Urban Parochialism and Government-Funded Rural Business Development Programs and Services

The landscape of government funding for rural business development support services introduces a number of pressures that hamper rural economic developers' ability to serve their businesses in the rural communities in which they operate. Founded on the premise that urban communities are the more cost-effective and cost-efficient rural business development service providers, the bulk of taxpayer dollars have long-supported urban economic developers in rural development, while rural economic developers scramble for their breadcrumbs. The post-COVID new normal illuminates the partisan preeminence of urban parochialism over the strategic allocations and distributions of taxpayer dollars for rural economic development.

1.??????High Match Requirements Create a Disparate Impact on Rural Organizations.?The current Federal and State grant environment skews the competitive landscape toward urban organizations by virtue of requiring high-dollar matching funds that rural communities simply cannot afford. The nationwide pattern of siting Small Business Development Centers, Veterans Business Outreach Centers and Women’s Business Centers in urban areas should have warranted further inquiry long ago. But, unexplainably, it hasn’t. Despite ongoing conversations with government leaders, Federal and State grantors continue to site new centers in urban communities. A more equitable model is needed.

2.??????The Aggregation of Performance Data Obscures Urban Grantees’ Inability to Serve Rural Businesses.?The State of Montana’s data show that the urban grantees receiving Federal and State grant support to serve SMDC’s six-county service area have struggled to do so.?For example, over the last 11 years, the SBDC Network has served an average of 1 business per county per year for more than a decade. That constitutes a trend—and cannot be summarily dismissed as statistically anomalous. Importantly, SMDC does not view the lack of performance in rural areas to be due to organizational failure on the part of urban grantees. In fact, their performance in their urban areas is exemplary and their impact powerful. Rather, SMDC believes the data reflects the ill-fitting SBDC model in Montana’s ultra-rural geographies. Too, the sociopolitical, economic and cultural differences among rural entrepreneurs and urban entrepreneurs are not inconsequential. The SBDC Network is needed in rural Montana, but in a secondary, supportive role rather than in a primary, fixed role.

Because SMDC’s Federal and State grantors primarily fund SMDC-sponsored projects, the vital data on SMDC’s business technical assistance and support activities are not well-captured. SMDC has not had the funding to formalize and standardize these activities. It has been more of a makeshift, response-prompted activity that has been considerably strained by the exponential growth in requests for business assistance since the onset of COVID. In the last quarter alone, SMDC served more than 400 of the 1,600 rural businesses in its service area. No one is capturing these rural data, nor would urban grantees' performance data suggest that anyone do so. Clearly, their 11-year data suggest there is no demand for services here.

3.??????Federal Grants to Urban Organizations for Rural Business Development Are Much, Much Greater Than Those to Rural Organizations. The SBA’s program funding for Small Business Development Centers, Veterans Business Outreach Centers, and Women’s Business Centers is typically $300,000 per center per year. Comparatively, USDA’s programs include “business development centers” among the lists of eligible activities but strongly discourage requests exceeding $35,000. Congressional appropriations simply are not enough to fund the mandate the agency has been given. The difference is that grants for urban organizations are adequate to support an entire center; grants for rural organizations will barely fund a part-time advisor. The crux of the problem is that urban organizations are funded to serve rural businesses and do not do so while rural organizations serve rural businesses and are not funded to do so. The model is flawed. It is a zero-sum game. A new model is needed to level the playing field for all players.

The benefits of meeting the unique needs of rural entrepreneurs and rural small businesses in the rural communities within which they operate are many:

1.??????Rural businesses contribute substantially to gross domestic product and gross national product.

2.??????Rural businesses are rural innovators and rural job creators.

3.??????Rural businesses create community assets and community wealth.

4.??????Rural businesses are strong exporters of goods and services.

5.??????Rural businesses create economic opportunity.

6.??????Rural businesses are value generators and create a sense of civic and community pride.

7.??????Rural businesses enhance the State of Montana’s regional competitiveness and draw our youth back home.

Postscript

Snowy Mountain Development Corporation is a 501(c)(3) nonprofit rural economic development organization in Central Montana organized for the purpose of building community and economic capital in a six-county area at the geographic heart of the State of Montana. It is wholly-rural and sparsely populated by more than 22,000 residents sprawled over nearly 13,000 square miles. It is financially underserved, with no lending institutions in two counties and only a handful in the others. Many residents travel hundreds of miles or more to access capital. Montana's Small Business Development Centers, Veterans Business Outreach Centers and Women's Business Centers that serve SMDC's six-county area are located 100-miles-and-more from SMDC's rural businesses, reflecting the evolution of the models toward the cost- and time-conveniences of its hosts and advisors rather than toward the cost- and time-conveniences of the rural businesses they were (purportedly) designed to serve.

Snowy Mountain Development Corporation is the only all-woman-staffed economic development organization in the State of Montana. It is the Nation's only economic development organization EnVision Center (US HUD); a State-Certified Regional Development Corporation (MT DOC CRDC); and a Federal Economic Development District (US EDA EDD).

If you would like more information about SMDC's Rural Business Development Center Model and our current efforts to secure government funding to support and implement this Model, please email: [email protected].