A great number of local and regional economic development organizations rely primarily on State and local tax dollars to support their operations. While talking with fellow economic development professionals last month at the IEDC Annual Conference in Cleveland, I noticed a distinct trend amongst economic development organizations from the western half of the USA. More and more of them are seeking to diversify their funding mix with private dollars.
While there are a number of factors that are driving this emerging trend, let’s focus on just one. It is no secret that recent weakness in the oil, gas, and coal industries has negatively impacted state and local tax revenue in the West. As a result, in some cases, the public financial commitment to economic development has been reduced. Quite simply, there are not enough dollars to go around for state and local government. In many instances, when government is faced with the choice of funding basic public services or economic development, it is economic development programming that bears the brunt of necessary funding cuts. If an EDO has not tapped the local business community for funding, or if the current level of private support is minimal, it makes sense that they would turn to the private sector to supplement reduced funding.
In many of these communities, the natural resources arena is not only an important source of tax revenue, it is also a major driver of the overall economy. When you have a weakening regional economy is the critical time to increase funding and intensify economic development efforts, not reduce them. In these situations, more is expected of local and regional economic development professionals. For EDO’s in states such as Wyoming, North Dakota, and Montana, the only option is to seek out funding from both the public and private sectors.
While the need to diversify your funding mix might be getting forced upon you due to public sector cutbacks, it’s important to look at this as an opportunity to improve your organization’s overall funding health. After all, the public-private sector funding model has been proven again and again as a successful approach to economic development success, and having an engaged private sector can open doors that might not have been possible with a 100% publicly funded organization.