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General Assembly reviews county tier rankings

February 23, 2018 / Carolina Small Business / Economic inequality, Economy, Rural

Each year, the NC Department of Commerce releases its ranking of each of the state’s counties on their level of economic distress. The county tier system has become the basis for how many of the state’s economic development programs distribute funding. However, this year the General Assembly’s Economic Development and Global Engagement Oversight Committee (EDGE) is reviewing the effectiveness of the county tiers, and may introduce some changes.

The tier system divides all 100 of NC’s counties into three tiers: tier 1 indicating the 40 most economically distressed counties, tier 2 indicating the next 40 counties, and tier 3 indicating the 20 least economically distressed counties. The tiers are based upon four factors: median household income, the unemployment rate, population growth and per capital property value. Each year these indicators are reviewed and new tier designations are published.

A recent article in the Carolina Public Press reports that 15 state programs rely on these tier designations in determining how funds are disbursed. Ideally, these rankings should help direct resources to those areas that are most in need of support and investment. Some are arguing that the tiers have not been effective in doing so. Senator Tommy Tucker from Union County told Carolina Public Press that 80 percent of the money has instead gone to the wealthiest counties.

What this points to is the difficult challenge of spurring economic development and attracting investment to truly underserved areas. Growing metropolitan areas attract new businesses and jobs because they have the infrastructure, talent, and amenities that companies are seeking. Areas that have suffered from years of economic decline pose a significant challenge, as they require a more concerted effort to support new business development.

The article also discusses that complex economic factors that go into determining true economic distress. Take property values. Coastal counties, for example, may have high property values, but as a state fiscal research economist pointed out, they also have a predominance of low-wage jobs– Pamlico County has the highest property values per capita in the state, but the lowest average wage.

Other provisions built into the tier ranking system create some rigidity that may be hampering the system’s effectiveness. All counties with less than 12,000 residents are automatically counted as tier 1, regardless of the economic conditions in those counties. Tier 2 counties cannot have a population of more than 50,000. Both of these rules may be restricting more economically distressed counties from being counted as tier 1 or tier 2.

This predicament is at the crux of economic development policies and programs. The point should be to spur investment where it would not have otherwise occur, and create economic activity where it is lagging. If the county tiers can be tweaked to reflect the economies of counties more accurately, and if the state’s programs are truly targeted to spur economic development in these areas, it could be a positive change for NC. However, it will take both a rethinking of how we define economic distress AND taking a hard look at our policies and programs to make sure that investments are steered in the right direction.