I'd like to elaborate on what Genie said above...
"I'd say there's little if any preference given to local acts unless "local" includes pretty much the entire Pacific northwest, including BC. Musicians, dance groups, etc., from Oregon, BC, eastern Washington, Idaho, etc. perform there regularly, as well as some from California and places much more remote."

It has been my understanding that participants are unpaid and selected from the Pacific Northwest Region that includes approximately Alaska, Washington, Oregon, Idaho, British Columbia and western Montana. Looking at the NW Folklife web pages, that distinction seems to have mostly disappeared. We have had "special guests" from all over the world (from Africa to Asia, Europe, etc.), and these people have obviously been paid to travel here and perform. So the regional nature of the festival appears to have become blurred to a large extent over the years.

It is interesting to look back at the origins of the festival in an account by Phil Williams, one of the founders - Northwest Folklife Festival Early History, "Where It All Began" (scroll down): "Since the Park Service was supporting the NFFA project, Andy and I contacted Charles Gebler, Director of the Northwest Region of the National Park Service. He was a weekend musician himself, and he agreed to co-sponsor the festival which would include participants from the area that his office administered - Alaska, Washington, Oregon and Idaho (later we added British Columbia and western Montana). I called a number of traditional arts organizations in the area, discussed the concept of a festival that would present Northwest traditional arts, and received a wide indication of support."

Last May I wrote a piece for the NW HOOT in which I reprinted accounts of the first festival from the archives of the Seattle Folklore Society Journal: 40 YEARS OF FOLKLIFE - 1972-2011, The First NW Folklife Festival â€" 1972, An Audacious Beginning. "After recently witnessing the 39th Annual (May, 2010) NW Folklife Festival, with a budget of $1.5 million, and 7,000 musicians, dancers and artists playing to 250 million visitors (Seattle Times), it’s hard to realize that this festival had a much simpler beginning in 1972. I recently found some early Journals from the Seattle Folklore Society and thought it would be interesting to reprint several articles about the first Folklife Festival. I think it is useful to re-examine its roots and history in order to guide future development." You can read the rest here. Interesting stuff!

Cheers, S. in Seattle