POWER IN PURPOSE POLICY STRATEGIES TO BUILD A MORE INCLUSIVE ECONOMY WITH COOPERATIVES BRETT THEODOS, LEIHA EDMONDS, AND CORIANNE PAYTON SCALLY A REPORT FROM THE URBAN INSTITUTE OCTOBER 2020 ABOUT THE AUTHORS Brett Theodos is senior fellow in the Leiha Edmonds is a research analyst in the Metropolitan Housing and Communities Metropolitan Housing and Communities Policy Center at the Urban Institute, where Policy Center. he directs the Community Economic Development Hub. Corianne Payton Scally is a senior research associate in the Metropolitan Housing and Communities Policy Center. ACKNOWLEDGMENTS This report was funded by Cooperative Office of Economic Development and Development Foundation in partnership International Trade; Jason Linde, National with the National Cooperative Business Rural Electric Cooperative Association; Association CLUSA International, with Margaret Lund, independent consultant; original funding from the Robert Wood Mo Manklang, US Federation of Worker Johnson Foundation. We are grateful to Cooperatives; Tim Palmer, Democracy them and to all our funders, who make it at Work Institute; Linda Phillips, Jason possible for Urban to advance its mission. Wiener|p.c.; Mary Ann Ralls, National Rural Electric Cooperative Association; The views expressed are those of the Stuart Reid, Food Co-op Initiative; Nathan authors and should not be attributed Schneider, University of Colorado Boulder; to the Urban Institute, its trustees, or Stacey Sutton, University of Illinois at its funders. Funders do not determine Chicago; Todd Van Hoose, Farm Credit research findings or the insights and Council; and Russell Wasson, National recommendations of Urban experts. Rural Electric Cooperative Association. Further information on the Urban Institute’s funding principles is available at We are also grateful to the people who urban.org/fundingprinciples. participated in the Power in Purpose: Cooperative Policy Roundtable Series We would like to thank the people who roundtables held in Billings, Montana; participated in phone interviews for Denver, Colorado; Harrisburg, this project: Larry Blanchard, CUNA Pennsylvania; Maple Grove, Minnesota; Mutual Group; Rob Brown, Cooperative Madison, Wisconsin; Sacramento, Development Institute; Victoria Clark, California; and Olympia, Washington, and Northcountry Cooperative Foundation; to those who participated in the regional Brian Cavey, CoBank; David Hammer, virtual roundtables in New England and ICA Group; Melissa Hoover, Democracy the Southeast. at Work Institute; John Kovacs, Colorado On the cover: Cooperators discuss strategies to build an enabling environment at the 2019 Cooperative IMPACT Conference just outside Washington, DC. Photo: NCBA CLUSA Copyright © September 2020. Urban Institute. Permission is granted for reproduction of this file, with attribution to the Urban Institute. POWER IN PURPOSE POLICY STRATEGIES CONTENTS TO BUILD A 3 EXECUTIVE SUMMARY 4 POLICY STRATEGIES TO BUILD A MORE INCLUSIVE MORE INCLUSIVE ECONOMY WITH COOPERATIVES ECONOMY WITH 5 The Cooperative Approach 6 Challenges to Launching, Sustaining, COOPERATIVES and Expanding Cooperatives 8 COOPERATIVE POLICY GOALS 9 COOPERATIVE POLICY OBJECTIVES 10 Policies that Directly Affect Members, Communities, and Customers 11 Enabling Legislation, Improving Incorporation and Chartering 12 Eligibility and Regulation 13 Financial Support BRETT THEODOS, LEIHA EDMONDS, AND 13 Grants CORIANNE PAYTON SCALLY 13 Loans and Guarantees A REPORT FROM THE 15 Taxes URBAN INSTITUTE 15 Technical Assistance and Training 16 Preferences in Contracting and OCTOBER 2020 Procurement 17 CONCLUSION 19 Notes 20 References CO-OP POLICY STRATEGIES 1 EXECUTIVE SUMMARY In this report, we provide an Major 20th-century federal policy initiatives enabled U.S. communities historically excluded overview of the role cooperatives from resources and services to use cooperatives to can play in building healthy, band together and create new opportunities. From equitable, and sustainable bringing electricity to rural America to accessing communities, and explain how to financing and credit services for people with low incomes, cooperatives have addressed significant advance that work through federal, market failures and offer an inclusive model of state, and local policy. The policy employment and business ownership. For more objectives we present are intended people to have the ability to improve their health and wellness, they need good jobs, stable housing, not to simply grow the field of and access to critical resources. Equally important cooperatives, but to enhance the is an empowering environment that provides work of cooperatives that address community members opportunities to develop and exercise leadership skills to influence policies economic and racial disparities in that impact their lives, families and neighborhood. the United States. Today, cooperatives with engaged memberships Photo: Sam Levitan A policy discussion at the 2019 Cooperative IMPACT Conference. 