Local governments and states are receiving the American Rescue Plan’s (ARP) Coronavirus State and Local Fiscal Recovery Funds. Armed with the refined guidance that was released in mid-June, governments have an opportunity to focus on designing an equitable recovery and job growth strategy. Recent research from the Federal Reserve Bank of San Francisco provides another justification in a growing body of literature as to why it is essential to rebuild equitably. The study shows that racial equity and gender disparities in earnings, employment and hours, education, labor utilization, and industry-occupation cost the U.S. $2.6 trillion in foregone GDP in 2019 that can reach $3.1 trillion in 2029.

In June, I presented to the East Bay Economic Development Alliance and suggested how economic developers and leaders can make equitable investments of the ARP funds based on three principles.

Think long-term about how to leverage, reallocate, and build. Plans should leverage local funds with state funding and soon-to-be-released competitive grants and look to intermediaries and partners that will also be receiving funds while supporting technical assistance to local businesses that can also apply for additional direct funding. 

Structure the response to address those most affected by the pandemic. Our work has shown that equitable community engagement is a fundamental step to designing the response. It provides a voice for residents and businesses in the discussions about what the current needs are and how existing programs may limit access to economic programs and opportunity. Disaggregating the data trends will be essential to determine which neighborhoods, business owners, and industries are suffering the most. Are they younger businesses or younger owners? Programs should target these identified challenges and develop equitable metrics that address community priorities and business growth. To ensure equitable access to programs, there must also be deliberate, culturally competent outreach. 

Rethinking incentives is part of designing the equitable structure of programs. Focusing on good jobs growth and tying it to clusters and small business strategies can include targets such as:

  • quality job creation that provides a wage floor for employees and for employees returning from incarceration, ensures healthcare for all employees, and addresses scheduling and advancement;
  • job retention credits that can keep existing jobs and maintain payroll, up to a certain cap per position, during the long recovery ahead; and
  • equitable tiering criteria to emphasize place-based needs (underinvested neighborhoods), industry clusters, and hiring practices (people of color, local, shared ownership, on-the-job training).

Be creative in program development. Build rapid prototypes that can serve as pilots and look to the opportunity to hardwire and embed those that work into long-term plans. Flexible programs are essential to tailoring assistance to the range of businesses in need given that 41% of Black-owned businesses shuttered in the first few months of the pandemic alongside 32% of Latinx and 25% of female business owners.

  • Suffering businesses may need grants focusing on people of color owners and younger owners as well as grants for their displaced employees. There may be a need for amnesty from business license fees for these and new businesses since the license cost could be a barrier even though it enables the business to apply for funding. Amnesty now helps governments develop a list of businesses that becomes a future outreach tool.  Economic developers also need to be ready to target and recruit new businesses to fill spaces being vacated by closing businesses.
  • New businesses are popping up at high rates and research indicates that new owners are likely people of color. Policy makers should look to help businesses scale as well as leverage the idea behind the Small Business Administration’s Community Navigator pilot, building a partnership with existing Community Development Financial Institutions, community-based organizations, or chambers that could enable the hub and spoke model or consider providing similar technical assistance that improves access to capital. 
  • Scaling up businesses that are faring well but would benefit with access to equitable procurement opportunities, enhanced broadband access, or digital technical assistance due to the growing need for automation, ecommerce, and advanced business service software that further helps a business grow. 
  • Businesses owners who are retiring or closing due to pandemic stress may also be an opportunity for programs that can allow them to design a succession and transition plan.

These three principles of equitable recovery offer a roadmap to addressing the pandemic’s effects as well as historical inequities of existing programs. For further information or to receive the presentation, please contact me: darrene@smartincentives.org.