North Carolina Rural Economic Development Center Exposed Part I: Rural Center Scheme Robs Taxpayers

What if I were to coax you into accepting a loan with money I stole from you? You’d probably call the police and have me arrested as a thief and a con artist. But here’s a news flash: The state government and the North Carolina Rural Economic Development Center (Rural Center) have been practicing this scheme for the past 26 years.

Back in the 1980s the North Carolina General Assembly implemented a largely untested method to spur economic growth. Lawmakers established a number of Special Purpose Nonprofits, entrusting them with millions in tax dollars to supposedly create jobs. Such organizations included the Rural Center, the North Carolina Biotechnology Center (Biotech Center) and the Technological Development Authority. Despite efforts in the ’90s to make it self-sufficient, the Biotech Center still relies heavily on tax dollars. Additionally, in a1992 report to the General Assembly, the Rural Center stated their plan to “diversify its funding base,” but twenty years later the Center continues to regularly receive roughly 70 percent of its funding from the state budget. Adding to the “special purpose nonprofit” gravy train is the NC Biofuels Center, founded in 2007 and promised to be permanently funded by taxpayers.

By far, the Rural Center is the biggest source of waste among these organizations. For example, one of the many ventures of the Rural Center is the Microenterprise Loan Program. Essentially, the state government collects tax dollars and then forces rural entrepreneurs into debt to the Rural Center to get a portion of those bucks back to start a small business. The state government then collects taxes on the new small businesses via the income tax, and the cycle continues. What this scheme fails to realize is that if the money were left in the pockets of private citizens, more money would be available to start small businesses in the first place.

But it gets even worse. Not only is the Rural Center state-funded, it is also prejudiced. The Rural Center discriminates on the basis of race and gender in the name of equality and social justice so that only a select group is eligible for the center’s interest-reduction programs. No private lender would ever get away with implementing these criteria. So much for social justice!

Thankfully, the amount of tax dollars tangled up in the Rural Center has declined in recent years. The Center went from receiving a whopping  $143 million  five years ago to $28 million  two years ago. The recently proposed McCrory FY 2013-14 budget recommended trimming funding down to $6 million. According to WRAL, Bill Ray Hall, the center’s president, objected to this, saying that the Rural Center cannot spur job growth with such a small budget.

But don’t be deceived. Just because it’s called the Rural Economic Development Center does not mean that it actually helps rural economies. If there’s one thing politicians know how to do, it’s how to make corruption attractive by wrapping it in the swaddling clothes of innocence. Under the McCrory plan, the Rural Center might only get $6 million, but that does not mean that rural North Carolina will only receive $6 million. It just means that state funding will be distributed to rural counties via different distributional methods. Besides, the Rural Center reports it has more than $160 million in assets and savings. How about using some of that loose change before demanding more tax dollars?

In case you are worried about the state funding decrease  harming the bank accounts of the Rural Center’s employees, most of whom ironically work in urban Wake County, don’t be. Billy Ray Hall, for instance, has been paid well in the past 26 years as the center’s president. His most recent salary is reported to be $214,000 a year. And that’s not counting benefits. Not bad for a non-profit employee.

In the next article we’ll follow the money trail and expose how wasteful this scheme is. Also, make sure to check out the video interview below with Rural Center Board Member and CaptiveAire Systems President (and also Civitas Institute Board Chair) Robert Luddy. He will give you an insider’s perspective and advice on what we can do to clean up the corruption.