Kansas: One big rural opportunity zone

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It’s a state incentive whose success has been debatable.

It started in 2012 with a goal of helping 50 rural counties reverse population declines with a mix of tax cuts and student loan assistance to lure people to Kansas.

Over the last nine years, the program has grown as lawmakers designated more and more counties as so-called rural opportunity zones.

Twenty-three counties were added in 2013. Four more were added a year later.

Last session, the Legislature added 18 more counties when it made any county with a population of less than 40,000 people eligible for the incentives.

Now, 95 of the state’s 105 counties will be eligible for the incentive, effectively making Kansas one big rural opportunity zone.

It’s prompted some murmuring within the Legislature — from Republicans and Democrats alike — about whether the program has become too large and will water down any effectiveness it might have for some communities.

Nick Hoheisel

“There is some concerns with folks that it is getting a little too big,” said Republican state Rep. Nick Hoheisel, vice chair of the House committee that deals with rural development issues.

“It’s almost like everybody but Sedgwick, Douglas, Shawnee, Johnson and Wyandotte,” Hoheisel said. “Are we just going to open it to everybody but the top five counties?”

The Wichita lawmaker agreed the program could help but said it needed to be focused on areas of the state that are losing population.

“Obviously, rural development is important, but we’ve got to make sure we’re targeting the counties that really need the help the most.”

When the program started in 2012, it targeted 50 Kansas counties in which the population had declined at least 10% during the previous decade.

The program consists of two components — a state income tax waiver and student loan repayment assistance — both of which are available for up to five years.

The tax component waives an individual’s state income taxes for up to five years under certain conditions, such as living outside the state for five years before relocating to a county designated as a rural opportunity zone.

Kansas offers eligible individuals up to $3,000 per year for five years to put toward their student loans if they earned an associate, bachelor’s or postgraduate degree before  moving to the rural opportunity zone county.

The student loan program requires a 50% contribution from cities, counties or a local business for the state to help cover its share of repaying the loan.

A 2020 study suggested that the program has not accomplished its primary goal of repopulating parts of Kansas that have been bleeding population for decades.

Demographers have long suggested that the premise of the program was flawed, questioning whether people would move based on incentives.

The study seemed to back that up, finding that the population increased in just seven of the 77 counties where the tax incentives were available during the study.

In the seven counties that saw population increases — Scott, Logan, Kiowa, Sheridan, Gray, Anderson and Linn — no increase was bigger than 2.5%, the report showed.

The study also concluded that incentives are not influencing where people decide to live.

Of the 522 people who received student loan subsidies and participated in the survey, only 155 had moved to Kansas from out of state. Most of the participants moved from one county to another.

The Commerce Department received survey responses from 522 people who had received the student loan subsidies.

Eighty-three percent said they would have moved to their county of residence regardless of the financial incentives.

About 70% said the incentives were not the reason they stayed in Kansas.

The question now facing the program: Has it reached a point where any of its potency might have been weakened as it has expanded across the state?

Jason Probst

“I think we have diluted the effectiveness of it,” said Democratic state Rep. Jason Probst, who served as the ranking member on the Rural Revitalization Committee last year.

“If you’re covering 95 counties with basically the same benefit, you’re taking away the advantage of the program from the original counties that it might have been intended for,” Probst said.

Probst, like other lawmakers, said some counties have gleaned benefits from the program, while others not so much.

But there is concern about the breadth of the program and whether it takes a special targeted incentive and makes it commonplace.

Republican state Rep. Troy Waymaster, chair of the House Appropriations Committee, said he expected several years ago that the program would expand like it has.

“I think we’ve lost sight of the purpose behind the rural opportunity zones, and there definitely needs to be some type of restructuring,” Waymaster said.

Troy Waymaster

“The addition of more counties is not the solution,” he said.

Waymaster said it’s disingenuous to the 50 original counties that were designated as rural opportunity zones now that it’s expanded to cover all but 10 Kansas counties.

“We’re getting to the point now where the original legislation is null and void,” he said.

“We’ve just expanded it so much. Why did we expand it when we haven’t seen the results that we wanted?”

