Transfers to state leave Rural Center with $7M

The Rural Center was under the gun to transfer its grant-making operations to the state Department of Commerce after lawmakers refused to fund the embattled nonprofit in the state budget and instead created a division within Commerce to handle economic development in rural counties.

State Budget Director Art Pope told members of the Joint Legislative Commission on Governmental Operations that $85 million in existing grants would be shifted to Commerce, and another $24 million in Rural Center assets would revert to the state's General Fund.

The $24 million includes $4.3 million in interest income from clean water funds given to the Rural Center several years ago, Pope said. The center will retain another $4.3 million in interest from the account to settle a dispute over who should control the interest income, he said.

A state audit determined that the Rural Center has earned $20 million in interest off state investments over the years, but no law required the agency to turn that money back to the state. Pope said lawmakers will have to close that loophole.

The June audit sent the Rural Center into a spiral. It also charged that the organization lacked adequate oversight of its grants and questioned the high salaries of its executives.

Following the audit, longtime President Billy Ray Hall resigned, Chairwoman Valeria Lee stepped down under pressure and the remaining board was left to pick up the pieces after lawmakers stripped its funding.

The board is looking at coordinating business loans in rural communities and providing scholarships and leadership training in the future.

In addition to the $4.3 million in state interest, the Rural Center also retains about $3 million in interest from a separate account that involved both state and federal money, said John Hoomani, an attorney for the Department of Commerce.

Lawmakers asked about a $242,000 severance account for Hall, but Hoomani said that money remains frozen until the Rural Center completes a legal review to determine whether it should be paid out.