2 POWER IN PURPOSE that aspire to cooperative principles offer cooperatives that provide resources to people solutions to some of the country’s biggest issues. and communities who are underserved by For example, cooperatives help renters purchase mainstream institutions and businesses. homes, help people set up checking accounts or take out loans, help families access affordable child Moreover, the six specific areas where policy can care, help older adults find reliable home care, and help cooperatives build an inclusive economy are help people access fresh food. as follows: n Moreover, crises like the COVID-19 pandemic and POLICIES DIRECTLY AFFECTING COMMUNITIES the ongoing violence of racism harm communities OR CUSTOMERS. Policymakers can improve of color, which are experiencing higher rates of policies for communities and customers, thereby death due to the coronavirus, higher mortality supporting cooperatives’ inclusive-growth work. rates during police encounters, and higher Such policies can involve consumer finance, child unemployment rates. As policymakers consider care, food access, and affordable housing. how to help their communities recover from these n ENABLING LEGISLATION. States can adopt general crises, new initiatives are critically important. incorporation statutes to provide a more inclusive Cooperatives offer a business model informed framework enabling cooperatives of all types to by the needs of workers and their communities, form and operate effectively in their state of origin. and they are striving to mitigate layoffs, protect n ELIGIBILITY AND REGULATION. Agencies can the health of workers and clients, and support the expand programs (such as the Community struggle for racial justice. Development Block Grant) or adjust regulations (such as the Workforce Innovation and Cooperatives are part of the solution to such Opportunity Act) to better include cooperatives. problems, but federal, state, and local government policies are needed to help cooperatives operate n FINANCIAL SUPPORT. Cooperatives can advocate at their full potential. In this report, we describe for dedicated local and state government funding four broad policy goals and six specific policy as well as tax credits and other subsidies to objectives that policymakers can use to improve support employee ownership and the conversion how cooperatives serve their communities. The four of businesses to worker cooperatives. near-term policy goals are as follows: n TECHNICAL ASSISTANCE AND TRAINING. Congress can enhance funding for technical n LEVEL THE PLAYING FIELD. Cooperative sectors assistance and training via the U.S. Department can be disadvantaged by federal, state, and of Agriculture’s Rural Cooperative Development local policy. Grants (RCDGs) and Small Business n HELP GROW THE NUMBER OF COOPERATIVES Development Centers. IN UNDERSERVED MARKETS. Policy can do this n PREFERENCES IN CONTRACTING AND by helping new cooperative businesses start up, PROCUREMENT. Policymakers can encourage converting existing businesses into cooperatives, preferential procurement and contracting processes preventing cooperatives from demutualizing for cooperatives with clear social mandates. by selling the cooperative to investors, and preventing cooperatives from failing. n HELP GROW THE SIZE AND MARKET SHARE OF EXISTING COOPERATIVES. Cooperatives benefit from increased employment (or membership) and higher revenues or profitability. n SUPPORT AND INCENTIVIZE COOPERATIVES TO REACH UNDERSERVED PEOPLE AND COMMUNITIES. Policy supports should target CO-OP POLICY STRATEGIES 3 POLICY STRATEGIES TO BUILD 500 L’Enfant Plaza SW A MORE INCLUSIVE ECONOMY Washington, DC 20024 www.urban.org WITH COOPERATIVES The impact of COVID-19 threatens the resilience communities. Cooperatives operate in a policy of workers, businesses, and communities with environment designed primarily to address staggering job losses and untold local-business the needs of investor-owned corporations and failures. As the pandemic ripples through individual proprietors. Though most cooperatives the economy, people of color, workers with are corporations, the cooperative ownership low incomes, and business owners are being model means that policies and regulations, if not disproportionately affected. To address these well crafted, can unintentionally create barriers problems, federal, state, and local policymakers that exclude cooperatives or make eligibility and working to make their communities healthier compliance complicated and costly. and more inclusive and resilient