Republican state Rep. Jim Kelly, chair of the committee that deals with rural issues, said he doesn’t believe the expansion has a negative effect on the program.

He said the program was not used in all 77 counties previously, and he doubted that it would be used in all 95 of the counties with the expansion.

“I don’t look at it as an all-exclusive club,” Kelly said.

Jim Kelly

“Kansas counties that aren’t the metro counties in general face hurdles,” the Independence lawmaker said.

“They need some help to attract people in to work in the jobs that they have available and to keep those individuals in those counties,” he said.

“When you live in a rural area, you need every tool you can to recruit people and keep people here,” he said.

Senate Majority Leader Larry Alley said in an interview during the session that he didn’t think the program was getting too big.

The metro areas, he said, already have an advantage because jobs are plentiful and they are educational centers.

“Those areas are growing,” he said. “Let’s create jobs in the rest of Kansas, and that’s what the rural opportunity zone is really trying to do.”

Last session, the Commerce Department proposed changes to help reinvigorate the program going forward.

The agency proposed giving people relocating to a rural opportunity zone financial assistance on a down payment on a home.

Eligible individuals would get to choose between either financial assistance covering up to 3% of a down payment on a home or a student loan repayment.

Counties or businesses would have to agree to pick up half the cost of the financial assistance toward a home down payment.

The agency also wanted to expand the student loan program to include new graduates
with vocational and technical education certificates.

It’s now only available to graduates with associate and bachelor’s degrees.

“The omission of certificate holders from accredited institutions — welders, plumbers, child care professionals, etc. — makes little sense,” the agency’s former legislative director, David Soffer, told the committee earlier this year.

“Shortages of skilled tradespeople are a key impediment to growth statewide, but particularly in rural places,” he said.

The agency also was proposing to increase the amount of money counties must commit to student loan payments or home down payments to participate.

The recommendations came out of a working group of lawmakers, county commissioners and economic development professionals who studied ways to improve the program.

Kelly said he thinks the latest proposals from Commerce could boost the program.

“I think it could be beneficial for those 95 counties,” he said.

Lt. Gov. David Toland, who doubles as the Commerce secretary, said the issue with rural opportunity zones is less about size than how it’s used.

He noted just 19 out of the 95 rural opportunity zone counties are willing to commit funding toward the student loan program.

An additional eight counties are not contributing funds, but they allow cities and other private resources to be matching sponsors.

The state expects at least 60 counties by the end of the month to have opted out of the student loan program portion entirely.

Toland pointed to the proposed changes that failed to advance last session as one way to help breathe life into the program.

“While we ran out of time this past session to get the bill across the finish line, we look forward to working with the Legislature in making these reforms, encouraging counties to commit to the program and getting the most value out of state dollars invested in” rural opportunity zones, he said in a statement.

Republican state Rep. Adam Smith chaired the Rural Revitalization Committee last year.

Smith, too, has seen mixed stories of success with the program.

Adam Smith

“We’ve got some counties out here that just used the heck out of it and really used it as a recruiting tool,” Smith said.

“The communities that really aggressively used the program, I think it’s been a great tool,” he said.

Commerce Department data, for instance, shows that the student loan incentive has been more popular in border counties such as Phillips and Nemaha in northern Kansas.

The student loan incentives also have been used more frequently in Greeley and Kearny counties.

In Kearny County, for instance, Kearny County Hospital used the student loan subsidies to attract doctors and nurses to southwest Kansas.

But there’s been a downside, too.

Smith said there have clearly been cases where the program didn’t work out as planned and incentives were given to people who would have moved to rural Kansas regardless.

“Did it really accomplish what the original goal is?” he asked. “Sure, there are some cases where it did not.”

Smith said he would have preferred a different approach than another expansion of the program this year.

He said the program might need to be tailored to a community’s specific needs to recruit certain types of employees.

“I think the focus of the program is trying to improve the local communities,” he said.

“It doesn’t do a lot of good to recruit people into a community if that profession or industry isn’t really in demand,” he said.

“The solution really needs to be tailored local.”