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West Virginia Keeps Favoring Big Companies

Legislators continue to stall on proposed and already-enacted laws that aim to promote small-business development in minority and low-income communities. At the end of last year, the state’s Black unemployment rate was nearly 3 percent higher than the overall average.

Last month, the West Virginia Economic Development Authority approved a loan of up to $66 million for seven separate ventures the state lumped together as a "high-impact" project.

Of the $66 million, $28.5 million were allotted for out-of-state venture investments. The seven projects are estimated to yield an average of roughly 100 employees each. The Economic Development Agency, or EDA, identified each of the enterprises as a "high-impact development project" requested by Gov. Jim Justice.

"For the most part, they're going to large corporations," The Rev. Matthew Watts, chairman of the Tuesday Morning Group, a faith-based political action group in Charleston, said in a phone interview about the agency's investments. "And it does not appear that we even have a plan or strategy to support existing businesses or to promote and encourage the development of small businesses."

According to state code governing the EDA, a "high-impact development project" is a project that the governor has requested in writing be approved for financing totaling at least $50 million. The entity undertaking the project also must privately invest at least $50 million.

The EDA, approved the $66 million loan without revealing the amount, recipient or terms of the agreement. The authority later provided details of the loan in a response to a Gazette-Mail Freedom of Information Act request.

But the EDA's support of large business enterprises should come as little surprise to anyone following the agency.

Of just over $500 million the EDA approved in financial support for private business entities in 2023, roughly $442 million was for businesses that had at least 100 employees or were projected to have at least that many within three years. Approximately $357 million was for out-of-state businesses.

The Economic Development Authority is administered by a 10-member board of directors that consists of the governor, state treasurer, tax commissioner and seven at-large members appointed by the governor.

The Justice administration has ignored the Tuesday Morning Group's call to set aside $300 million of $482 million American Rescue Plan Act funding the Legislature allocated to the EDA through a 2023 appropriations bill to fund housing and other economic development projects in heavily populated minority and low-income communities.

The United States Department of the Treasury noted in its final rule on state and local COVID funding established under the American Rescue Plan Act that minority-owned businesses were overrepresented in industries hit hardest by the economic downturn like transportation, waste management and food service, citing a Federal Reserve Bank of Cleveland finding that 22 percent of all minority-owned businesses were among the hardest-hit industries, compared with 13 percent of nonminority-owned businesses.

But West Virginia leaders have not acted on legislation — both proposed and already law — aimed at fostering small-business development in minority and low-income communities.

Poor Outcomes Followed Legislation Languishing

That lack of action is on the verge of being cemented for up to another year with Wednesday marking the 2024 regular legislative session deadline for bills to advance out of their house of origin.

This session marks 20 years since the enactment of legislation, Senate Bill 573 of 2004, that required the EDA to take on initiatives to encourage minority business ownership. Such initiatives were to include helping community and economic development corporations provide technical and business advisory services to minority-operated enterprises and enlisting lending institutions to be "more creative and favorable to lending in minority communities."

In 2009, the Legislature passed House Bill 2950 establishing the Neighborhood Housing and Economic Development Stabilization Program within the EDA for low-income minority neighborhoods. The program was established to provide grants and forgivable loans to support local economic development and housing initiatives in minority, low-income neighborhoods. HB 2950 authorized the EDA to contract with the West Virginia Housing Development Fund to administer the program.

West Virginia Housing Development Fund communications administrator Whitney Humphrey said no funding was allocated to the affordable housing-focused organization through HB 2950 beyond an initial $2.4 million for two nonprofits through an agreement with the EDA provided by the 2009 law. Most of the funds were disbursed between 2010 and 2013, Humphrey said.

Watts recalled the HOPE Community Development Foundation, the economic development and support services-focused group for low-income youth and families he formally established in 1997, was one of the two recipients of funding through HB 2950. Watts isn't aware of any further support coming from either HB 2950 or SB 573.

Neither the EDA nor the Governor's Office responded to requests for comment.

Since passage of SB 573 and HB 2950, data show poor economic outcomes for Black West Virginians compared with other racial groups.

Median household income for Black West Virginians totaled $32,100 in 2018 — 29 percent below the $44,900 income for white households, according to a West Virginia University Bureau of Business & Economic Research analysis of U.S. Census Bureau data.

West Virginia's 7 percent Black unemployment rate for the fourth quarter of 2023 far exceeded the state's 4.2 percent clip across all racial groups, according to an analysis of U.S. Bureau of Labor Statistics data by the Economic Policy Institute, a nonprofit think tank.

That means Black West Virginians are more likely to be adversely affected by moves state lawmakers are making toward slashing state unemployment benefits.

