With new direction, NC leaders seek answers for rural areas

acurliss@newsobserver.comNovember 2, 2013 

  • The story so far

    The administration of Gov. Pat McCrory has assumed control of the state’s programs for helping rural areas, taking most of the money and responsibility away from the nonprofit N.C. Rural Economic Development Center. A series in The N&O in May highlighted political influence on grants, money spent on big-box stores and restaurants and overstated claims of job creation. A critical state audit in June said the center had been lax in overseeing grants.

  • By the numbers The state and the nonprofit N.C. Rural Economic Development Center finalized a deal recently that officially brought a three-decades-long arrangement to an end and returned millions of dollars from the Rural Center to the state. The Rural Center will no longer make grants using taxpayer money on behalf of the state. That job now shifts to an arm of the state Department of Commerce.

    Some numbers that help explain the transfer:

    $69.2 million

    Amount transferred to the state that is tied to pending projects.

    421

    Number of approved and pending projects state will now oversee.

    $75,000

    Amount set aside since 2006 for a Hertford County water and sewer project.

    $49,626

    Balance unspent on a $150,000 grant awarded in 2008 for a Warren County program to train workers for heavy equipment and maintenance jobs.

    $348,570

    Amount set aside for a waste irrigation project in Nash County from 2008 until the project went under contract in June.

    $27 million

    Approximate amount in Rural Center accounts not awarded to a project and, as a result, returned to the state’s general fund.

The president of Brushy Mountain Bee Farm in Moravian Falls wrote a letter this summer with sharp words about hiring troubles in his corner of rural North Carolina.

“We have a very hard time finding trained workers,” Steve Forrest wrote to a nonprofit that helps people improve their skills. “Here in Wilkes County, the functional illiteracy rate is over 50% and we find that to hire good employees is labor intensive and time consuming and very costly.”

He wrote that he keeps employees once they’re hired, but “unfortunately, ‘the pickings are slim.’”

Forrest’s business makes and sells a variety of beekeeping products from an expanding operation in a picturesque spot halfway between Winston-Salem and Boone.

But his sentiment highlights just one of the challenges that is holding back growth, development and the economy in rural areas all across North Carolina. It comes at a time when the state is abruptly changing its approach to rural economic development – and at a time when experts agree that there’s no one simple answer for what ails rural areas.

In some places, including on Brushy Mountain, businesses can’t find workers with the basic skills needed for their jobs. In others, there are no jobs for qualified workers as regions continue to struggle amid a long decline in manufacturing, textile and other such operations that for years provided work for families across the state.

The administration of Gov. Pat McCrory, like others before, says helping rural pockets prosper is a critical part of boosting North Carolina’s overall economic health. McCrory, a Republican, and Commerce Secretary Sharon Decker say they want more jobs at higher wages outside the state’s metropolitan areas.

Solutions have proven difficult, a wide range of experts say, and that’s something state leaders acknowledge.

“There is no one program from the state that is going to solve it,” said Pat Mitchell, a former county manager in Ashe County. She has just started work in a new position as the Commerce Department’s assistant secretary for rural economic Development.

Mitchell was thrust into the new role by a series of events over the past few months that led to changes at the N.C. Rural Economic Development Center, the state’s longtime voice for rural areas. A News & Observer series and a critical state audit prompted reforms that were finalized recently. The Rural Center transferred about $100 million to the state, money that lawmakers had provided over the years for rural development that had not yet been spent.

Mitchell and a board of 16 people – 15 of whom have not been appointed – will now lead the state’s rural efforts alongside other nonprofit groups that aim to boost struggling areas, such as the Golden Leaf Foundation, which is financed with tobacco settlement money.

The new Rural Economic Development Division will continue to oversee about $70 million in infrastructure, building and other ongoing projects that had been launched by the Rural Center. Lawmakers will direct an additional $24 million to the state’s new rural division over the next two years, specifically to make grants for water and sewer, gas lines, broadband Internet service, health care facilities and improvements to vacant buildings.

A redefined role

The Rural Center will survive in a much smaller role, focusing on helping small businesses and offering training for rural leaders. It will no longer make grants with state money.

McCrory has visited small-town main streets to talk about his plans for the economy and has stopped at community colleges to talk about connecting them better to jobs. Decker often repeats in speeches across the state that rural areas are vital to her strategy.

“We want to create a net job growth. We want a higher average wage. We want more and better jobs where people live,” Decker told an N.C. Farm Bureau gathering earlier this year, according to her prepared speech. “Those outcomes are going to happen by placing a greater emphasis on existing industry, doing more for small businesses and entrepreneurs, targeting our recruitment on industry sectors – like advanced manufacturing, agribusiness, and others, with a strong emphasis on rural North Carolina.”

