The Rural Opportunity Zones (ROZ) program incents individuals to move to rural Kansas counties. Currently, 95 of the state's 105 counties qualify as rural opportunity zones. The program incents individuals to move by providing up to 2 benefits: up to $15,000 in student loan repayment assistance over 5 years and, for individuals who relocate from out-of-state, a 100% state income tax credit for up to 5 years.
As part of this audit, we used program data to estimate how often the ROZ program incented program participants to move to rural counties. We also used data from the U.S. Census Bureau to help estimate to extent to which the ROZ program counteracted rural depopulation. Based on our estimates, the ROZ program had limited effects on rural depopulation on a statewide basis. However, the program had more significant effects on the extent to which 19 counties gained or lost population.
The Rural Opportunity Zones (ROZ) program incents individuals to move to rural Kansas counties. Currently, 95 of the state's 105 counties qualify as rural opportunity zones. The program incents individuals to move by providing up to 2 benefits: up to $15,000 in student loan repayment assistance over 5 years and, for individuals who relocate from out-of-state, a 100% state income tax credit for up to 5 years.
As part of this audit, we used program data to estimate how often the ROZ program incented program participants to move to rural counties. We also used data from the U.S. Census Bureau to help estimate to extent to which the ROZ program counteracted rural depopulation. Based on our estimates, the ROZ program had limited effects on rural depopulation on a statewide basis. However, the program had more significant effects on the extent to which 19 counties gained or lost population.
Welcome to the Rundown your source for the latest news and updates from the Kansas Legislative Division of Post Audit featuring L P A staff, talking about recently released audit reports and discussing their main findings, key takeaways and why it matters. I'm Andy Brizo . In August, 2023, L P A released an economic development incentive evaluation of the Rural Opportunity Zones Program. I'm with Josh Lui , principal auditor at Legislative Post Audit who supervises this audit. Welcome back Josh.
Speaker 2:Thanks, Andy. Happy to be here.
Speaker 1:So why don't you start by outlining what the Rural Opportunity Zones program is, how it works at a high level, and how it's changed over time?
Speaker 2:Yeah. The Rural Opportunity Zones or RAs program tries to get people to move to counties designated as rural Opportunity zones. People who move to one of these counties can get up to $15,000 in student loan repayment assistance or a 100% state income tax credit for up to five years. People can get one or both of these benefits depending on whether they meet the program's eligibility criteria. The main way the program has changed is that more counties have been designated as Rural Opportunity zones. The program was first created in 2011, and at that time the legislature designated 50 specific counties as uh , ROS counties . By 2014 , the legislature had added 27 more counties as RO counties , and then several, several years later, in 2011, the legislature made any counties with a population of less than 40,000 people a rural opportunity zone. That means that today in 95 of the state's , 105 counties are raw counties. Aside from that, the program really hasn't changed much. Um, the only real other thing is that the legislature has extended the program sunset on a few occasions. The current sunset for the program is in 2026. And um, in terms of that kind of background information, the only other thing I'd note here is no other states have state operated programs like raws . Uh, there are , however, some locally run programs throughout the country that have various incentives , um, like grants or free lots of land for people who move to specific areas.
Speaker 1:So statute doesn't define the program's purpose, but the legislature appears to have intended for Roz to counteract rural depopulation in Kansas. So tell me more about this.
Speaker 2:Right. The statute doesn't say what the Roz program is supposed to do, but when the program was created back in 2011, testimony shows the program was targeted to counties that had experienced population losses of 10% or more over the past decade. That is between 2000 and 2010. Testimony from the time also suggested the purpose of the program was to halt or reverse the depopulation trends rural Kansas had been and continues to struggle with. And while the program has expanded to cover more counties, counties are designated as RO counties based on their population. So we thought it made sense to view, view the program's purpose as being to address issues with rural depopulation.
Speaker 1:Now let's dig into each element of the program. In turn. Tell me first how the student Loan Repayment Assistance program works and how many people have benefited from it.
