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NC Budget and Tax Center

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.

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For years, North Carolina progressives have frequently been critical of what might properly be described as the state’s “good ol’ boy economic development establishment.” This skeptical attitude — which has been constant under both Democratic and Republican leadership — was/is born of the rightful perception that too much of the money the state spends in this area (be it on tax breaks and loopholes for corporations, direct handouts to businesses by various governors and their Departments of Commerce or on nonprofit economic development agencies) is subject to favoritism and lack of rigor when it comes to demanding real results. 

Given this backdrop, the recent attention on the North Carolina Rural Center is not unwelcome. The recent examination of the Center by the state Auditor provides strong evidence that the Center had many “good ol’ boy” tendencies and didn’t always get all the bang for its buck that would have been desirable (and that it probably led many to believe it was actually generating). In addition, the compensation package for the Executive Director was way too high. 

 All that said, this morning’s editorial in Raleigh’s News & Observer is absolutely right about the need to avoid rash action on the Center’s future. As the editorial puts it: Read More

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There’s more discussion over at the News & Observer about some of the troubles facing the N.C. Rural Center, the public-private economic development group that’s been a mainstay in North Carolina politics and rural parts of the state.

An audit released today by the N.C. State Auditor found that longtime N.C. Rural Center Director Billy Ray Hall had a plush retirement severance of nearly a quarter of a million dollars waiting for him when he leaves the non-profit funded by the N.C. General Assembly. That’s on top of a $221,000 a year salary and a separate retirement account.

The audit determined that Hall’s $221,000 salary was “not reasonable,” according to the News & Observer.

From the N&O’s Andy Curliss:

Auditors also found that leaders of the nonprofit Rural Center have put nearly a quarter million dollars into a special account to pay president Billy Ray Hall, 65, a severance when he leaves the rural agency, which emphasizes its efforts to help poor and struggling pockets of the state.

The severance account for Hall was started in 2003 and board members have put $10,000 to $40,000 a year in it since, according to the audit. The severance account held $241,856 on June 30, 2012.

You can read the actual audit here.

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The News & Observer had another interesting read from over the weekend, a two-part series by investigative reporter Andrew Curliss about the N.C Rural Center.

The Rural Center has traditionally been funded at the tune of $25 million a year by the N.C. General Assembly but is facing considerable uncertainly in current budget negotiations.

Curliss’ first piece (available here) looked at the how money flowed through the center to create low-wage jobs at big-box stores and that the “jobs created numbers” used by the center weren’t accurate.

His Sunday piece (click here) looked at the politics of the center, and how longtime director Billy Ray Hall has run the organization paying special attention to legislators and the politically powerful, including waiving the rules for a movie theater in state Sen. Tommy Tucker’s district and grant money that benefited Gov. Pat McCrory’s  budget director Art Pope’s family business.

From the article:

Officially, the nonprofit N.C. Rural Economic Development Center awards “job generating” grants, funded by state taxpayers, to nondescript government agencies. The city of Rocky Mount. Montgomery County. The town of Indian Trail.

From the center’s files, other stories emerge: Legislators influencing where the money goes. People and businesses from across the political landscape getting in on the deals. Political money men benefiting from taxpayer cash, spent with little notice or scrutiny.

One of the biggest names: Discount store business Variety Wholesalers, whose CEO, Art Pope, is a well-known supporter of nonprofit groups that criticize taxpayer subsidies for businesses. A former Republican legislator, he’s now Gov. Pat McCrory’s budget director.

One of the best connected: Bob Jordan, the former Democratic lieutenant governor who helped start the Rural Center and was a longtime board member. His company was recently part of a grant, but then backed out.

Curliss’ article also referenced a 2012 N.C. Policy Watch report about a Rural Center grant that state Rep. Tim Moore received but later backed out of to expand his law practice.