NC looks at shedding tiers to boost rural economic development

Posted February 4

— After using a three-tier system for three decades to funnel state funds to the poorest North Carolina counties, the state Department of Commerce is now urging lawmakers to adopt a system to better reflect the economic strength of each county.

The state adopted the tiered system in the 1980s to direct more incentive money for development to economically disadvantaged counties, and the system was later applied to doling out block grants and money in infrastructure improvement programs. Officials said the growing economic gap between North Carolina's urban centers and rural areas is proof that the system no longer works, adding that many of the tax incentives that spurred its creation don't even exist anymore.

Jeff DeBellis, who works with the Commerce Department's Labor and Economic Analysis Division, told lawmakers that an index that compares each county to the state average would be more flexible and better reflect the economic differences from one county to the next. Instead of population growth, property values and poverty rates, counties would be measured based on the unemployment rate, median household incomes, average annual wages and the percentage of residents who didn't complete high school. DeBellis said those factors are better indicators of low wealth and limited opportunities for good jobs.

Applying the new system to Wilson County, for example, would show the county is the 29th most economically challenged county in the state, he said. Right now, Wilson County doesn't even rank among the 40 counties in the lowest of the three tiers.

Eighty-three of North Carolina's 100 counties currently lag behind the state average in the indexed system, which would open up some state development programs to more areas than can now access such help.

Sen. Tom McInnis, R-Richmond, said he fears that the change would spread limited economic development resources too thinly to help the poorest counties.

Meanwhile, Rep. Rena Turner, R-Iredell, and Sen. Tamara Barringer, R-Wake, said they would prefer if the indexed system reflected differences within counties and not just from one county to the next.

"Even in Wake County, there are some pockets of economic distress," Barringer said.

Rep. Mark Brody, R-Union, questioned the need for a new system, suggesting it wouldn't lead to companies flooding rural counties with jobs.

"We can't even meet the needs of our current tier system – the needs being bringing businesses into them – that I don't see the actual purpose ... of changing the system that we haven't reached capacity on in the first place," Brody said.

"I think we do have enough business," Assistant Commerce Secretary for Rural Economic Development Pat Mitchell replied, "but we need to be more creative in working with these (distressed) communities."

Regardless of the system used, Brent Lane, director of the Center for Competitive Economies in the Kenan-Flagler Business School at the University of North Carolina at Chapel Hill, urged lawmakers to focus their economic policies on boosting incomes for state residents.

Per capita income growth in the state has lagged behind the national average since 1997, Lane said, and the state now ranks 39th in the U.S.

"Make income not the only metric but a priority in this state," he said. "We can, county by county, see how we're doing and see where we want to go and then design the strategies, the portfolio, that will get us there."


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