IN VESTING IN RU RA L P R OSP E R ITY | C H A PT E R 5

Local Governments across

Rural America: Status,
Challenges and Positioning
for the Future

LINDA LOBAO
Professor of Rural Sociology, Sociology, and Geography
The Ohio State University

PAIGE K ELLY
Postdoctoral Associate
Cornell University

81
The views expressed in this article are those of the individual author/authors and
do not represent the views of or an endorsement by the Federal Reserve Bank of
St. Louis, the Federal Reserve Board of Governors, or the Federal Reserve System.

82
L ocal governments are an important but frequently overlooked com-
ponent of rural development. Conventionally, rural development has
tended to be viewed as a private-sector endeavor, spurred by incoming new
businesses and led by groups such as chambers of commerce and real estate
interests. This conventional portrayal has led to a unidimensional view
that business development and community development are one and the
same. Yet business growth alone cannot improve the lives of all people in a
community. Further, such a view underestimates the scaffolding needed for
economic development as seen in local infrastructure, land-use planning, an
educated and healthy labor force, and quality public services. This is where
local governments come in. They make a difference by addressing the needs
of all residents and providing the support for the community’s future.
In some sense, communities are only as strong as their local governments;
their fortunes are intertwined. We know quite a bit about the social and eco-
nomic conditions of communities. But there is far less information available
about local governments, particularly in rural areas. This information is
critical because profound changes have occurred that affect how well local
governments can promote sustainable forms of development and provide
quality public services to all residents, especially those in need.
Local governments have faced dramatic changes to their operating
environments from a variety of external forces. These include the protracted
recovery from the Great Recession and now the COVID-19 downturn,
ongoing devolution from state and federal governments, and more-recent
pressures from state governments that affect local policy and budgets. Local
governments have been called upon to do more with less or without marked
funding increases. Yet the need for public services has grown in the wake of
national economic distress, climate-related events and social distress such
as from the opioid crisis. These changes signal a “new normal” operating
environment. They call for creative responses from local governments and
place-based policies that are tailored to specific local conditions and popula-
tion needs.

83
 To what degree are rural local governments up to the challenges of deal-
ing with the new normal? In this chapter, we take stock of the status of local
governments across the nation and how they are coping. We focus on county
governments. Counties cover both small, rural communities and large, urban
areas. They are the major local governments for rural America because they
cover unincorporated places and often provide services that rural towns and
municipalities do not. Counties’ roles in providing services have also expanded
over time in both urban and rural areas because of population growth, devolu-
tion from state and federal governments, and other factors.

Today’s County Governments

Relatively little is known about how rural local governments are cop-
ing with the challenges they face because public sources of such informa-
tion are limited. For example, the U.S. Census of Governments does not
cover the range of factors (noted above) that can influence local economic
prosperity and well-being. To obtain such information, we followed an
established approach of surveying government officials. The survey method
is used when researchers need to collect information for large numbers of
local governments. Our survey methodology is more fully explained in a
recent article by Linda Lobao and Paige Kelly.1 In brief, questionnaires were
mailed in late spring 2018 through early winter 2019 to 3,052 counties in
the 46 contiguous states that have functioning county governments. The
official selected to receive the questionnaire was identified by the National
Association of Counties in consultation with the researchers. There were
1,097 responding counties, a 36% response rate. Seventy percent of respond-
ing officials were county commissioners or county managers/executives,
and the remainder were other top administrators. On average, officials had
served in their county governments for 14 years.
We report the results for three categories of counties: metropolitan
counties contain or are located within a region that has a large urban core;
adjacent rural counties are nonmetropolitan counties located next to met-
ropolitan counties; and remote rural counties are nonmetropolitan counties
that are not adjacent to metropolitan counties and that have relatively small
or no urban populations.2 This three-tier classification is often used by rural
researchers because it highlights meaningful differences in a parsimonious

84
manner. Rural America is not homogeneous, and this classification allows
for some gradation. For example, poverty rates historically have been highest
in remote (nonadjacent) rural counties. Sixty-one percent of the responding
counties are nonmetropolitan: 27% (300) are remote rural, and 34% (368)
are adjacent rural. The remaining 39% (429) are metropolitan. The propor-
tion of responding counties is similar to the national share of all counties.
It is rare to have such good representation of rural local governments in a
national survey.

How Level Is the Playing Field? Challenges Faced by Rural and

Urban Governments
By looking at both rural and urban counties, we can see the level of the
playing field between local governments. Analysts have long noted that rural
places tend to be at a disadvantage. This is usually attributed to factors such
as smaller population size; poorer quality economic structure; an older, less
affluent and less educated population; lower population density; and overall
poorer tax base. As a result, rural county governments tend to face greater
barriers to improving economic prosperity and population well-being.
Governmental capacity—the administrative, fiscal and other resources
needed to get things done—varies a great deal between rural and urban
counties. In general, a gradation exists where remote rural counties have the
least capacity, followed by adjacent rural counties. Remote rural counties
have much smaller governments, with a median of 84 employees, compared
to adjacent rural (136 employees) and metro (460 employees) counties. They
are less likely to have grant writers and economic development profession-
als on staff that could help them to better compete for external funds. Only
26% of remote rural counties and 35% of adjacent rural counties have an
economic development professional on staff, compared to over half of metro
counties. Twenty-four percent of remote rural counties and 27% of adjacent
rural counties have a land-use planner on staff, compared to over half of
the metro counties. Rural county administrators tend to have less-formal
education and are often overburdened because of lack of staff. Only 77% of
remote rural county governments have a website, compared to 93% of metro
counties and 86% of adjacent rural counties.