Speaker 2:The gist of the student loan repayment assistance part of Roz is this, if you're someone who has an associate's degree or higher and you have student loan debt and you move to Aras County, you can get up to $3,000 in assistance per year for five years. That's as much as $15,000 total in student loan repayment assistance over those five years. Um , that's the basic idea. There are however, some additional details or catches if you will. The main thing is that people who wanna get this student loan assistance, I'm gonna call them participants. Um , so participants who want the student loan assistance, they have to move to a raw county that has adopted a raw resolution. The raw statute requires counties to adopt a resolution to participate in raws in a resolution. A county agrees to share 50% of the student loan repayment assistance costs with the state up to whatever amount of money the county is willing to put up each year. So a county may be designated a county, but it also has to pass that resolution for people who move there to get the student loan benefit. I'm kind of recapping here then. If you've got a degree in student loan debt, you're on track for qualifying for student loan repayment assistance. If you then move to a raw county that has that raw resolution and that county has funding available for you , uh, you can get that student loan repayment assistance. Um, however, if you move to a county without a resolution, even if it's designated by statute of the raw county, you can't get the loan assistance. There are two raw counties that don't have resolutions right now and those are Chase and Jefferson counties. And like I said, if you move to a county that has used up all of its funding on other participants , um, then you can't get assistance. Instead you have to wait for funding to become available. That's , um, called being put on a wait list. Um , and I'll talk more about that later. Um, I'd also note some counties have passed $0 resolutions. Um, that is they've adopted a resolution to participate in raws , but they haven't put up any funding to , um, sponsor participants that move to their counties. That's so that other entities in the county, like cities or employers can agree to sponsor participants. Um , but if you were, for example, to move to a county with a $0 resolution that doesn't have any other sponsors, you would still have to wait for funding to somehow become available. In terms of participants between 2011 and 2022, about 1,670 people participated in the student loan part of the Roz program. About 600 of those folks have completed the program. About 260 are currently participating and about 90 are currently waiting for funding to become available for them. The remaining roughly 720 people either withdrew or were disqualified from the program, and that could be because they did things like move out of the R County. They're getting benefits from , uh, statute does require that folks who move out of their , their Roz County to be disqualified. Uh, and then finally, in terms of costs, the student loan part of the Roz program has cost the state and sponsors about $13 million , um, between 2012 and 2022.
Speaker 1:Now let's turn to the income tax credit that Roz offers. How does this part of the program work and how many people have benefited from it?
Speaker 2:The tax credit part of Roz is specifically for people who move to a R county from outside of the state. Um, in terms of eligibility, you have to meet four criteria. If you meet those criteria, you get a 100% state income tax credit for each year. You live in a RA county for up to five years. Those four criteria are as follows. First, like I said, you have to have lived outside of Kansas and you have to have done that for at least five years. Second, while you were living outside of Kansas for those five years, you have to have less than $10,000 in Kansas source income in each year. That is, you can't basically come across the board and work in Kansas while living in Missouri or something like that. Third, you have to live in a raw county for a whole tax year to claim the tax credit for that year. That means living in Oz County from January 1st through December 31st. You could not, for example, move to Oz County in February, 2024, then claim the tax credit for tax year 2024. You have to be in the county for the whole tax year and fourth and finally you have to file your income tax return timely and not be delinquent on any other tax payments. So to put that a little more concisely, if you lived and worked outside of Kansas for five years and then you move to Aros County, stay there and pay your taxes timely, you can get a 100% state income tax credit for up to five consecutive years. Uh , you can get that tax credit regardless of whether the county has passed a resolution since. Um, this is a purely state funded part of the program or I guess in this case , um, the state is giving up revenue rather than funding the program directly. Um, and kind of speaking of um, costs and participation between tax years 2012 and 2022, about 1700 individuals applied for the Roz tax credit. Um, about only 270 of those folks though claim the credit for five years. The rest claim the credit for less than five years. Um, and that's because some of those people are still in the process of claiming the credits they're , um, allowed to claim, but that's not gonna be true for everyone. Um, there are some past claimants, for example, who left the state before claiming all five years of credit. Uh , and then in total the RAs tax credit cost the state almost 14 million in foregone tax revenues.
Speaker 1:The thrust of the team's audit work was to determine the extent to which Roz has been effective at slowing or reversing rural depopulation. Tell me about the data limitations the team ran into and how they solved them .
