Rural Center will survive, but as a shadow of its former self
Despite fears that the North Carolina Rural Economic Development Center would meet its maker after losing its state funding, the center’s board of directors decided to persevere, albeit in a diminished capacity.
“Right now, the decision is that the Rural Center will remain,” said CeCe Hipps, a rural center board member and the president of the Haywood County Chamber of Commerce. “It will be a slimmed down version of the Rural Center.”
The state froze funding to the N.C. Rural Center after the Office of the State Auditor released a report in July showing a lack of oversight within the nonprofit. Not long after, the General Assembly passed its budget, which eliminated millions in state funding to the center. During the last couple months, leaders at the Rural Center have been working to figure out whether the nonprofit had a future.
A five-person subcommittee is leading the Rural Center through the transition process, making recommendations for what to keep, identifying possible future funding and working through any legal hurdles of transitioning from a state-funded organization to a completely self-sustaining entity.
“Their primary responsibility was to look at things the Rural Center was doing — projects, programs and operations — that could and should be kept in operation,” said Bill Gibson, acting chairman of the board of directors and former head of the Southwestern Commission in Bryson City.
When the state froze the Rural Center’s monies, about $90 million in grant funding was left in limbo. Many organizations that had already been notified of grants feared that the money they’d been promised wouldn’t come through. However, the state announced plans to dole out the pledged funds.
“The best news is all the grants that were promised will be paid,” Hipps said. “Those are in the pipeline to get final approval by the state budget director.”
The first full-year budget of the new Rural Center will only amount to about $1.5 million — about $30 million less than it is used to operating with.
“It is going to be a very tight budget,” said Hipps.
All the state money previously in the Rural Center’s budget will now go to the state Department of Commerce, which will take over the grant-making functions of the Rural Center with a new rural economic development division.
The new Secretary of Commerce Sharon Decker has worked with the Rural Center “hand and glove,” according to Gibson.
“It seemed the better side of wisdom to her to lift what she saw at the Rural Center,” Gibson said.
To get through the transition, the center will use $700,000 it has accumulated through grant administration fees. By year’s end, its staff will have shrunk, and the nonprofit will have a better idea of exactly what will stay and what will go.
“We are getting by on that,” said Brian Crutchfield, head of the Rural Center’s transition committee.
The Rural Center is expecting to then operate on about $1.5 to $2 million a year, a combination of private donations, corporate sponsorships and grants — and as a back up can draw from about $11 million in savings.
The savings is interest accrued from money the state awarded the Rural Center. The funds were placed in the bank and gathered interest over time. While the state comptroller has said the interest money belongs to the Rural Center, no final decision has been made. The state could decide to ask for the money back.
The new state rural economic development division will also hire some of the Rural Center’s employees and will use part of the center’s building in Raleigh. Already the Rural Center has trimmed its staff. A couple weeks ago, 15 people were handed pink slips.
The 50-person operation will eventually be whittled down to between 10 and 15 people. The Department of Commerce is expected to hire 15 of the Rural Center’s employees by the end of this month to run the grant programs under the rural division.
“(Decker’s) promise to ensure a seamless transition of the Rural Center’s physical infrastructure section to the Department of Commerce should be fully trusted. Current grantees and future applicants will notice no difference between the excellent customer service they received from the Rural Center and that they will enjoy from the Department of Commerce,” Gibson said.
Although the state will rent out part of the Rural Center building, the nonprofit will remain there as well. As long as the Rural Center stays in its current building, it has an agreement that its mortgage payment is waived.
“I think that is the big reason they are staying in the building,” Hipps said.
Several Rural Center programs will continue, including its small business loan program and leadership training. The programs are those that the state would not offer.
“It became obvious quickly that there was a group of services and programs offered by the Rural Center and operated by the Rural Center that did not lend themselves well to being transferred to the state,” Gibson said. “They are not typically the kinds of things state government does.”
Those programs included the N.C. Small Towns Economic Prosperity Program, which helps town with planning and funds growth initiatives; the N.C. Microenterprise Loan Program, which provides small business loans to those who may not qualify for bank loans; and the Rural Economic Development Institute, which offers training for community leaders.
“We had to keep the programs that we knew were winners and also had jobs associated with it,” Crutchfield said. “That was a large part of picking and choosing what we keep and what we lose.”
As part of the new Rural Center, some previously free programs may come with a fee.
“They may have to charge for some of those things,” Hipps said.
One thing’s for sure, though, the nonprofit won’t be what it was.
“We will never be the Rural Center we were, but there are lots of good things I think we can still accomplish,” Crutchfield said.
For many within the Rural Center, the shutdown felt sudden.
“It was really a house of cards that all came down at once,” Crutchfield said.
Leaders also felt the state did not take enough time to evaluate the Rural Center or give it adequate time to remedy problems found by the auditor.
“‘Our house was torn down before they took a look on the inside of our house.’ I thought that was a really good statement because it really was like what happened,” Hipps said, recalling a fellow board member’s sentiment.
By the numbers
The North Carolina Rural Economic Development Center has grown for 25 years as a nonprofit distributor of millions in state grant funding, giving out about $600 million during its lifetime for projects intended to boost economies in rural areas. However this year, all that state funding was cut. The agency will no longer continue in a grant making capacity, as that function has been transferred to a new rural economic development arm of the commerce department. But the Rural Center will continue to exist.
• Annual budget prior to cuts: $33 million
• Estimated budget after cuts: $1.5 million to $2 million, from a combination of reserves and private fundraising