ARC Funding Cuts Threaten Livelihood of POWER Grant Recipients — ‘What would that money have done if used elsewhere?’

ARC Funding Cuts Threaten Livelihood of POWER Grant Recipients — ‘What would that money have done if used elsewhere?’
(Photo by Ian Schneider via Unsplash.)

Though the Trump administration has threatened to eliminate its funding in the upcoming budget, the Appalachian Regional Commission has continued to encourage regional development through small-scale growth.

Revitalization through individual entrepreneurs, rather than by mega-companies, has been the tactic.

The Appalachian Regional Commission is a federal-state partnership, promoting economic, social, and cultural development throughout the region. Created in the 1960s, much of its focus has been on transportation and infrastructure development such as highways and water systems, though problems remain.

In 2016, the Obama administration used the commission to launch the Partnerships for Opportunity and Workforce and Economic Revitalization initiative, which concentrates assistance on communities who have seen economic decline due to the loss of coal-related jobs. The grants are targeted to “diversify and grow” the area, and ARC has dispersed $94 million in grants through the program across 10 states.

In Ohio, as of September 2017, this has meant a focus on building an entrepreneurial hub, among other activities.

For Ohio, the majority of POWER grant funding focuses on economic development. Funds go to projects such as centers that focus on training and advanced manufacturing innovation and commercialization in Youngstown, another education and skills training project in Nelsonville, and a “community development financial institution” that offers loans to local businesses for capital investment throughout the 32 Appalachian counties in the state.

A dozen projects centered in Ohio failed to gain funding, ARC records show.

Among the projects:

  • Small-scale infrastructure improvements, like a water system in Carroll County and redeveloping the Armory building in Athens
  • Tourism initiatives, such as a travel guide mobile app for Zanesville and Muskingum County, and painting murals to revitalize downtown Portsmouth
  • Worker training centers, be they focused on health care in Lawrence County, or teaching sustainable agricultural practices in Perry County, general training in Piketon and Jackson County
  • Regional investments like  a “regional coalition” and community energy plan for Appalachia Ohio, a development finance agency to spur business investment across seven Appalachian states, improving access to health care services in five Ohio counties, and refurbishing a defunct plant as a processing hub for manufacturing focused on energy projects

Some of those projects may have been too niche for a POWER grant, as their purpose is for larger, regional projects. Others may have been less appealing than their competitors’ applications. Of the five project leaders who could be reached for comment, none have moved forward with alternative funding sources.

The largest grant recipient in Ohio was the Leveraging Innovation Gateways and Hubs Toward Sustainability project. LIGHTS matches talent around its innovation hubs in Athens and Zanesville with the local workforce in a 28-county area. They offer business assistance through facility space, consulting, training opportunities, marketing, and finding new markets for the created products. The businesses involved have been small, ranging from high-end cosmetics and leather bags to pottery and ceramics to energy-efficiency technology.

The project received $2 million to develop a “regional innovation network” in southeast Ohio, intended to improve upon what already exists in the area. It’s an attempt to “get back to our Appalachian traditions,” as Jennifer Simon, the executive director of the LIGHTS project, puts it. Rather than trying to copy the approach of other regional economies, LIGHTS has assisted businesses that have a history in the region. That has meant ceramics and pottery, leather goods, and energy-efficiency technology, among others. They take the familiar and find a new economic niche for an old economic practice.

“It was one of the best things I’ve ever seen the commission do,” Simon said. “This kind of investment, where it’s a multi-partner, multi-county expectation, the types of collaboration that have evolved as a result–that is an opportunity that comes by once in a lifetime.”

To seize that opportunity, LIGHTS is focused on a foundation for long-term results.

The state has received 10 POWER grants totaling $6.6 million to develop the region. Most of those awards have passed through local colleges, which serve as de facto or intentional development hubs.

Of the dozen grant applications that went unfunded, none who responded to inquiries could find alternative funding.

Part of the struggle in growing the regional economy comes from a skills deficit. Appalachian workers aren’t less productive than other workers, but they lack the capital investment to compete with other regions, as James Ziliak, an economist at the University of Kentucky, explained. “This suggests that investments in education, coupled with economic development programs that aim to diversify the economic base around nearby urban centers, may offer a path out of persistent poverty,” Ziliak argued in a 2015 paper.

“Are we creating enough economic action that people who have been displaced can move into other jobs?” Simon asked.

Some entrepreneurs who have worked with LIGHTS experienced that skills deficit firsthand. For Holly Molnar, their assistance was critical. She is the founder of Austin Molnar, a handbag and cosmetics company.

“They’re a go-to for me because I’m a person who wears 20 hats,” Molnar said. “They help guide me and give me suggestions that could help my business grow and connect me with people that could help me.”

Currently, Molnar has her merchandise in about 80 stores from the Midwest to the West Coast, with plans to expand. Growing her business in Appalachia could be an issue, though. The infrastructure doesn’t always exist and could push her away from the company with which she currently works.

This sort of investment involves a trade-off. Whatever money the government sends to Appalachia as part of a place-based development policy is taken from other regions of the country. While results can be seen and felt in Appalachia, funding becomes a bit of a zero-sum game.

“You have to ask, ‘What would that money have done if used elsewhere?’” Joshua Gottlieb, an economist at the University of British Columbia, said. Gottlieb wrote a paper with fellow economist Edward Glaeser on place-based policy like ARC, concluding that “The rationale for spending federal dollars to try to encourage less advantaged people to stay in economically weak places is itself extremely weak.” One of their concerns was that such policy can keep poor people in place, rather than leaving for better opportunities.

Keeping people in place, however, is an implicit part of ARC. “The mission of ARC,” said Wendy Wasserman, communications director at ARC, “is to bring the region into socio-economic parity with the rest of the nation.” To do that, more Appalachians need to stay. Were more of them to leave, those with less-transferable skills or deep familial ties may be rooted in place, left in a declining region.

The promise of the POWER grants, which aim for larger, multi-county projects, runs the risk of falling short in reality. Placing development bets on emulating other parts of the country, as was seen in making Appalachia into a tech hot-spot “Silicon Hollow,” can lead to lost investment funds, political corruption, and long-term infrastructure costs. What has worked well for the LIGHTS project is not emulating other regions, but in growing what already exists.

The danger in not trying for fear of failed investments, is stagnation.

“[Without ARC] we would be stuck,” Simon said. “So it is helpful to have these shots in the arm to make this kind of stuff happen.” That shot might inoculate Appalachia from further decline as entrepreneurs, policymakers, and its youth figure out what comes next in the region.

For LIGHTS, their project doesn’t end when ARC funding runs out. “Right now, we are seeking other sources to sustain our operations,” Simon said. The organization isn’t meant to be a one-and-done project, but something that can self-perpetuate and support the area’s economy. Whether that can happen without backing from ARC, so far, remains an open question.

Anthony Hennen (@anthonyhennen) is an Ohio native who works as a writer/editor at the James G. Martin Center for Academic Renewal in Raleigh, North Carolina.

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