Speaker 2:Yeah. To figure out the extent to which Roz has countered rule depopulation, you need four pieces of information. You need to know how many people left rural Kansas. You need to know how many people participated in raws . You need to know how many people those participants had in their families, and you need to know whether raws is what caused those people to move to raw counties To determine how many people left rural Kansas counties in the years those counties were participating in raws . We use census data. Census data are based on estimates, but we think the data is sufficiently reliable for our work. And realistically, the census data is the best data available when you're talking about population. Uh , we use data from the departments of commerce and revenue to determine how many people participated in the Roz program. Um , but this is where things start to get tricky with data limitations. Like you mentioned. Um, commerce administers the student loan part of Roz while revenue administers the tax credit part. And those two agencies administer their parts of the program separately and they each gave us data showing how many people participated in their parts of the program, but they didn't have a good way to identify the people who participated in both parts of the program. Uh , so we had to manually go through participants' names to try and figure out whether there was overlap between the roughly 1,670 student loan participants and the 1700 tax credit participants. As it turns out, the overlap was pretty limited. Uh , we think only about 150 people participated in both parts of the program. Um , but that was a manual process where we're like looking at people's names and saying, well, this person's name John Smith and that person's name John Smith , are they the same person? So it's possible we miss some people because maybe they changed their name , uh, or we incorrectly assume that two people with the same name were the same person when they're not. Um , finally we use data from Commerce's surveys of Roz participants to determine their family sizes and whether the Roz program was what caused them to move to Roz Counties. Um , so here I'll talk a little bit more about commerce's surveys first and then I'll explain why those two factors were important for our analysis. Um , commerce surveyed Roz participants in 2019 and 2021. Those surveys went to individuals who were participating in the student loan part of Roz because that's the part that commerce administers. It did not go to tax credit participants unless those folks were also student loan participants. There were some people in the survey who participated in both parts of the program. Um, but generally speaking were generalizing student loan participants responses to tax credit participants. Um , in their surveys, commerce asked participants about their relationship status and how many children they had living with them . We used that information to estimate the participants' household sizes. Commerce also asked participants whether they would've moved to their raws counties if their raws program hadn't been offered. We used this to estimate how often Roz directly caused participants to move to RA counties. Now why are those things important? Family size is important because it's not just loan participants who are moving to RA counties. If I'm married and have a child and I bring my spouse and child with me to a RA county when I move there, then that represents three people moving to ARO County, not just one. And that's something our analysis needed to account for. And whether raw caused participants to move is important because it helps us evaluate the program's effect. If someone would've moved to a R County, even if they hadn't participated in the program, it means the program didn't cause them to move to the raw county. And if the program didn't cause someone to move to a raw county, then it doesn't make sense to credit the program with that person's move.
Speaker 1:Did Roz effectively slow or reverse rural depopulation in Kansas?
Speaker 2:The short answer here is Roz didn't slow rural depopulation much. We estimate the program offset only about 5% of Roz County's population losses. Um , now here's the longer answer. Um , in response to your last question, I outlined how we did our analysis and some of the challenges we ran into. Um, here I'll put some numbers to those concepts so we can talk about what we found based on the census data. Roz County's lost about 29,400 residents in the years between their adoption of Roz resolutions in 2022. And based on the commerce and CDO program data, about 3,200 individuals participated in the Roz program between 2011 and 2022. Based on the survey data I discussed, we estimate the average Roz participant had a household of three people. So in a best case scenario, those 3,200 Roz participants represent almost 10,000 people moving to RA counties. However, most of the program participants who responded to commerce's survey said they would've moved to their Roz County even without the program. Specifically 14% of student loan participants said they would not have moved without the program. That is about 86% of participants would've moved to their raw county even if the program hadn't existed. And 27% of participants who got both student loan and tax credit benefits said they wouldn't have moved without the program. In other words, based on commerce's survey data, the vast majority of raw participants likely would've moved to their Roz counties even if the Roz program hadn't been available to them. This means we estimate Roz directly caused only about 1,430 individuals to move to a R county. Without Roz , Roz counties would've lost about 30,800 people instead of 29,400. This means raws reduced county's population losses by about 5% on a statewide basis. Um, that is to say roz's effects on rural de population aren't zero, but they are fairly minimal. It's also likely we overestimated the program's effects. For example, we assumed all raw participants stayed in their raw counties after participating in the program. And we know that's not true. As I said earlier, many student loan participants were disqualified from the program and that was because some left their raw counties. We also did some work with C D O R to look at a small sample of 26 tax credit claimants and what they did after claiming the tax credit, we found 17 of those 26 claimants moved to another state after claiming roz's tax credits. So in some cases, the Roz program isn't causing a lot of people to come to Roz counties and it's not necessarily keeping them in those counties. That said, some counties did benefit from the program. We estimate Roz had significant effects in 19 counties. We estimate two counties, Marshall and Nemaha would've lost population without Roz . For example, we estimate Omaha County would've lost about 15 people since 2013 without Roz , because of the program, the county may have instead gained about 20 people for 15 counties. We estimate Roz decreased population losses by 10% or more. And also because of Roz for two counties, we estimate the program may have increased those counties population gains by 10% or more. But for the remaining 76 Roz counties, we estimate the program had less than a 10% effect on population gains or losses.
Speaker 1:Now, the team also talked to stakeholders about RA's effects and how the program might be improved. What did they tell you?
