Legislation that would redistribute sales tax revenues to local governments has reignited the old image of “two North Carolinas.” The measure rests on the premise that this state has two contrasting identities: one rural and distressed, the other urban and robust.
Lawmakers, mayors, county managers, school superintendents, and journalists are scrambling to figure out which localities gain, and which lose, under the proposed distribution formula. But here is a tax bill in which the devil is in more than the details; the devil also resides in its old, out-of-date mindset and its misreading of the reality of modern North Carolina.
Still, even as “metropolitanization” progressed, a rural strain remained embedded in the state’s DNA.
Over the past generation, the process of “metropolitanization” has taken hold. Metro areas have become the state’s engines of economic propulsion, with Mecklenburg County and Wake County especially powerful magnetic poles. Metro areas consist of their core cities, suburbs, exurbs, and patches of ruralness.
Still, even as “metropolitanization” progressed, a rural strain remained embedded in the state’s DNA. North Carolina has fought to preserve and bolster rural communities that had long defined the state’s culture. Consider the record of initiatives, across both Democratic and Republican administrations, over four decades.
It was at Gov. Jim Holshouser’s initiative that the state built a network of rural health clinics. Then, the legislature approved the East Carolina University Medical School, along with Area Health Education Centers under UNC-Chapel Hill. Gov. Jim Hunt promoted a “balanced growth” plan in his first term. Gov. Jim Martin approved locating the Global TransPark at Kinston specifically to spur rural development. At the same time, legislative Democrats, led by Lt. Gov. Bob Jordan, launched the Rural Economic Development Center.
In the early 1990s, the state enacted low-wealth and small-county supplemental funding to provide rural school systems with financing they could not obtain from their county property taxes, with rates already maxed-out. In his second term as governor, Hunt appointed Erskine Bowles, who was then transitioning out of a White House job, to chair a Rural Prosperity Task Force. As the state expanded its incentives to attract industry before and during the administration of Gov. Mike Easley, it developed the “tier” system designed to favor economically distressed counties.
Despite all of these efforts, powerful countervailing forces have imposed limits on rural economic advancement.
Despite all of these efforts, powerful countervailing forces have imposed limits on rural economic advancement: persistent poverty, industry seeking a higher-skill workforce, and national and international economic trends. As a result, 49 counties lost population between 2010 and 2014, the U.S. Census Bureau reported a few days ago. A cluster of nine counties in the northeast region had population losses ranging from 3 percent to 7 percent.
And yet, population decline isn’t the whole story of rural North Carolina. Some historically rural counties – near major cities, along interstate highways and featuring natural beauty – have become transformed. Growth counties now include Union to the east of Charlotte, Johnston to the southeast of Raleigh, and Brunswick lodged between Wilmington and Myrtle Beach, S.C. Among the top 10 in growth rates from 2010 to 2014 are Hoke, near Fayetteville/Fort Bragg, and Harnett, between Raleigh and Fayetteville.
What, then, are lessons to be learned from the state’s “metropolitanization,” and from the state’s experience in striving mightily to enhance the health, education and economic well-being of its rural residents and communities? Three lessons spring to mind:
To be sure, many rural counties have higher property tax rates, but less revenue per capita, than urban counties with stronger property tax bases. And yet, the amount of money towns and counties would gain from sales tax redistribution, while not insignificant in the short-run in tight budget times, would hardly be enough to change the medium- to long-term trajectory of rural communities. The tax shift is not a more potent injection of stimulus than the array of initiatives dating from the 1970s.
What’s more, lawmakers provide no assurance that local officials would use the money for sustained economic payoff rather than short-term political advantage. Some officials would be tempted to reduce property taxes, leaving their public sector budgets no better off.
Schools are vital to the future of North Carolina’s rural residents. Rather than an un-targeted redistribution of tax proceeds, rural schools would benefit more from an infusion of purposeful funding through the low-wealth and small-county supplemental mechanisms – as well as from broad state policy decisions on pay of teachers and principals, on expanding pre-K to give more children a strong educational start and on further linking high schools to community colleges.
It’s important to be clear-eyed, not sentimental, about education and rural communities. Some young people will return – for reasons of family and life-style. And yet, better schools will lead to more rural young people heading off for universities and community colleges – and inevitably that will mean many of the best and brightest ending up in good jobs in metropolitan areas. It is simply the right thing for North Carolina to do to give its rural young people the intellectual and social skills to become upwardly mobile and to exercise real choice in pursuing a career and deciding where to live.
For the foreseeable future, North Carolina will depend on its major metros for its overall economic vitality. To shift tax revenue from urban to rural may end up hurting both urban and rural.
Cities and suburbs face daunting fiscal and planning challenges in absorbing economic and population growth. In-migration of high-skill, high-earners has also resulted in an influx of lower-skill, low-earning service and retail workers. As MDC’s State of the South reports, the Raleigh and Charlotte metro areas both had an increase in people in poverty of more than 90 percent from 2000 to 2012, Greensboro of more than 70 percent. In addition to dealing with their own pockets of economic distress, metro areas need assured water supplies, updated transportation systems, parkland and recreational amenities and, of course, schools that propel students to high achievement.
Rather than pit urban versus rural, a better approach involves building upon strength – that is, linking more rural residents to the job opportunities offered in metro areas. Easier said than done, but the dynamic is already evident. The vibrancy of Asheville has rippled into Madison, Henderson, and nearby mountain counties. The future of Eastern North Carolina increasingly depends on Greenville and Wilmington. Mecklenburg and Wake now have more than one million residents, and have emerged as such powerful economic engines that the state would suffer if these metro economies sputter.
Editor’s Note: Ferrel Guillory served on the Rural Prosperity Task Force, and he is the co-author of MDC’s State of the South report.