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Revitalizing Oklahoma’s Rural Communities

November 11, 2016 - 1:02pm CST

Revitalizing Oklahoma’s

Rural Communities

By Steve Anderson

In recent months I have written several articles about a rural revitalization program for Oklahoma that mirrors the Rural Opportunity Zone (ROZ) program in Kansas, a program I helped to create. ROZ was the first economic plank in Governor Sam Brownback’s plan to address 50 years of lackluster economic performance by the state. 

Governor Brownback understood that if you looked at the state as an economic entity, the most undervalued asset on the balance sheet was in the rural areas. Before ROZ, Kansas’s existing rural programs shared the same characteristics as current Oklahoma rural programs, such as the Rural Economic Action Plan (REAP). They merely throw money at the symptoms instead of addressing the cause. He knew that the status quo was unacceptable.

Governor Brownback made the decision to empower local citizens and local economic development directors by creating Rural Opportunity Zones. These initially applied to counties who had lost population over the prior decade, but lawmakers soon discovered the idea was so popular that additional rural counties were added in successive legislative sessions.  

Rural Opportunity Zones were created to address the cycle of depopulation which leads to decreasing local property and sales tax revenues, which in turn lead to poor infrastructure and limited services available locally. As necessary services like hospitals either disappear or provide very limited treatment options, this further incentivizes people to move out of that county.

The basic idea was to make any individuals who moved to those counties from out of state free from individual income tax for five years. If an eligible county chose to participate (and not all did), the state agreed to waive individual income taxes for five years on a qualified individual. Qualifying required that you have lived outside of Kansas for five or more years and earned less than $10,000 in Kansas source income in each of the five years before moving to a ROZ county.

Moreover, the state agreed to pay up to $15,000 of a new resident’s student-loan debt if the county matched or exceeded that amount. (Not all of the participating counties elected to participate in this part of the plan.) Some of the participating counties formed 501(c)(3) charitable organizations to allow citizens to contribute while obtaining the tax benefits. A good measure of the community support was that some created funds that exceeded the state’s contribution. To qualify, the individual had to meet criteria listed in the preceding paragraph and hold an associate’s, bachelor’s, or post-graduate degree with a student-loan balance outstanding.

The state’s objectives were intertwined with the county’s interests but a key element—which is missing in programs like REAP—was that there was no cost to either the state or the county without a successful outcome. If the incentives did not work to bring out-of-state residents to rural Kansas, then not one dollar would be expended. We were well aware that there was no one silver bullet that would reverse more than 50 years of shrinking rural population. We left almost all of the marketing of the plan initially to the counties and required the matching school-loan payments to ensure active participation from the locals.    

The student loan provision was specifically designed for the short-run goal of bringing young college graduates to the rural areas. Health care services were especially crucial. One example of ROZ success is Dr. Aaron Zook, who, after doing his medical residency in Denver, relocated to rural Pratt, Kansas, in part because of Kansas’s debt-reduction offer. “Any help I can get is going to be real nice,” he told KSN TV, referring to his $200,000 in student-loan debt.

Attracting younger people to the rural areas has even more widespread impact on low-population counties than is first perceived. Greeley County, which is located in the far western part of the state, is an example of what happens when a well-planned incentive is given to a motivated community. During the previous decade, the county experienced the state’s greatest population loss—a 19 percent drop. The ROZ student-loan program in the first full year had 25 participants, but it created a far greater economic impact. All but one of the recipients was under 40 years old, and the ROZ households account for 17 children, five of whom are in school and 12 of whom are preschool age. Christy Hopkins, the county’s community development director, is quoted in a Salina Post article (“Rural Opportunity Zone program working in rural Kansas”) as saying, “We’re seeing population growth for the first time since the 1980s and school enrollment has recently grown, with a 25 percent increase from 2013 to 2014.”

Mike Thon, a member of the county Board of Supervisors, is quoted as saying: “It doesn’t take many children enrolled in our school district to offset the cost of ROZ. We’ve seen an increase in student enrollment in Greeley County and it’s not just because of the ROZ program, but we’ve seen growth where other counties haven’t and ROZ was a part of that.” 

The Salina Post also reports that “Ken Bockwinkel, superintendent of Greeley County Schools, said in addition to experiencing an increase in students, the school district has been able to hire more teachers. Since the student loan repayment is an incentive for individuals with degrees and certifications, Thon said it is an important recruiting tool for schools and hospitals. ‘Working in schools, it’s hard to recruit teachers out here to western Kansas,’ Bockwinkel said. ‘By having the ROZ program available, teachers can take advantage of that and hopefully stick around for more than just a year.’”

These sorts of stories are exactly why a Rural Opportunity Zone plan is needed for rural Oklahoma. It is not a comprehensive fix for what ails rural Oklahoma, but it’s a great tool that can help empower locals to take charge of their future without having to come to Oklahoma City to beg state lawmakers for money.

OCPA research fellow Steve Anderson is a Certified Public Accountant with more than 30 years of experience in private practice. He has also served as budget director for the State of Kansas and as a budget analyst in the Oklahoma Office of State Finance. At one time he held 17 state teaching certifications, ranging from mathematics to physics to business.