Speaker 2:Yeah. We held phone surveys with 14 stakeholders , um, mostly student loan sponsors to get their opinions on the program. They told us Roz is one of the few programs targeted to rural Kansas. They also told us the program helped their areas recruit employees and develop stronger communities. Five respondents told us the program helped with employee recruitment. For example, one told us that Roz helped their county attract teachers, hospital workers and attorneys. And two respondents told us Roz helped with community development. For example, one of those respondents told us that Roz helped them convince teachers who worked in their county to live in the county. They said this was important because teachers who live in the county are more invested in their community. Our respondents also had a variety of suggestions for how to improve the program. Most respondents ate said they wanted better communication from the state . They said commerce needed to do better communicating with sponsors and provide things like education about how the program works. This would help counteract confusion about the program. A few of the stakeholders we surveyed were pretty confused about how the program works , um, and that , uh, to some extent interfered with their decisions to participate in the program . For example, one respondent told us their county didn't participate in ROS for a while because they thought the student loan benefit was only for people from out of state . It's not so that county didn't participate in the program for a while . Because of that misunderstanding. Respondents also said they wanted the state to better promote the program so people would be aware of it and take advantage of it. Additionally, five responds suggested expanding the program in various ways. They suggested doing things like offering benefits beyond student loan assistance. They suggested that benefits could include things like assistance with childcare or housing costs. They also suggested making the program available to people who had professional certifications like a commercial driver's license that aren't college degrees. Respondents told us their communities needed people like drivers or tradesmen who may not have college degrees, but would still be valuable to their community. They said the program could compensate these individuals for the costs of their certifications. And finally, five respondents suggested restricting the program. For example, one respondent said, participants should have to work in the Raws county They live in. Three other respondents said fewer counties should be designated as raw counties .
Speaker 1:So the report also outlines a few possible issues with how the program is operating. Tell me about these.
Speaker 2:Yeah, there are four things I'll mention here. First, earlier I talked about how counties have to agree to help sponsor student loan participants. That is counties have to help the state pay the costs of the participant student loan repayment assistance. I also very briefly mentioned that other entities like cities , employers and foundations can sponsor student loan participants. But that's not something statute explicitly allows. Statute only talks about county sponsorships. Commerce is elected to allow other entities like employers to serve as sponsors. It's not clear to us that this should be allowed because statute doesn't talk about sponsors other than county sponsors. Um , this situation could be a good thing because it might expand the reach of the program. Um, if counties aren't able or willing to put up much funding to sponsor participants, then having other entities also put up funds helps more people get sponsorship. But we also heard about a few situations where individuals did things like sponsor themselves or other family members and we're not sure this is what the legislature intended to have happen under the program. For example, one business owner appeared to have used their business to sponsor themselves. That is they use their business to help pay for their own student loan reimbursements. If Roz isn't what caused this individual to move to a Roz County, then that person is basically leveraging a state match on student loan payments they would've had to make anyway. And like I said, this is something we're not sure the legislature intended to have happen. Second, we noticed some student loan participants have been on a wait list for a very long time. Like I said earlier, if you move to a raw county and qualify for assistance, but funding isn't available for you, you have to wait. And some people have been waiting for a very long time. For example, at the time of our analysis in early 2023, there were five people who were about five people who'd been on a wait list since 2012. Um , there are about 75 people who have applied to the program between 2012 and 2021. And we're on a wait list . And you know, for people who applied in like 2012, 2013, those folks have been waiting for more than a decade at this point. Um, third, we noticed some student loan participants moved between raw counties. Um , about 40% of student loan participants moved between counties that had become raws eligible by 2021. This is allowable under statute, but what it means is the Roz program is sometimes moving people around rural Kansas. Rather than helping rural Kansas increase its overall population , uh, it means one county's gain is another county's loss and it doesn't help increase the state's net rural population. And fourth and finally, we noticed many student loan participants don't complete the program for participants. From 2011 through 2017, only about 45% completed the program. Um , to the extent that participants are generally disqualified or withdraw from the program because they left their Roz County , this could mean Roz isn't keeping people in rural Kansas.
Speaker 1:Finally, what's the main takeaway of this audit report?
Speaker 2:If we look just at the data, then we see raw has only decreased rural population by little, about 5% on a statewide basis. However, for a minority of counties, 19 of the 95 raw counties, we estimated raw increased population gains or losses by 10% or more. So there are at least a handful of counties where raws did have more significant effects. It's not clear from statute what the program's performance was supposed to be. So it's up to policymakers to decide whether these outcomes are appropriate for the program. But I think it's also important to consider things beyond the data. The raw stakeholders we spoke to told us the program was important for their communities. Uh , the program may not be causing lots of people to move to rural Kansas, but it may have other benefits for rural Kansas, for example, the program may have beneficial economic effects. People who get benefits under raws may have more money to spend in their communities. They may be more likely to buy houses or open businesses. Those things can all benefit rural counties. It's harder to quantify those benefits, and it's not something we focused our analysis on. Uh, but I felt like it was important to acknowledge that data side . Some stakeholders advocated in favor of the program and viewed it as one of the few incentive programs available for rural Kansas.
Speaker 1:Josh Luthi is a principal auditor at Legislative post audit . He supervised an evaluation of the Rural Opportunity Zones program. Thanks for joining me. Yep .
Speaker 2:Thanks again, Andy.
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