Benefits imperiled, minority economics ignoredThe Senate Finance Committee advanced legislation to the full Senate Saturday that would:

  • Limit the maximum number of weeks a person may receive unemployment benefits depending on the state's average unemployment rate, via SB 840
  • Lower the maximum weekly benefit rate from 66.7 percent of the average weekly wage in West Virginia to 55 percent of the state's average weekly wage, with a cap of $550 per week

The Senate Finance panel advanced the bills despite receiving testimony from WorkForce West Virginia Acting Commissioner Scott Adkins that the state's unemployment trust fund isn't in dire straits. Senate Finance Chair Eric Tarr, R- Putnam, characterized the legislation as necessary to preserve the trust fund.

"We're in pretty good shape," Adkins said, adding it would take 91 weeks to bankrupt the fund at an unemployment rate of 10 percent, such as the state faced during the 2008 recession.

"This is quite possibly the most heartless act I've seen in my 25 years of representing working people at the Capitol," West Virginia AFL-CIO President Josh Sword said in a statement Saturday.

Meanwhile, state lawmakers have bypassed legislation aimed at developing small businesses and improving labor force participation among minority populations.

House Bill 4606, led in sponsorship by Delegate Kayla Young, D- Kanawha, would create the "Small Business and Minority Populations Economic and Workforce Taskforce." The task force would help the head of the EDA develop and implement a procedure to address employment and economic development issues of small businesses, disadvantaged populations and minority populations.

The task force would include the executive directors of the EDA, the West Virginia Small Business Development Center and the West Virginia Housing Development Fund, the presidents of West Virginia and Marshall universities, and at least one minority business owner.

Per HB 4606, the task force would provide technical assistance and support to local communities and work with state executives to ensure existing legislation targeting vulnerable communities is executed and create a "one stop" that maps resources and direct businesses to the right entities.

HB 4606 is virtually identical to SB 256 of 2023, which was led in sponsorship by Sen. Glenn Jeffries, R- Kanawha, chair of the Senate Economic Development Committee. SB 256 failed to move out of the Senate Finance Committee after Jeffries' panel moved it there.

Jeffries did not respond to a request for comment.

The Tuesday Morning Group has urged state legislative leaders to back HB 4606 and three other bills that have stalled:

HB 4496: Would create a payroll tax credit for businesses formed July 1, 2024 or later that employ fewer than 15 employees

HB 4642: Would establish a grant of up to $25,000 for West Virginia small businesses affected by the COVID pandemic

HB 4811: Would make those that invest in a business with up to 50 employees and annual gross revenues of up to $1 million in its most recent fiscal year from July 1, 2025 to Jan. 1, 2027 eligible for grants of up to $25,000.

"The boost that it needs is that there needs to be a capital fund established, a small-business development fund that's actually established," Watts said of small minority business development in West Virginia.

But House of Delegates Speaker Roger Hanshaw, R- Clay, and Senate President Craig Blair, R- Berkeley, downplayed the Tuesday Morning Group's calls for reform in a statement provided by House Deputy Chief of Staff and Communications Director Ann Ali.

" Pastor Watts would no doubt like to see his organization become a line item in the budget with no strings attached, but as demonstrated by the handful of bills he's watching, we receive thousands of policy recommendations from throughout the country and the 134 people elected by the 1.8 million West Virginians to represent them have the task of figuring out what will best serve the long-term interests of the state," Hanshaw and Blair said.

The Legislature has favored legislation this session to build support between economic development agencies.

Signed into law by Justice on Friday, SB 354 creates a 15-member board that includes representatives of economic development agencies in McDowell, Mercer, Mingo, Wayne and Wyoming counties and governor appointees from the private sector.

The board is to look out of state and propose legislation for bonding and tax credits to facilitate economic development along the Interstate 73/74 corridor stretching from northern Michigan to eastern South Carolina.

A legislative finding in SB 354 asserts importance of supporting "existing successful industries in West Virginia" but doesn't mention small businesses.

The nearly identical SB 571 passed by the Senate shares that language and would establish a board of county economic development officials to pursue energy and business growth in the Corridor H area rather than southern coalfield counties.

HB 5223 passed by the House would establish a council consisting of governor's cabinet members, southern coalfield county officials and higher education representatives. The body would work with officials within the Commerce department to educate businesses investing or interested in investing in the southern coalfields about access to economic development assistance, including tax credits.

But HB 5223 would prioritize "natural, native resources and industries," namely coal, oil and natural gas. Like SB 354 and SB 571, HB 5223 wouldn't directly establish a financial aid mechanism for minority communities — or any small business.

"If we're going to revitalize coal communities," Watts said, "it's probably going to be with small-business development, rather than attracting large businesses to go to these remote places."

(c)2024 The Charleston Gazette (Charleston, W.Va.) Distributed by Tribune Content Agency, LLC.
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