Economically challenged? Agency looks to eliminate funding for prominent “new economy” programs

Rep. Bill Botzow, D-Pownal, chair of the House Commerce and Economic Development Committee, speaks to reporters at a recent press conference.

State funding for several high-profile economic development programs would be eliminated under the Douglas administration’s Challenges for Change proposal (see page 23).

If Kevin Dorn, Secretary of the Agency of Commerce and Community Development has his way, the state’s contribution to the Vermont Sustainable Jobs Fund, the Vermont Council on Rural Development, the Vermont Women’s Business Center, the Vermont Software Developers Alliance and the Vermont Employee Ownership Center will be cut entirely. In all, the groups were slated to receive $324,140 this year, or about 6 percent of the $5 million the state spends on programs for businesses.

Together, the groups bring in millions of dollars in foundation and federal monies to Vermont annually. Several executive directors of the organizations say without state matching funds, it will be difficult to apply for federal funding.

The Vermont Council on Rural Development, for example, has raised $3.7 million, including a $2.5 million federal grant, to expand broadband use in local communities. In addition, the council, which started the first statewide broadband initiative 10 years ago, has brought hundreds of thousands of dollars to towns that needed Internet access, according to Paul Costello, executive director.

Costello can’t understand why the agency would “zero out” funding for his organization. “With all that we do for Vermont, it’s hard to think we aren’t worth a dollar to the state,” he said.

The $47,000 the Council receives from the state pays for operations costs; federal and foundation money is passed through the organization for specific programs. Without the state funding, Costello isn’t sure whether his two-person office will have the capacity to manage the broadband initiative.

“We make ourselves up every year,” Costello said. “We ask, what’s the most important thing Vermont needs, and who can help us do that? We don’t have any provision of funds from year to year. The only piece we’ve been able to count on is state funding.”

Dorn said affected groups should seek funding from another source outside state government.

Linda Ingold, executive director of the Vermont Women’s Business Center, said this would be difficult to do in the current economy. Her organization, which helps women become financially independent, receives $19,000 from the state – which goes toward a match for funding from the U.S. Small Business Administration.

“The bigger question is, have they tried?” Dorn asked. “They have to get creative. Doing it the same way isn’t going to work.”

Dorn said in an interview that funding for services like those provided by the Vermont Women’s Business Center could be eliminated because small business development centers already work with the state’s entrepreneurs.

Specialized training for women, however, is crucial, Ingold said. Her organization provided startup and business expansion programs for 923 women last year. “We help women become more self-sufficient, and that’s something that’s good for this state.”

Reorganization in the fast lane

The agency’s four-page synopsis in the Challenges progress report unveiled last week is purported to save $2 million – half of which comes through the elimination of grants programs; it was supposed to come up with $3.4 million in reductions or 10 percent of the Unified Economic Development Budget, which includes all state subsidies for business-boosting activities, from broadband projects and community development to marketing and tourism to Small Business Development Centers, Regional Development Corporations and grants to organizations such as the Vermont Sustainable Jobs Fund.

The plan also includes the consolidation of 54 regional economic development and planning commissions statewide, including local state employment offices and small business development programs.

When asked why the cuts weren’t spread across the agency, Dorn said his agency had already taken a hit.

Vtdigger.org will analyze this restructuring proposal in Part 2 of “Economically challenged?”

The agency would deep-six state support for Adult Technical Education ($430,000) and the Agency of Human Services Micro Business program ($328,000). The total amount saved through the elimination of the aforementioned programs would be $1,082,140, or 2 percent of Vermont’s total expenditures ($34 million) for economic development.

When asked why the cuts weren’t spread across the agency, Dorn said he had already taken a hit – he’s lost 12 employees out of a total of 105 state workers since the recession began. Jim Saudade, deputy secretary of the agency later said this number was incorrect: 22 state workers have been laid off in all.

Additionally, Saudade said the Challenge stipulated that the reductions come from the Unified Economic Development Budget, but much of that budget is derived from the federal government and cannot be cut. The agency would lose one staff member, Saudade said; but certain programs would remain untouched such as sales and marketing, which spends $1.6 million in advertising for ski areas and Vermont products.

The House Commerce and Economic Development Committee took testimony on the plan last week, and chair Rep. Bill Botzow, D-Pownal, said members of his committee are on a fast track to finish their recommendations for the House Appropriations Committee by Wednesday

Challenges 2 – the sequel to Act 68, a.k.a. Challenges 1, which was enacted on Feb. 25 – is scheduled to be passed out of the House and sent to the Senate for consideration by April 12. The Legislature does not have direct control over the $38 million in reductions required under the law – that’s the purview of the administration. Instead, lawmakers are charged with accepting or rejecting statutory changes necessary to advance agency proposals.

New versus old economy

The consolidation of economic development services would reward traditional, regional business support systems – regional development corporations and small business development centers – at the expense of “new economy” programs that are designed to support innovative green jobs, the high-tech sector and low-income entrepreneurs, according to Will Patten, executive director of Vermont Businesses for Social Responsibility, a trade association for do-good, for-profit enterprises such as Seventh Generation, Ben and Jerry’s Homemade, Gardener’s Supply and Small Dog Electronics.

“We live in resource-restricted times,” Patten said, as he read his written testimony to the committee. “As a society, we are exhausting our social, natural and financial assets. There is no fluff. So we cannot embark on any new ventures or make any new investments without taking the money and energy from existing projects.”