85
 Governmental capacity depends upon fiscal health, and this has become
a problem for most counties. Fifty-two percent of responding officials report
that their governments experience “moderate” or “significant” levels of fiscal
stress. Yet fiscal health also follows a gradation. Remote rural counties fare
worst: 43% of metro, 57% of adjacent rural and 59% of remote rural counties
report “moderate or significant” levels of fiscal stress.
What are the sources of counties’ fiscal problems? In terms of revenues,
the most frequently mentioned source of strain was state government.
Eighty-four percent of counties reported that the loss of state revenue was a
“somewhat important” or “very important” problem for their finances over
the past three years. Reported loss of state revenue was widespread, with
no statistically significant rural-urban differences. With regard to federal
revenue, however, rural counties were more likely than urban counties to
report the loss of federal revenue as an important problem (77% versus 73%,
respectively). A declining tax base was another major revenue challenge.
This was much more frequently reported by rural counties: 73% of remote
rural and 68% of adjacent rural counties rated tax-base decline as important,
compared to under half of metro counties.
In addition to revenue losses, counties are stressed by the need to cover
the costs of operations and services. Counties face cost pressures in numer-
ous areas, and our survey captures only some of these pressures. Almost all
(95%) counties reported that covering the costs of employees’ health insur-
ance was a “somewhat” or “very important” problem for their finances, with
no statistically significant rural-urban differences. Covering mandated costs
from federal or state governments was reported to be an important prob-
lem for 89% of metro and adjacent rural counties and 84% of remote rural
counties. The costs of employee pensions were another important problem,
reported by 79% of all counties, with no significant rural-urban differences.
About 70% of counties reported that substance abuse services were import-
ant to finances, with no significant rural-urban differences. Covering the
costs of natural disasters loomed highest for remote rural counties: 64%
reported this was an important problem as compared to about 55% for
both adjacent rural and metro counties. Only about one-quarter of counties
reported that the costs of immigrant populations had an important effect on
finances, with no statistically significant urban-rural differences.

86
Promoting Community Well-Being: Economic Development,
Public Services and Land-Use Policies
Despite challenges due to capacity, resources and rising costs, county gov-
ernments make important efforts to improve local economic development
and provide public services.
Local economic development activities are often classified into two gen-
eral types: traditional, competitive development activities such as external
business attraction (e.g., tax abatements, state/international travel to recruit
businesses, and national advertising) and alternative strategies aimed at local
entrepreneurship, small-business development and worker training. While
it might be thought that traditional, competitive development activities are
used to the exclusion of alternative strategies, or vice versa, the most-active
counties today use a mix of the two strategies.
Although remote rural counties have greater need for economic develop-
ment, as shown by their concern with tax base decline, they are significantly
less likely than other counties to employ traditional as well as alternative devel-
opment strategies—the latter of which are best suited to creating more locally
sustainable businesses. These rural-urban differences are further reflected in
budget allocations and staff, with only 52% of remote rural counties budgeting
for small-business development, compared to 61% of adjacent rural and 65%
of metro counties. Arts-based community development—sometimes termed
“creative place-making programs”—has been increasingly advocated for rural
areas. However, only 18% of remote rural counties and 26% of adjacent rural
counties have such programs in place, compared to 34% of metro counties. Yet
rural counties are likely to have greater need for such programs because they
tend to have overall poorer economic conditions.
Turning to public services, we examined 26 services that counties pro-
vide. The most ubiquitous service offered is law enforcement, provided by
94% of all counties. Close to 90% of all counties also provide 911 emergency
service, jails and correctional facilities, courts and road maintenance. For
13 of the 26 public services in the survey, there were statistically significant
differences across the three county categories, with rural counties providing
fewer services than metro counties, and remote rural counties providing
fewer services than adjacent rural counties. Some of these differences are
in programs that directly affect the health and well-being of the workforce.

87
For example, mental health programs are provided by 40% of remote rural
counties, as compared to 48% of adjacent rural and 54% of metro counties;
nutrition programs are provided by 31% of remote rural counties and by 35%
of adjacent rural and 44% of metro counties; and drug-alcohol programs are
provided by 22% of remote rural counties and by 29% of adjacent rural and
34% of metro counties.
Finally, land-use planning is important to guiding future local develop-
ment. We asked county officials whether their counties had enacted any of 14
different land-use policies. There was a clear rural-urban gradation in all these
policies. For example, 37% of remote rural counties, 45% of adjacent rural
counties and 66% of metro counties have comprehensive land-use planning.
Zoning policies have been enacted by 40% of remote rural, 44% of adjacent
rural and 63% of metro counties. Capital improvement planning is used by
21% of remote rural, 31% of adjacent rural and 53% of metro counties.

