Like all budgets, Governor Pat McCrory’s proposed spending plan for FY2013-2015 is based on a set of ideas about how the world works—what spurs economic growth, what creates jobs, and the most effective ways of using state government to achieve these goals. Unfortunately, his proposal for economic development represents quite a few bad ideas, including the sharp reduction in spending for economic development nonprofits that receive state funding through the Commerce-State Aid portion of the budget. These nonprofits provide vital economic development resources for historically disadvantaged and persistently distressed communities and minority populations.
At the same time, he proposes boosting spending on industrial recruitment and other traditional economic development activities that will likely bypass the communities benefitting from the work of these nonprofits, if any meaningful job creation or economic growth is generated at all.
As seen in the following chart, McCrory’s budget for FY2013-14 proposes a more than 55% cut to the overall spending on nonprofits that are geared specifically to providing important economic development support for economically distressed regions and populations within North Carolina. Even more troubling, some of the most important nonprofits were zeroed-out altogether—funding for the N.C. Community Development Association, the N.C. Community Development Initiative, and the N.C. Indian Economic Development Initiative has been eliminated altogether.
Created as a way of addressing past discrimination and persistent poverty, these organizations provide technical assistance, capacity building, and much needed financial assistance for local community development groups working in economically distressed neighborhoods and Native American reservations. In turn, these local groups use the resources provided by these nonprofits to perform a range of economic development activities vital to these forgotten communities, including providing job training services, assisting with affordable housing development, and helping start small businesses in communities that have been left behind in the global economy. They also provide access to capital for many small businesses at a time when commercial banks have refused lend.
Both the governor and leaders in the General Assembly place a lot of stake in the argument that the poor should take responsibility for lifting themselves out of poverty. These economic development nonprofits provide the very tools that help poor families and poor communities achieve this goal, so it makes little sense to eliminate them.
In taking away these tools from historically disadvantaged communities—while simultaneously boosting funding for traditional industrial recruitment activities—Governor McCrory is apparently making the bet that the economic growth he hopes to create through his approach will somehow trickle down to these communities. This is a bad bet, given the historical and current failure of statewide economic growth to lift these communities out of persistent poverty. As a result, eliminating these programs will only cause these communities to fall further behind.