Few state job creation grants go to rural Montana. Here’s why.
(Montana Free Press) There aren’t too many businesses adding jobs amid the rural fields of north-central Montana these days, but Big Sandy Organics is doing just that.
Headquartered in the 600-person town between Great Falls and Havre, the four-year-old business manufactures the Kracklin’ Kamut-brand wheat snack, transforming locally grown large-kernel kamut wheat into a Montana-made product that’s beginning to find its way into stores nationwide.
As the company attempts the leap from one-off arrangements with mom-and-pop stores to contracts with national distributors, it’s getting help from a key state jobs program, the Big Sky Economic Development Trust Fund, designed to nurture businesses that can provide Montana workers with stable, well-paid jobs. A $22,500 grant award through the program will help Big Sandy Organics hire an expected three new employees this year.
“For a company like us, that’s a major factor,” said General Manager Thomas Dilworth.
The small-town company, however, is an anomaly for the job grants program, which is administered by the Montana Department of Commerce. While the 2005 law that created the Big Sky trust calls for the department to “balance” the needs of urban and rural areas, a Montana Free Press analysis of commerce department data finds that rural counties, home to a third of Montana residents, have received only 16 percent of the $26 million in job creation grants awarded over the program’s history.
“I’m concerned the needs of rural areas are not being balanced with the state’s urban areas,” said Rep. Joel Krautter, R-Sidney, after reviewing the MTFP analysis. “Montana’s urban areas are the places doing best economically in the state, and it’s the rural areas that are really struggling and need the help to support economic development.”
Five of Montana’s urban areas — Bozeman, Billings, Missoula, Kalispell, and Helena — accounted for 70 percent of the state’s net job creation between 2001 and 2016, according to data from the U.S. Bureau of Economic Analysis
Commerce officials point out that the Big Sky trust isn’t the state’s only economic development program, and say they’d like to put more job creation grant money into rural Montana, but are limited by the number of rural companies that apply. With approximately 140 job creation grants awarded since the program’s creation, commerce officials say they’ve turned down only five applicants.
“We’re not getting a bunch of rural Montana applications that we’re denying,” commerce director Tara Rice said in response to the MTFP findings. “It’s really an outreach issue. To the extent that you’re seeing a bigger circle [see graphic] in urban areas, it’s because of where applications are coming from.”
Signed into law by then-Gov. Brian Schweitzer in 2005, the Big Sky Economic Development Trust Fund program takes an eighth of the revenue collected through Montana’s coal severance tax and invests it in an endowment, whose interest earnings are used to support economic development efforts.
Under the administrations of Schweitzer and Gov. Steve Bullock, both Democrats, the Big Sky trust’s job creation grants have become one of Montana’s highest-profile state economic development programs, with grant awards consistently publicized by state government and routinely covered by media outlets. Most recently, Bullock’s office touted $1.2 million in Big Sky trust job creation awards to six companies in a press release May 16, two days after he announced his bid for the U.S. presidency.
In 2018, the Big Sky trust received a $7 million share of the taxes levied on Montana’s active coal mines, according to the state Legislative Fiscal Division, and maintained a balance of about $100 million. The bulk of the money drawn from the endowment’s investment earnings, three-quarters, is channeled to the job creation grants, amounting to $3.8 million this year, according to the commerce department. The remaining interest revenue is used for planning grants that help local governments and economic development groups conduct business feasibility studies and draft strategic plans.
The job creation grants are focused on supporting “basic sector” companies, defined as those that sell to out-of-state customers — meaning their business models help energize Montana’s economy by generating income from beyond the state’s borders. Companies, generally with help from regional economic development organizations, apply through city, county or tribal governments. They’re eligible for up to $7,500 in support for each full-time job they add to their payrolls, provided they pay at least either the average wage for their county or $14.45 an hour.
“The real intent was to create good-paying jobs,” said former Rep. Monica Lindeen, who sponsored the Big Sky trust bill while representing a rural district east of Billings. “We were really trying to figure out what we can do in Montana to attract new businesses or grow existing businesses in order to attract jobs.”
Lawmakers also included a provision requiring the state Department of Commerce to attempt to ensure that “the needs of rural areas are balanced with the needs of the state’s urban centers.”
“We didn’t want all the money to go to the seven largest urban areas,” said Lindeen, who served as state auditor from 2009 to 2017 and is now the executive director of the Montana Democratic Party.
Regardless, the Big Sky trust job grants have been awarded with a distinctly urban skew. Urban counties were awarded $33.16 per capita in job creation grants between 2005 and 2018, compared to $13.37 per capita for rural counties.
The program’s planning grants, intended in part to help rural communities strengthen their economic development chops, have been awarded more proportionately. Even when planning grants are factored in, however, urban Montana has received nearly twice as much support from the Big Sky trust on a per-capita basis.
Certain urban regions have also received substantially more job creation assistance than others. For example, the Missoula region, including the Bitterroot Valley, has received $72.86 per capita in job grant awards since the Big Sky trust’s creation. Billings, the state’s largest city, has grown its private sector employment base at roughly the same rate as Missoula, but received about one-sixth the assistance as measured by award amount: $12.10 per capita.
