by Tim Carpenter, Kansas Reflector
August 23, 2023
TOPEKA — The combination of state income tax credits and student loan repayment assistance authorized by the Kansas Legislature and a Republican governor in 2011 has done little to slow population losses in rural counties despite $27.1 million in incentives, a state audit said Tuesday.
The Rural Opportunity Zone initiative was signed into law by Gov. Sam Brownback to address erosion of people from 50 counties that had lost more than 10% of their population in the previous decade. In 2021, the ROZ program was expanded to 95 of the state’s 105 counties by including all with less than 40,000 people.
The law offered up to $15,000 in student loan repayment assistance over five years to people who settled in a population-stressed county and a five-year 100% state income tax credit for people who moved to Kansas and did likewise.
The Legislature’s auditing division reported to a joint House and Senate committee that $13.3 million in student loan payments and $13.8 million in tax credits had reduced outmigration from the targeted counties by 1,400 people from 2012 to 2022. In other words, population in participating counties would have plummeted by 30,800 instead of 29,400 in that period.
“Seems pretty expensive,” said Rep. Sean Tarwater, a Stilwell Republican and chairman of the audit committee. “I’ve been a critic of this program since I got here (2017). I haven’t liked it at all. If anyone has any good ideas to replace this program, I’m all ears.”
Tarwater said he wasn’t concerned how much a replacement program cost, but was insistent the current version be overhauled to effectively support population growth in rural communities.
Rep. Tom Sawyer, a Democrat from Wichita, was equally blunt: “It doesn’t really sound like it’s doing too much.”
Affirms bleak assessment
Sen. Caryn Tyson, R-Parker, said Kansas was the only state with a population incentive program of this design. Likewise, she said, Kansas was alone in offering taxpayer-financed STAR bonds to support economic development projects with an entertainment or tourism feature.
“If there was a pattern and constructive development other states would be picking this up. Maybe we need to look at both of those programs,” Tyson said.
The audit report followed a 2020 evaluation of ROZ by the Kansas Department of Commerce that concluded the program hadn’t been effective at reversing or slowing rural depopulation in the state.
The program would end in mid-2026 unless reauthorized by the GOP-led Legislature and Democratic Gov. Laura Kelly.
State law never provided benchmarks for evaluating whether ROZ could be declared a success, but legislative auditors said the program appeared to benefit 19 counties. In Nemaha County, the report said the population grew by 20 people between 2013 when authorized by the county and 2022. Thomas County lost 55 people from 2011 to 2022, but auditors said without ROZ incentives the county may have given up as many as 120 people.
U.S. Census Bureau data show rural counties across the nation experienced declining population in recent decades. Since 1980, more than half rural U.S. counties surrendered people to more urban areas. In Kansas, rural population declined 9% from 1980 to 2021. Some counties declined more than 20%, while the state’s urban population surged 50% since 1980.
Inside the numbers
The ROZ statute required a county to sponsor half of the repayment of college debt for a person moving to the eligible county. However, the state Department of Commerce allowed counties to pass a “$0 resolution,” so cities, foundations or businesses could cover that sponsorship. So far, the commerce department approved nine cities, five foundations and 147 employers as sponsors of the 50% repayment obligation. The agency also permitted those donors to select recipients.
Josh Luthi, the principal auditor who presented the report to legislators, said state law didn’t specifically allow cities, foundations or businesses to be program sponsors. He said auditors learned a few foundation donors sponsored themselves or members of their family. In other words, some participants were able to take those directed contributions to cover half the college debt and compel the state to pay the other half of that debt.
“It looks like there are a couple examples of, I think if we were not talking about business and incentives when we were talking about people getting assistance, we’d call it fraud,” said Rep. Jason Probst, D-Hutchinson.
Student loan assistance was capped at $15,000 over five years. Between 2012 and 2022, the audit report said, about 1,670 people enrolled in the student loan part of ROZ and accepted $13.3 million in aid.
An individual relocating to an sufficiently rural county in Kansas from out-of-state could receive a full state income tax credit for up to five years through the program. That person had to live outside Kansas for at least five years before moving to a ROZ county and had to live in that Kansas county for one year before claiming the credit.
The Kansas Department of Revenue said 1,720 people applied for the state tax credit and received $13.8 million from 2012 to 2022. That cost was borne entirely by the state of Kansas. Only 270 claimed the credit for the full five years, while 550 did so for one year.
An estimated 150 people received both the tax credit and the college repayment support, but the state departments of commerce and revenue were unable to tell auditors the precise figure because they don’t collaborate on tracking beneficiaries.
Kansas Reflector is part of States Newsroom, a network of news bureaus supported by grants and a coalition of donors as a 501c(3) public charity. Kansas Reflector maintains editorial independence. Contact Editor Sherman Smith for questions: info@kansasreflector.com. Follow Kansas Reflector on Facebook and Twitter.