Decker has also talked up the idea of building a bigger stockpile of money to use as incentives for luring companies to the state. North Carolina has traditionally avoided large-scale “elephant hunting” in jobs recruitment. Decker has been gauging interest from lawmakers on whether they’d want to compete more with other states for projects that would employ many people.

About one-fifth of the state’s counties – all rural – reported double-digit unemployment in August, the most recent data available. That’s above national averages and the statewide mark of 8.3 percent.

Those counties are distributed across the state, with concentrations of joblessness in a swath northeast of Raleigh and another swath along the South Carolina border between Wilmington and Charlotte.

New direction unclear

Mitchell said in an interview that it’s too early to say what types of policies or ideas will be used to try and solve problems.

She couldn’t yet say, for example, where grants would be made. Under the Rural Center, 85 of the state’s 100 counties were eligible. Lawmakers have allowed as many as 80 counties to remain eligible under the state’s new approach, but Mitchell could not say whether there would be a more defined emphasis than that.

It’s not clear whether the state will emphasize higher wages in its job-creation grants. Many Rural Center grants were made on the promise of creating only minimum-wage jobs.

Interviews and documents also showed politics played a role in grant-making at the Rural Center on questionable projects. Leading lawmakers have said that needs to stop.

Mitchell deflected a question about how she would prevent political influence around the state’s future rural grants.

“Why don’t you ask me that question in about six months,” she said.

No ‘sweeping answer’

Dan Broun, a program director at Durham-based MDC, a 50-year-old nonprofit that has focused on helping rural areas, said wide-ranging research and experts agree that educating people for jobs is the most important piece of any long-term solution.

After that, most ideas are going to succeed or fail depending on circumstances unique to each town, city, county and region, he said.

“There’s not a sweeping answer to fixing what ails rural areas,” Broun said. “So there’s not going to be a decisive, one-size-fits-all way to go at this.”

In its work, MDC has emphasized helping a community take advantage of what it already has, using data and “thoughtful examination of community history” to produce a clear diagnosis.

Only then can leaders tailor their efforts. In one place, it might lead to an emphasis on connecting better to a nearby larger metro area. In others, the focus should be on growing businesses or place or recruiting industry.

MDC counts Danville, Va., as a relatively rural place that has worked well to chart a future amid the textile industry collapse. Software firms are now in old tobacco buildings. The Ikea furniture company opened a factory. A research facility sprung up, with aid from the state and Virginia Tech.

Enrico Moretti, a professor of economics at the University of California-Berkeley who has studied local and regional economies, said the twin forces that hammered rural areas – offshoring and better automation in mills and factories – are not going away.

In an interview and in a recent book, “The New Geography of Jobs,” Moretti says geography remains an important part of labor markets – and he challenges any thinking that broadband Internet access would level the field for rural areas.

Instead, he said, skilled workers are clustering in metro regions and creating an even greater gap between “high-knowledge” areas and all others, especially rural. Raleigh and Durham are benefiting from this, he said, and stand out as an example nationally of what he calls a “great divergence.”

Communities that want to prosper should focus on “innovation sector” jobs that include information technology, life sciences and other digital industries, Moretti said.

“Where there is success, where there is the most transformation, there wasn’t necessarily explicit planning for that,” Moretti said. “It happens organically and often from the success of local companies. There is no single recipe, certainly not from a state level. Each place has to build on its unique strengths.”

He said today’s “innovation” jobs are major economic engines on their own, with each one spinning off about five more jobs in other sectors, such as real estate, construction and services.

But there’s a catch: Innovation jobs only exist where there are quality education and the availability of highly skilled workers.

A need for basic skills

Shane Gebauer, the general manager at Brushy Mountain Bee Farm, said worker skill has been a hot topic in his region. He is a member of the board at the Chamber of Commerce for Wilkes County, where he said even the Tyson Foods plants have had trouble filling open positions.

Unemployment in Wilkes County is at 9.5 percent, with about 2,750 people reporting they are looking for work.

Gebauer said he recently advertised for a warehouse supervisor’s job, a position that did not require a college degree and would pay somewhere in the range of $30,000 annually. The average wage in the county is $31,000 .

Only 10 people applied, he said.

For lower-level jobs, ones that require only some basic manufacturing skills, it has been even harder to find good workers. He said his job applications ask for basic math skills and a paragraph describing why the applicant is suited for the job.

“Those types of jobs that we are looking to fill in our manufacturing ... you do have to be able to read and write,” Gebauer said. “And many of the folks who come to us can’t even do that.”

Many applicants cannot add fractions of numbers, he said, which is needed by people who will use a ruler. Gebauer and the company president both believe education must improve as a way to help rural areas.

“A lot of us, a lot of the businesses in the area that are trying to find good workers and create a position where someone can come in and earn a decent wage, are having problems filling those jobs,” he said. “Education is a huge part of this.”

Curliss: 919-829-4840; Twitter: @acurliss

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