Grants are awarded based on expected job creation, but businesses receive money from the state only after they document that the new positions have been filled. It’s common for participating businesses to overestimate their hiring, and over the course of the program’s history the commerce department has paid out for slightly more than half of the jobs initially proposed.
While a handful of grants have gone to small-town companies such as Big Sandy Organics, larger tech and manufacturing operations in the state’s urban centers have routinely won bigger-dollar amounts.
The Shelby branch of fertilizer company Humic Growth Solutions, for example, won a $118,800 award in 2016 to add 18 positions in the 3,100-resident town, and ultimately created 13 new jobs according to commerce department records. That same year, companies operating in Missoula County won seven separate grants, out of 20 that department records show were awarded statewide. Among the recipients were Advanced Technology Group, which received $307,500 to help create 41 jobs, and mapping company onX, which was awarded $187,500 to bring on 25 new employees. OnX also received a second award of $80,000 in 2016 to add 16 employees in Bozeman.
The fundamental challenge, economic developers say, is that it’s easier for government programs to fan job-creation flames where the economy is already running full blast than it is to coax embers to life in places that have, in many cases, struggled with employment declines in timber, mining and agriculture for decades.
Fueled by scenery junkies, growing tech companies and their respective state universities, the Missoula and Bozeman regions have added 23,000 private-sector wage jobs between them since 2005, according to figures compiled by the commerce department — three-and-a-half times the net job creation in rural Montana.
“You don’t create growth with governmental capital, you stimulate growth,” said Evan Barrett, of Butte, who ran the Governor’s Office of Economic Development in the Schweitzer administration. “We do have an economy in Montana where certain areas are growing faster than others.”
“We all know that places like Missoula, Billings, Bozeman and Kalispell — those communities are going to be creating jobs by accident,” said Paul Tuss, who runs Bear Paw Development Corporation in Havre. “You’re going to create more jobs in those places by the time you have breakfast than we’ll get in a year.”
The flip side, Tuss said, is that adding even a few good jobs in a small town can make a significant difference to the local economy. He pointed to the three jobs Big Sandy Organics is planning to hire. Proportional to population, he said, that’s the rough equivalent of adding 300 new positions in Missoula.
“I can tell you with certainty, three jobs in Big Sandy is a really big deal,” he said.
“What we can do here is focus on outreach and focus on supporting capacity,” said Rice, whom Bullock appointed to lead the commerce department in February. “Going into this summer, it is a big priority for us to do a push in rural areas.”
One difficulty is that urban companies often benefit from well-staffed economic development entities like the Missoula Economic Partnership, which has a full-time grant writer focused on helping local businesses apply for Big Sky trust grants and other programs. While most parts of Montana are served by regional economic development corporationsdesigned to support entrepreneurs, Rice said grant-writing help can be harder to come by in small towns.
With dozens of grant programs available through the state commerce department alone, sorting out which opportunities a business qualifies for can be a bewildering prospect. And then there’s the application process itself: The current administrative manual for the Big Sky trust program runs 35 pages including appendices. It specifies that job grant applicants are required to submit a business plan, financial statements, and hiring plans, among other documentation necessary to ensure they’ll put a public subsidy to effective use.
“We have a good appreciation for the challenges of getting our program dollars out to rural places,” Rice said.
“This isn’t just this program,” she added. “This is basically every program in state or federal government — this challenge just exists everywhere.”
Dilworth, the Big Sandy Organics manager, said the company came to the Big Sky trust program through a referral from an economic development specialist who had worked with the company on a different application for a federal program through the U.S. Department of Agriculture. She referred them to Bear Paw, the Havre-based economic development group, which helped them put in for the Big Sky trust grant.
“I just can’t express how great it has been,” Dilworth said. “They’ve bent over backwards to try and accommodate us and try to get this pushed through.”
The company would be growing anyway, he said, but the state grant will let it bring on three additional employees without having to choose between expanding its workforce and adding storage capacity to its warehouse. The program’s pay requirements also spurred the company to plan for hiring at a slightly better wage.
“It pushed us to say, ‘Maybe we can bump that up a little bit,’” Dilworth said.
Depending on what contracts come through, he hopes to hire the three positions supported by the program in late summer or early fall, possibly recruiting from Havre or Great Falls if he can’t find qualified workers locally. After a probationary period, the company plans to pay $15 an hour.
Dilworth agrees with the commerce department’s diagnosis that familiarity is the primary limitation on the program’s reach in rural areas. After all, he said, he didn’t know about the grants until he got the referral.
“It’s just a lack of knowledge,” he said. “I think most small businesses aren’t aware of it.”
This story is published by Montana Free Press as part of the Long Streets Project. This work is supported in part by a grant from the Greater Montana Foundation, which encourages communication on issues, trends, and values of importance to Montanans. Reach Lead Reporter Eric Dietrich at firstname.lastname@example.org.