NC Budget and Tax Center

NC Budget Magnifying Glass: Senate budget cuts to economic development would spawn nightmare on (rural) main streets

This is the 6th post of a Budget and Tax Center blog series on public services and programs that face cuts in the budget process or have been underfunded in past years. See the other posts here.

If the Senate budget passes this year, rural communities are going to be living through a nightmare. Despite promises by the McCrory administration to support economic development in rural North Carolina, the budget passed by the state Senate last week continues long-term disinvestment in the very initiatives that rural communities need in order to create jobs and grow their local economies.

For most of the past 30 years, the state’s primary actor in promoting economic development in the state’s 85 rural counties was the N.C. Rural Economic Development Center. Incorporated as a state-charted nonprofit in the late 1980s, the Rural Center used a mix of state funding and private fundraising to support a range of rural development work—everything from small town revitalization efforts and building rehabilitation grants, to small business lending and workforce training programs.

Over the past three years, however, the legislature has significantly reduced state investment in these important activities, undermining the state’s ability to promote job creation and economic revitalization in rural communities, many of which are still grappling with long-term decline in manufacturing. Even in the darkest period of the Great Recession in FY 2009, the state strongly supported these efforts by funding the Rural Center at $24 million. Unfortunately, the new legislative majority in 2011 significantly reduced support for rural development, cutting the Rural Center’s budget down to $16 million.

Then, in last year’s budget, the General Assembly eliminated all state funding for the Rural Center, instead opting to move some of these operations into a newly-created Division of Rural Economic Development in the N.C. Department of Commerce. As part of this move, the legislature reduced state funding for rural development even further, from $16 million in FY 2012-13 for the old Rural Center down to just $13.8 million in FY 2013-14 for the new Rural Development Division, of which $2.5 million was dedicated to a newly created Limited Resource Communities grant program intended to support economic development specifically in designated low-resource communities (e.g., the poorest 40 counties in the state). And the damage to rural development extends beyond the dollar reductions—the new division simply doesn’t carry out many of the specialized initiatives once conducted by the Rural Center: the state no longer supports small business lending in rural areas, targeted rural workforce development, or small town revitalization efforts.

In this year’s budget proposal, the Senate went even further in dismantling the state’s ability to promote job creation and revitalization in the most distressed rural communities. Although the Senate allows the Division’s appropriation to rise to $13.4 million in FY 2014-15, $350,000 of this is one-time money, which will vanish next year, and perhaps more importantly, the proposal eliminates the grant program for limited resource communities, a reduction of $2.5 million.   As a result, if the Senate budget is enacted, total state investment in rural economic development will dropped from $24 million in 2009 to just $13.3 million in 2014—at a time when rural joblessness remains high and Governor McCrory says that supporting rural North Carolina should be a top priority.

This long-term disinvestment in rural economic development is a waking nightmare for many rural communities, and the Senate budget only makes it worse.

One Comment

  1. jeff nelson

    June 13, 2014 at 9:33 am

    The House is “offering” a 5% raise for teachers. This issue is not about a raise. It is about commitment and honor.. The NC House is now offering an average 5% raise. While it seems to be positive first step…this does not honor the commitment the state made, in writing to it’s teachers. This is not what we based our careers on. This is not what we budgeted our lives around. This is not a compromise, it is a bone. WE are not asking for a “raise”…we are asking for the state to honor it’s commitments, unfreeze the salary scale and move us to our correct step. So far over 550 people have signed the petition,representing 140+ communities and stretching from the mountains to the coast. This is what a commitment really is… Please add your voice…click the link, sign and share the petition. Show this state you have honored your commitments and believe the state should do no less… .http://petitions.moveon.org/sign/unfr