More equitable spending by anchor institutions would lift historically underutilized businesses in North Carolina

Prosperity Watch, Issue 92, No. 2 

Sept. 11, 2018

According to the N.C. Department of Commerce, public school systems in North Carolina were the largest employer in 64 counties in the fourth quarter of 2017.[1] In 96 counties, public school systems were among the top 3 largest employers. Wake County Public Schools and Charlotte Mecklenburg Schools, only 2 of the 115 public school districts, combine to employ more than 37,000 people.[2] [3] In 2016-2017, those two systems alone spent $326 million dollars on purchasing (goods and services contracts) with other businesses. More than $2.2 billion dollars in purchasing was spent across all public school systems in North Carolina.

These trends present a natural opportunity for public sector anchor institutions, such as school systems, hospitals, local sports complexes, universities, and community colleges to use purchasing dollars to partner with historically underutilized businesses (HUBs). This would infuse much-needed capital into communities of color, who are often challenged by lack of investment and network isolation due tohistoric and persistent discrimination. Unfortunately, according to data, this has not been the case. The N.C. Department of Administration reveals that of the $2.2 billion dollars spent on purchasing by public school systems, only 6.65 percent was spent with HUBs.  Of the $147 million dollars in purchasing spent with historically underutilized businesses, $31.6 million was spent with African-American owned businesses, $5 million with Latinx businesses, $12.7 million with Asian-American businesses, $9.6 million with American Indian owned businesses, $60.5 million with women-owned businesses, and $12.1 million with businesses owned by a person with a disability. These trends have considerable implications given the universal coverage that public school systems spending provides across the state compared to other anchor institutions.

 

The underwhelming nature of HUB utilization sees little distinction between urban and rural counties. While K-12 systems in urban counties spend more total dollars on goods and services than rural counties, the rates by which these institutions do business with HUBs are both below the aspirational goal of 10 percent reaffirmed by Executive Order 24.[4] [5] In actuality, rural counties spend more than urban counties by percentage. School systems in urban counties spent $1.35 billion dollars on goods and services while $80.9 million (5.9%) was spent with HUBs. Rural counties spent $809 million dollars on goods and services, $65.1 million (8%) of that with HUBs.

All told, these data points represent an opportunity for anchor institutions to intentionally engage the communities in which they operate, particularly those of color. In Vance County, where African-Americans make up 49 percent of the population, working to ensure procurement policy is equitable, efficient, and inclusive has enormous upside. If HUB utilization with Vance County Public Schools matched the proportion of African-Americans living in the county, it would result in nearly $2.7 million more dollars flowing to enterprises of women and color. In Wake County, that figure would be $29.8 million dollars.

 

[1] NC Department of Commerce, Demand Driven Data Delivery System-D4

[2] WCPSS District Facts https://www.wcpss.net/domain/100

[3] CMS Background, Facts and History http://www.cms.k12.nc.us/mediaroom/aboutus/Pages/default.aspx

[4] County designations of Core Based Statistical Areas, https://files.nc.gov/ncdhhs/Metro%20Micropolitan%20Counties%20%2812DEC16…

[5] Governor’s Advisory Council on Small and Historically Underutilized Businesses, https://ncdoa.s3.amazonaws.com/s3fs-public/documents/files/EO24.pdf