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Inflation slows awarding of two main state government grant programs

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(The Center Square) – Awards through North Carolina’s Job Development and Investment Grant program declined sharply in 2023, on pace for roughly half the number approved in recent years.

Two recent grants – $2.7 million for battery pouch manufacturer Dai Nippon Printing Co. on Tuesday of last week, and $3.4 million for graphite provider Epsilon Advanced Materials Oct. 26 – brings the total number of Job Development and Investment Grants awarded this year to a dozen, based on the number of deals announced.

The program, in its 20th year, is a performance-based, discretionary incentive program that provides taxpayer-funded cash grants directly to a company based on jobs created and money invested.

The last time North Carolina gave out fewer than a dozen of the job development grants was 2005. The state awarded 28 in 2022, 32 in 2021, 27 in 2020, and 28 in 2019.

It’s a similar situation with the state’s other major incentive program, the One North Carolina Fund, with 13 awards in 2023. That figure has been above 25 since at least 2019.

The Commerce Department is “in the midst of our standard year-end review process, so I don’t have final numbers to share at this time,” David Rhoades, spokesman for the department, wrote in an email to The Center Square.

“It’s been a very solid economic development year for the state, where we’ve attracted $12.3 billion of private-sector capital investment so far,” he wrote. “While we won’t match the level of project activity from the two previous years (2021 and 2022), that’s not surprising since those years were absolutely extraordinary, the best on record in fact.”

Rhoades told the News & Observer in October that the drop in 2023 is not the result of any changes in the grant process, but more to do with “macro factors in the nation’s economy.”

Since March 2022, the Federal Reserve has increased the baseline interest rate 11 times, going from 0.25% to 5.5% by July 2023, to tame raging inflation. Those increases, as well as rising input costs, have led many companies to reduce hiring and scale back expansions, and some, including in North Carolina, to impose layoffs.

And while the pace of taxpayer-funded incentive grants has slowed in 2023, outcomes have continued to show most don’t produce the jobs and investments that are often touted when they’re announced.

The most recent NC Commerce report on the Job Development Investment Grant program from October shows only 42 of the 406 grants the state has doled out since the program launched in 2003 have met hiring and investment goals.

Ninety-two ended without payment, while 91 were canceled with a portion of the funds dispersed for creating some jobs. Another 181 are active, suggesting companies could still fulfill the agreements.

In total, taxpayers have spent $489.5 million to create 61,228 jobs over the last two decades, “which equates to approximately $7,995 per job created,” according to the report.

Another 140,441 were retained, while private investment from grantees since 2003 totals over $11.8 billion.

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