When Congress passed the American Rescue Plan (ARP) in March 2021, state and local governments in North Carolina were to receive more than $8.8 billion in federal funding for pandemic relief and recovery. Since then, our elected leaders have understandably focused on how to spend the funds. From addressing the eviction crisis to the childcare shortage, ARP funds will allow state and local leaders to make a significant down payment on meeting the urgent needs of North Carolinians still reeling from the pandemic.
Less discussed is a different question: How can state and local governments make sure public contracts using ARP funds are distributed in an equitable and inclusive way?
With ARP dollars, state and local governments can expand jobs and build wealth with significant impacts for Historically Underutilized Businesses (HUBs) and the communities they empower.
New analysis of federal contracting data, however, should alarm anyone concerned with equity in public contracting. Recent work from the National Equity Atlas found that entrepreneurs of color received less than 12% of federal contracting dollars in 2020 — despite the fact that people of color represent 39% of the U.S. population and own 29% of all businesses.
The authors also found that the overall number of small businesses winning federal contracts had fallen dramatically over the past decade — declining 40% since 2010 — and that federal contract spending was largely concentrated in just 17 congressional districts. Where public procurement could be used to foster equitable economic development, it is instead concentrating public dollars in a select few communities.
Anyone hoping for more encouraging data from North Carolina will be sorely disappointed. The state’s own 2021 Disparity Study found that state agencies, community colleges and universities have made abysmal progress toward the modest goal of awarding 10 percent of public contracts to Historically Underutilized Businesses. Across all five industry categories in the report, aggregated from FY2014 to FY2018, Minority Businesses Enterprises never received more than 2.02 percent of contracts awarded by state agencies.
The same story holds true at the local level in North Carolina. Public school systems are frequently the largest employer in their local community, but they typically spend only a small percentage of their purchasing power with businesses of color — even when located in majority-minority communities.
Analysis from NCREG has shown that in 2018 only 1.3% of goods and services contracts from Warren County Schools were awarded to minority-owned businesses, in a county where 62% of the population are people of color. The financial impact that equitable public contracting could have in communities of color is considerable: In Wake County alone, equitable public contracting by the public school system would infuse businesses (and communities) of color with an additional $30 million in revenue annually.
It’s no exaggeration to say that the American Rescue Plan presents a once-in-a-generation opportunity to target financial resources to Historically Underutilized Businesses in North Carolina. Yet many of the ideas proposed by the NC General Assembly to support businesses have failed to center the experiences of these businesses that have been excluded from prior help, and far fewer supports have been put in place to ensure public contracts are accessible and to address systemic barriers to opportunity for HUBs.
For decades, entrepreneurs of color have persisted in navigating a well-documented obstacle course of structural barriers: a lack of access to capital, networks, large public contracts, and technical assistance. The data on disparities in public contracting are particularly stark, and there is no shortage of evidence-based strategies that state and local leaders could pursue to close these gaps once and for all:
- Evidence from accelerator models — including one in Greensboro — shows that with strategic investment and support, HUBs are poised to thrive. The state’s exemplary network of community colleges and HBCUs are perfectly situated to house and deliver these supports to entrepreneurs of color.
- State leaders can take immediate action on the Disparity Study’s 11 recommended policy changes, including one to include full-time HUB coordinators within each state agency and to strengthen the HUB office’s enforcement authority.
- In designing programs to deliver relief funds to small businesses, state and local leaders can choose to make funds available as grants — rather than loans — to increase access to aid for HUBs of color.
North Carolina needs a plan to get to the other side of this pandemic in a way that doesn’t keep in place the barriers that have blocked businesses owned by people of color and other locally owned firms from reaching their full potential.
With ARP funds, our state finally has a real opportunity to make sure every business has the tools and opportunity to thrive, not just the large, profitable multi-state corporations that continue to be the focus of legislative leaders. Only time will tell if we’ll seize it.
Sally Hodges-Copple is a former intern with the Budget & Tax Center, a project of the NC Justice Center. She is currently working with the Budget & Tax Center to support Historically Underutilized Businesses and support equitable economic development.