N.C. small business sees little incentives.

• Author: Cline, Ned
• Position: Capital - North Carolina

The best thing government can do for business, Ronald Reagan was fond of saying, is to get out of its way. Maybe--though reality often took a back seat to his rhetoric--but that's not the North Carolina way. The prevailing viewpoint among Raleigh power brokers is that government's involvement with business is like oil's with an engine: Gotta have it.

North Carolina spends tens of millions of dollars each year to lure or keep companies whose announcements of new or expanded operations are cause for politicized public celebration, especially in a state that has lost 125,000 manufacturing jobs during the last four years. Big business gets the big bucks while small business draws the short straw when it comes to winning tax breaks or direct grants. Officials get little political mileage out of announcing a startup with just a handful of employees--even though that's how many successful Tar Heel businesses began.

If you think that small businesses don't play a large role in North Carolina's economy, look at the numbers. In 2002, the state had 229,655 business establishments with fewer than 100 employees and only 5,684 with more than that. Employment growth for the smaller ones averaged 5%, while the larger ones averaged a net loss of 3%. About half of Tar Heel workers hold jobs at small businesses.

That, of course, is only half the story. Even though big-business establishments represented less than 3% of Tar Heel companies, they provided 51% of the total private-industry payroll. Those are the kinds of numbers that catch politicians' attention and land the dollars they dole out.

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In the last fiscal year's $14.8 billion state budget (it's up another billion this year), small-business development received about a tenth of a percent of what was spent for assistance to businesses. Large businesses--including a few that cut jobs--got tens of millions in grants and tax breaks, not counting millions from local government. "It's just hard for small businesses to get much traction because they're not as visible among elected officials and there is no natural constituency to advocate for them," says Scott Daugherty, executive director of the Raleigh-based Small Business and Technology Development Center, which works through the University of North Carolina system to promote small-business development and growth.

Daugherty and other small-business advocates say they're not opposed to incentives for General Electric, Reynolds...