Under the Dome

NC lawmakers to take on long-standing ‘tier’ system for state aid

North Carolina’s long-used system for rating the economic need of individual counties is often blind to reality and should be repealed, according to a new report that won lawmakers’ interest on Monday.

The current “tier system” ranks each county as a distressed 1, or an economically average 2, or an affluent 3 for the purposes of allocating public aid.

The new report said that system is an unfair blanket approach that misses downtrodden areas within otherwise well-to-do counties and hasn’t resulted in a meaningful flow of grants or credits to communities most in need.

Legislation to void the system is in the works. On Monday, the General Assembly’s Joint Legislative Program Evaluation Oversight Committee voted to draft a bill that would put end-dates on the tier system and order new criteria for distributing aid.

“We cannot continue with this one-size-fits-all,” said Rep. Jason Saine, a committee member who hails from Tier 3 Lincoln County, which borders mostly with Tier 2 counties that are more eligible for public dollars to assist on a range of issues. That’s despite parts of Lincoln County bearing economic similarities to those considered Tier 2s.

The tier system has been in place since the mid 1990s, and even though the ranks are revised annually, most counties see no change in tier.

Robeson County, for instance, has long been a Tier 1 in light of its relatively high unemployment rate along with lean population growth and median household income. Sampson County, faring better by average, is a Tier 2. Wake County, with its high growth and consistently better-than-average jobless rate, is a Tier 3.

Fifteen public programs that base their allocations on the tier system handed out $71 million last fiscal year for downtown revitalization projects, infrastructure improvements, industrial development and more. But less than $17 million – 24 percent – went to Tier 1 counties, according to the state. Seventy-two percent of the total – $51.6 million – went to Tier 2 counties.

“This result is counterintuitive,” said Sara Nienow, a senior program evaluator at the General Assembly’s Program Evaluation Division, which produced the report. The point of the tier system would seemingly be to primarily offset the needs of Tier 1s, she said.

By statute, there is an equal number of Tier 1 and Tier 2 counties — 40 each, with 20 Tier 3s. The Department of Commerce, which administers the rankings, bases them on average unemployment rate, median household income, percentage growth in population and adjusted property tax base per capita.

But there are quirks.

If a county is ranked Tier 1, it by law keeps that rank for two consecutive years. Any county with a population less than 12,000 automatically qualifies for Tier 1. Any county with a population less than 50,000 automatically qualifies for Tier 2.

While Camden County is among the top-20 wealthiest counties in the state, as measured by tier criteria, its population is less than 12,000, meaning it goes down on paper as an in-distress Tier 1.

“Tier 1 basically means nothing in Tier 1 counties now,” said Sen. Tom McInnis, whose district includes three Tier 1 counties — Scotland, Richmond and Anson.

While Brunswick County has spread-out areas of unemployment or low income, the beach homes and golf course communities elsewhere help to skew the numbers enough to label it a Tier 3, making the county ineligible for state awards from the Industrial Development Fund Utility Account and the Job Maintenance and Capital Development Fund.

The tiers are also disconnected from their original purpose. They were set up in 1996 initially as a five-tier system solely for specific job development tax credits to encourage business investments in impoverished areas. Those credits expired at the start of 2014.

The tier system today is also a go-to for programs that aren’t focused on economic development, like the state’s spay-and-neuter fund and the Farmland Preservation Trust Fund. And, like many other programs, their allocations’ reliance on the tier system is written in statute, meaning a repeal would require new criteria.

Ideas vary.

Committee members and state staffers floated concepts that included abandoning the blanket approach for counties and instead considering census tracts with documented hardships.

But that might not be the right answer, either, officials said. According to the Commerce Department, that federal data are sometimes outdated or have large margins of error.

“We don’t think there’s a good reliable source that would have sub-county data,” said Jeff DeBellis, the department’s manager of economic policy and analysis.

The legislation requested by the committee on Monday will recommend repealing the tier system for non-economic development programs by July 2017 and direct affected state agencies to come up with new criteria. Economic development programs that use the system would feel the repeal by July 2018.

The bill would also establish a legislative commission to focus on chronically distressed communities, how to identify them and how to soften their problems.

As the legislating plays out, there may be some wary constituents, noted Rep. Nelson Dollar, a Wake County Republican.

“Particularly, folks in Tier 2 ought to pay real close attention to what goes on in the future as changes are made,” he said, noting the percentage of funds those counties have received under the current structure.

The full General Assembly isn’t set to reconvene until April. Both the House and the Senate would have to agree on legislation before the governor could sign it.

Benjamin Brown: 919-832-8358, @benbrownmedia

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