As Patten put it: “What is it we’re going to stop doing?”

Patten urged the committee to carefully examine the annual Unified Economic Development Budget report (which the Agency submitted to the Legislature three months after it was due on Jan. 1) that provides performance measures for the 60 different programs that provide economic development services.

Patten singles out two programs that are aggressively pushing Vermont into the new economy: the Vermont Software Developers Alliance and the Vermont Sustainable Jobs Fund.

He compared the efficacy of spending $360,000 on four entities that are fostering entrepreneurial innovation – the Vermont Software Developers Alliance, Vermont Sustainable Jobs Fund, the Vermont Council on Rural Development and the Vermont Employee Ownership Center – with the $3.6 million the state spends on traditional economic development programs such as Sales and Marketing, the Regional Development Corporations, the Vermont Procurement Technical Assistance Center and Business Retention and Expansion.

In his view, the innovation projects are a better investment hands down, and he pointed to the detailed descriptions of the programs in the Unified Economic Development Budget analysis.

Patten singles out two programs that are aggressively pushing Vermont into the new economy: the Vermont Software Developers Alliance and the Vermont Sustainable Jobs Fund.

One of the main problems the Vermont Software Developers Alliance has identified is a lack of qualified technical personnel for the state’s 250 software companies, according to the UEDB.

The alliance sponsors Vermont 3.0 expos to match developers with new talent. It also provides direct training for young Vermonters who don’t have access to basic computer programming experience in local high schools. Jobs in the field pay $60,000 on average, and the industry generates salaries worth about $38 million a year, according to a fact sheet from the Alliance. Most of the companies the trade association serves expect to double their workforce in the next three to five years. Last year, the Alliance received $8,000 from the state.

The Vermont Sustainable Jobs Fund was created by the Legislature in 1995 for the express purpose of helping businesses break into the green economy, according to Ellen Kahler, executive director. The Fund is a statewide nonprofit organization that provides technical assistance and loans for targeted market sectors, and its role has expanded to include the development of markets and new industries that benefit entrepreneurs in the state, Kahler said.

The Fund’s biofuels project is a good example. So far, the Fund has helped to set up three facilities for sunflower or canola seed oil production on farms in Vermont.

The oil is used to fuel tractors and other equipment – and the byproduct is used as feed for animals, enabling farmers to stem their reliance on Midwestern grain, which is naturally high in phosphorous – a pollutant that is harming Lake Champlain, Kahler said.

The Fund is also working with suppliers in the wood products industry to help local manufacturers produce value-added, certified sustainable furniture for the retail market. Last year, the Legislature asked the Fund to create a 10-year strategic plan for the agricultural sector called the Farm-to-Plate Initiative. The initiative is designed to give Vermonters more access to local foods and farmers more opportunities to raise and sell diversified crops in the state.

Ironically, the agency has featured the Fund as one of its key state partners in its marketing materials. The Fund received $233,890 from the state last year, which represents 22 percent of the organization’s general operating and program budget. The Fund expects to leverage the state funds to bring in $2.4 million in additional monies for projects in the state.

“We’ve never taken our state appropriation for granted,” Kahler said. “It’s incredibly precious to us because of the type of funding it is.”

“The administration is taking advantage to overstep the expectations (for Challenges for Change),” Shupe said. “They are making sweeping political changes under the guise of budgetary efficiencies. This is their last hurrah; they’re trying to pile on everything they haven’t been able to get to, it seems.”

Kahler said she doesn’t understand why the agency has suddenly dropped support for the Fund. There was no communication, she said, from the agency as it developed the Challenges proposal.

“Clearly, we’re very disappointed to have been zeroed out at this time and we are working to try to restore partial or full funding as we can,” Kahler said. “One of the frustrating parts about what was put forward was a lack of awareness of the importance of statewide entities and the roles they play in addition to regional entities. We believe there is a role for state organizations that have a statewide perspective and do more state planning work that has relevance in regions as well as in the whole economy.”

She pointed to the Vermont Council on Rural Development and the micro business programs as important statewide entities that fulfill a unique role in the state’s economic development ecosystem.

In addition to its extensive work to expand access to broadband statewide, the council led economic development planning and implementation programs in a dozen towns last year; facilitated educational forums around more effective school governance and a board consolidation project in Addison County; it also recently sponsored the Future of Vermont project which brought together disparate groups of Vermonters to create a vision for the state’s economy, landscape, civic culture, education and health, transportation and public safety.

The council is an actively nonpartisan group that brings together public, private and academic entities around issues, council executive director Costello said.

“We pull people together and try to make everyone succeed,” Costello said. “We’re not environmentalists or developers per se. We don’t attack from the left or right. We are centrist. We want to help all of us work together in unity in service to the people of Vermont.”

Brian Shupe, the sustainable communities program director for the Vermont Natural Resources Council, said the state has ignored the groundbreaking leadership of the council and the Fund which have led the way in exploring innovative economic development opportunities that the Agency of Commerce and Community Development should be advancing. In fact, he argues that the Fund and the council do more to promote economic development in Vermont than the (state agency) does. “They should be funded, not the agency,” Shupe said.

“The administration is taking advantage to overstep the expectations (for Challenges for Change),” Shupe said. “They are making sweeping political changes under the guise of budgetary efficiencies. This is their last hurrah; they’re trying to pile on everything they haven’t been able to get to, it seems.”