comes about again. And so it is with the rising tide of interest in Appalachia these days.

We are experiencing interest and involvement from the private sector, government, and foundations, and the media, among others. Each has been urged to take its interest one step further and provide more resources or provide resources more effectively in other words, to invest more and invest more wisely in the Appalachian Region.

And yet, behind all the excitement and energy, something is missing. We expect to invest more, but we have no comprehensive model for achieving an even greater rising tide of resources and investment. We expect to invest more wisely, but we have no measure of success that values self-sustaining momentum and permanent capacity and assets, objectives that prior efforts failed to realize. Consider three conditions that may be holding us back, despite the renewal of interest in and present wave of excitement and energy about Appalachia.

First, those of us who are focused on the Appalachian Region are doing our work and fulfilling our commitment in isolation working, if you will, in our own silos from our turfs, as if each of us alone is shouldering the entire burden.

Second, and related to the first, we are often looking to one another with expectations that someone else can help, or what could be worse, that someone else can provide us the resources to do our work. Thus, government convenes foundations and hopes they can help. And foundations look to government for funding philanthropic associations. And both look to the private sector financial institutions, utilities, and other corporations for investment capital. Seen this way, the public, philanthropic and private sectors are each working to leverage resources and investment capital from one another. Seen another way, we are all fund raisers and we are all donors.

We need to realize that the problem is the size of the pot of resources we are allocating and that the pot is quite small. We need a bigger constellation of resources and a larger universe of donors than those that currently exist. Per capita giving and endowment levels vary widely in Appalachian counties, but per capita giving and endowment, private investment, and government spending are in the aggregate very, very low. Focusing on philanthropy alone would unleash untapped resources in the region that could help significantly in creating and sustaining cycles of place-based community development that is regionally-managed and "owned." We might also discover that existing resources and dollars could be more strategically applied.

Third, also related to the first and second, is the absence of common ground or a civic space, free of the agendas embedded in government, foundations, and corporations in which we might converse, plan and work together on building investment and capital; raising resources; and providing leadership for the Region. While some of us have and provide more resources than others, and in that sense are not equal, we are equal in our interest and in our intention.

Windows like this don't happen often. It is a continuum of resources - private, public and philanthropic - that has the best chance of succeeding in helping the region to build on its full array of opportunities. We need to be able to link resources and capacity together and separately in ways that can help actualize the right idea at the right time in the right place with the right leadership. Entrepreneurship and flexibility are key. Sufficient capital and capable leadership, provided they are nimble, will effectively respond to opportunities. But sufficient capital and capable leadership are themselves insufficient because, in order to operate effectively, they require preconditions like well-oiled working relationships and established communication networks, heretofore lacking in the Region.

Were we to assume that the first, second, and third are right for now, what institutional perspectives and cultures, aside from the media, could be brought together for this conversation? What "divides" currently exist, with respect to the Region, might be bridged in this uncommon yet common conversation?

o a geographical divide between those inside and those outside (the region) o a philanthropic divide between types of foundations and foundation funds o an institutional divide between foundations, government, and the private sector o a technological divide between those with technology and those without technology o a digital divide significantly disadvantaging small to medium sized businesses, rural communities, and philanthropic nonprofit organizations (in the region) o a mission divide between private venture capital and philanthropic venture capital (or between profit and not for profit venture capital) o an income and wealth divide between those that have and those that have not o a political divide between parties, partisans, and political leaders o a cultural divide between developed and less developed communities and between urban and rural populations o a racial and ethnic divide between persons white and persons of color o a strategic divide between what can be politically sustained in the short term and what must be practically accomplished in the long term in persistently poor communities

Clearly, we could be building better bridges and creating a conversation space between capital in its three forms - one, financial capital (market investments, philanthropic grants); two, social and human capital (leadership development, networking, constituency-building, relationship development, service, volunteering), and three, civic capital (leadership, engagement, participation).

We could be finding more ways to convene and create cross-conversation between those inside and outside the Region who could be investing in the Region.

We could also be addressing what may be no more than an unfortunate consequence of language and metaphor -- that we are unable to see how the public sector (local, state, regional and federal agencies and political leaders), private sector (individual investors, investment firms, financial service institutions and utilities), and philanthropic sector (private foundations, community foundations, corporate giving programs) are each, in their own way, from within or from without, investing and providing resources to the Region. Borrowing a phrase from Paul Newman as "Cool Hand Luke," "what we (may) have here is a (not insignificant) failure to communicate."

Seen broadly, where are the resources, ideas, and contributions for this conversation?

o Federal Agencies (Appalachian Regional Commission; Departments; Federal Reserve o Congress o Governors and State Legislatures (including Office(s) of Appalachia) o Local Governments o Private Sector (Financial Service Institutions, Investment Firms, Corporations, Individual Investors, especially Private Venture Capital Firms) o Non-Governmental Organizations [for example, Ohio Appalachian Development Fund, Corporation for Ohio Appalachian Development] o Philanthropic Sector: · Grantmaking Organizations (Corporate Foundations and Giving Programs, Community Foundations, Private Independent and Family Foundations) · Local and Regional Community Foundations · National/International Associations of Grantmakers (Council on Foundations) · The Forum of Regional Associations of Grantmakers, especially New Ventures in Philanthropy · Regional Associations of Grantmakers (Council of Southeastern Foundations, Atlanta and the Ohio Grantmakers Forum, Columbus) · Others including the Aspen Institute, Rural Development and Community Foundations Initiative (RDCFI), Community Strategies Group · The Investment Fund for Foundations, Charlottesville (TIFF)

Consider three ideas for bringing these caregivers and investors together for a common conversation.

First is a project to develop a marketing campaign complete with literature, web sites, speech material and so on focused on Ways to Give and Invest in Appalachia and, for those within the Region, Ways Appalachia Gives and Invests in Itself. Some themes, were alliteration to be important, could be wealth, work and wisdom...or investment, initiative and interest....or the more traditional, stewardship-oriented time, treasure and talent. Possibilities for the ways to give and invest could include:

o Government investments o Private investments o Philanthropic grants and program-related investments o Investments from foundation endowments and portfolios (asset allocations for community re-investing, venture capital) o Region-focused or advised and directed funds in foundations o Planned gifts (lead and remainder trusts, estate and gift planners, advisors, including the Planned Giving Design Center and other information sources) o Newly-organized foundations (community foundations, family foundations) o Citizenship, civic participation, leadership and ambassadorship o Volunteer service (board service, advocacy; remaining true to roots as especially sons and daughters of the region staying home, coming home)

Second is a pilot project in one sub-region, perhaps Appalachian Ohio, to develop and implement ways in which those inside and outside the region and those from the public, philanthropic and private sectors can better work together for the benefit of and increase their investment in the region.

Third is a conference convened jointly by the public, philanthropic and private sectors and community sectors and charged with addressing these issues, building the relationships we need, and breaking new common and uncommon ground.

Windows of opportunity like this don't happen often.