Uneven Ground: Local Public Funding Gaps Between Rural and Nonrural America

• In Event: The Public Workforce: Perceptions, Mobility, and Service Disparities

Abstract

Public investment plays a central role in shaping local economic opportunity, yet persistent disparities between rural and nonrural communities raise questions about how effectively public funding systems support place-based development. While rural areas receive substantial public resources through federal transfer programs such as Social Security, Medicare, and SNAP, these forms of people-based spending primarily stabilize households rather than build the long-term economic capacity of places. This paper examines whether and how public funding systems contribute to or mitigate spatial inequality by focusing on differences in locally controlled, place-based investment.

Using data from the U.S. Census of Governments from 1977 to 2022, we construct county-level measures of local government revenue and expenditures across all major government types, including municipalities, counties, school districts, and special districts. We compare rural and nonrural counties to assess disparities in per-capita spending, revenue capacity, and the composition of public investment. We consider differences in fiscal agency, the ability of local governments to raise revenue, exercise discretion, and deploy administrative capacity, as a framework for understanding how structural constraints shape local investment decisions and economic trajectories.

We find that rural communities consistently generate less locally controlled revenue and spend less per capita than nonrural communities, particularly at the municipal level where discretionary, place-based investments are most critical. These gaps persist and are exacerbated in high-need rural areas and are reinforced by structural features of federal and state funding systems, including competitive grant designs, matching requirements, and administrative burdens that disproportionately disadvantage lower-capacity jurisdictions. As a result, rural communities often face a cycle in which limited fiscal capacity constrains investment, slowing economic growth and further eroding the local tax base.

Drawing on a case study of Portsmouth, Ohio, we illustrate how coordinated, place-based public investment combined with institutional partnerships and local leadership can begin to rebuild fiscal and economic capacity, even after prolonged decline. The findings suggest that the effectiveness of public funding depends not only on the volume of resources but on whether communities have the fiscal agency to direct and sustain investment.

These results have important policy implications. Strengthening rural economic resilience requires rebalancing public investment toward flexible, locally controlled funding, expanding administrative capacity, and redesigning funding systems to better align with the needs of lower-capacity communities.

Author

• Amanda Weinstein, Center on Rural Innovation
  Presenting Author