The flow of dollars for economic development efforts in Pennsylvania has begun to move more in the direction of urbanized areas and less toward outlying areas, according to a report issued Wednesday.

The Harrisburg-based Keystone Research Center found that between 2003 and 2008, "older" areas of the state typically serving as the urban core of a region received $1.25 per capita in state economic development assistance for every $1 sent to suburban and rural "outer" areas.

Pittsburgh lagged the trend, with the urbanized area receiving 98 cents for each $1 received by outlying areas.

Keystone's researchers tracked the allocation of three assistance programs offered by the state's Department of Community and Economic Development: the Opportunity Grant Program, the Infrastructure Development Program and the Pennsylvania Industrial Development Authority program. Over the five-year period, the three agencies issued 1,157 subsidies totaling $631.1 million.

The report, titled "Making Smarter State Investments," is the sequel to a 2003 study that Keystone conducted for the Brookings Institution. That one covered the period between July 1998 and May 2003. In the earlier period, funds from the three programs were evenly distributed between the two types of markets, in 1,333 subsidies totaling $719.5 million.

In a conference call Wednesday, Keystone executive director Stephen Herzenberg credited changes in state policy for the shift, especially the 2005 adoption by state agencies of "the Keystone Principles," a set of guidelines for development that "absolutely embrace smart growth."

"Smart growth" is the economic development community's shorthand for growth that makes greater use of existing infrastructure, as opposed to unlimited horizontal expansion requiring more and more new infrastructure.

The report recommends agencies continue to use those principles in choosing where to distribute funds, as well as urging a focus on distributing information about the use of the funds, suggesting those involved "strengthen public disclosure regarding where business subsidies go."

To that end, the research center is drawing attention to the proposed "Economic Development and Fiscal Accountability Act" winding its way through both houses of the state Legislature. The act would require that more information be made public about which companies receive state economic development funds and what results they produce.

In addition to producing an overall report for the state, Keystone released individual reports for nine metro areas: Erie, Harrisburg, Lancaster, Lehigh Valley, Philadelphia, Pittsburgh, Reading, Scranton and York.

The report is available on Keystone's website at http://keystoneresearch.org/21st-century-economic-development.

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