The Recession
Affects Rural America

The recent economic downturn has affected companies in all corners of the nation. The economic development districts that provide services to rural America are also feeling the recession’s effects.

Slowdown Impacts Program Budget
In previous years, eight of Tennessee’s nine districts received $120,000 from the state (one received $90,000), which was partially used as program matching funds. Though only a portion of the districts’ budget, these funds have leveraged other funds including those for aging, the Economic Development Administration and the Appalachian Regional Commission. As of mid-December 2001, the state, which does not have an income tax, has only disbursed half of these funds, which was not anticipated in the districts’ budgets. The outlook for 2002 funding levels is uncertain.

To make ends meet, some districts are drawing down their reserves, which could disappear if fiscal problems persist. One potential revenue source -- increased dues among member localities -- is being hampered by the possibility that the state may cut its funding to localities. Joe Max Williams, Executive Director of South Central Tennessee Development District in Columbia, TN, commented that while all the districts have been impacted, poorer, more rural districts would be affected the most. “We’ve survived fiscal crises in the past, but if things get bad enough, we may have to cut back on some of our programs,” Williams said.

Unemployment Numbers Rise
Unemployment has risen to an average of 20 percent in the six counties served by South Delta Planning and Development District, an EDA funded district headquartered in Greenville, MS. Plant closures in such industries as plastics, chicken processing and apparel have resulted in the loss of more than 2,600 jobs over the past year, and more are expected.

South Delta makes business development loans through its Economic Development Administration Revolving Loan Fund program, US Department of Agriculture Intermediary Relending Program, and other funds. Since 1998, South Delta has seen an increase in delinquency and default rates, from 4 percent to about 14 percent. South Delta negotiates workouts with borrowers that decrease monthly payments and ensures that the district is repaid. However, according to South Delta’s executive director William Haney, delinquencies, defaults and workouts slow the recapitalization of these funds, thus inhibiting South Delta’s ability to finance new loan requests. “Currently, our loan review board has approved and is holding two loans on the condition of available funds,” Haney said.

Lack of Funds Impact Programs
A combination of events is impacting New York’s regional development organizations. The state legislature failed to pass a full budget for the first time, and the baseline budget finances only essential services, which has resulted in a dramatic loss of state-supported revenue to communities throughout the state. The events of September 11 added to the budget crisis by drawing state funds to the New York City recovery and away from other parts of the state.

Corning, Inc., the major employer in the Southern Tier Central (STC) region, has laid off approximately 4,000 workers due to the sagging fiber optics industry. As a result, income and sales tax revenues have fallen. Since communities are getting less tax revenue and less funding from the state, they are decreasing their use of STC-managed service contracts, which decreases revenues for the district. However, counties in STC service areas have assured the district they will maintain the required level of financial matching assistance to the district.

“It is unprecedented that the state is only able to fund essential projects, which keeps us from launching new projects,” William Hess, Executive Director of the Southern Tier Central (STC) Regional Planning and Development Board in Painted Post said. “Fortunately, New York districts’ state association has maintained good relationships and contractual agreements with several state agencies, such as the Department of Environmental Conservation and the Department of Transportation, which at least ensures that we will have some continued state support in the areas of water quality planning and state aviation planning.”

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