Local Governments and Future Rural Community Development

Local governments are, in many respects, the unsung heroes behind rural
development, providing the scaffolding for the future of rural communities
in the U.S. The picture that emerges from our research is that local govern-
ments across the board are working hard to deliver public services and foster
economic development, despite the many barriers they face. For almost
all the public service and economic development efforts discussed above,
county officials indicated that their activities in these areas had increased
rather than decreased in recent years. Local government officials are savvy
in recognizing the different ways in which services can be delivered. They
collaborate with other local governments and with nongovernmental and
private-sector partners to deliver services where this is feasible. Remote
rural counties engage in somewhat less collaboration, and we have found
in our previous research that they use less outsourcing, likely due to a lack
of interested private firms because those firms find service delivery in rural
areas less profitable. Overall, our research suggests that local governments
are doing all they can given their current resource capacity.
The challenges faced by local governments described above will set the
course for future rural development. Most of these challenges are not of local
governments’ own making but rather are systemic in character—they are not

88
constrained by county borders and affect localities across the nation. First, it
is important to point out that local governments have long experienced fiscal
pressures, what some see as continual austerity, particularly from the 1980s
onward. Underfunded, they do their best to provide services. They also must
balance budgets and respond to often unfunded/underfunded mandates that
arise from federal and state governments (e.g., seen in some requirements
for Medicaid, the Clean Water Act and the Clean Air Act, and various state
mandates such as support for indigent health care and legal defense).3 Local
governments are perpetually being asked to do more with less.
This long-term trend toward fiscal stress is exacerbated by more-recent
challenges from the new-normal operating environment. Counties are faced
with rising costs due to community social and economic distress and climate
change. Rural counties are likely to be particularly at a disadvantage in
addressing such growing needs in the future owing to their weaker tax bases.
Another issue that will affect counties’ future service and development
efforts is their state government. States too often push down their own fiscal
problems to local governments, allowing them to avoid raising taxes. As
our survey data show, revenue cuts from the state are the most frequently
identified source of revenue loss for counties. Worse, some states restrict or
preempt county efforts to protect their populations from potentially unsus-
tainable forms of development, such as shale-gas extraction, and tie counties’
hands from raising revenues and enacting policies that help workers and the
poor. About 73% of all counties report that their states have restricted them
to some degree in their recent efforts to raise local revenue. Another 69%
report their states have affected their ability to control recent local expendi-
tures, with a similar share reporting that states have restricted their ability to
make local policy. Adjacent rural and metro counties report being hampered
by state governments’ actions more than remote rural counties do (which in
general have more bare-boned governments to begin with).
As the fates of local governments and their communities are intertwined,
it is important to consider how to improve local governments’ future effec-
tiveness. The trick is to realize what can be done at the local level and what
needs broader systemic intervention. Our research points to the importance
of initiatives that are already being undertaken by localities, such as the
following: collaborating with other local governments and nongovernmental

89
organizations; developing public-private partnerships, though these need to
be carefully monitored; retaining and expanding small, local businesses; and
supporting workers and families. For rural communities particularly, reducing
the administrative burden of serving in local office and increasing avenues for
leadership development would be important. These types of local initiatives
have long been the staple of many community development efforts.
Our research shows, however, that local governments’ hands are tied
strongly by external, systemic forces, such as the national economy and the
actions of state and federal governments. As analysts have long noted, federal
engagement with rural areas has historically come in the form of farm policy,
when a concerted rural development effort aimed broadly at communities
and rural people is needed. As state governments have consigned their own
distress to local governments, the need for federal policy has increased. Local
governments were coping with fiscal stress before the pandemic, and without
additional federal support, the future is likely to be an environment of auster-
ity. The nation’s communities and their local governments deserve better.

90
References
Lobao, Linda; and Kelly, Paige. “Local Governments across the Rural-Urban Continuum:
Findings from a Recent National County Government Study.” State and Local
Government Review, 2019, Vol. 51, No. 4, pp. 223-32. See journals.sagepub.com/
doi/10.1177/0160323X20922287.
U.S. House of Representatives. “Unfunded Mandates: Examining Federally Imposed
Burdens on State and Local Government.” Hearing before the Subcommittee on
Intergovernmental Affairs of the Committee on Oversight and Government Reform,
One Hundred Fifteenth Congress, First Session, April 26, 2017. See govinfo.gov/con-
tent/pkg/CHRG-115hhrg26556/pdf/CHRG-115hhrg26556.pdf.

Endnotes
1
See Lobao and Kelly.
2
Counties are categorized using the Rural-Urban Continuum Codes prepared by the
U.S. Department of Agriculture’s Economic Research Service. Metropolitan counties
include rural-urban continuum codes 1-3. Adjacent rural counties include codes 4, 6
and 8. (Adjacency is determined by physical boundary adjacency and commuting
flows.) Remote rural counties include codes 5, 7 and 9. Most differences among the
three categories of counties denoted are statistically significant. See ers.usda.gov/
data-products/rural-urban-continuum-codes.
3
See U.S. House of Representatives.

91
92