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This research has two objectives. First, it examines the nature of state-level agenda setting, comparing it to the prevailing federal level theories of agenda setting and agenda denial. Specifically it examines state tax exemptions for nonprofit hospitals in North Carolina to determine if this policy arena follows acknowledged theories of agenda setting and denial, or if there is something unique about tax policy that creates a different agenda setting dynamic. Areas of focus included the status of nonprofit hospital property tax exemptions on the policy agenda and how the issue came to that position. Interviews with legislators, lobbyists, hospital and local government representatives, appointed officials, academics, and legislative staff were conducted in 2004. The interviews indicate that many of the federal level theories of agenda setting did not provide substantial explanatory value. Political entrepreneurship, agenda denial, and the role of campaign contributions were found to play a significant role. The new factor, absent in the current literature, was the overwhelming drive for economic development, thus suggesting a unique aspect of state level political theory. The second objective is an examination of the costs and benefits associated with the property tax exemption for nonprofit hospitals. This includes a cost-benefit analysis of the value of charity care provided by nonprofit hospitals as it relates to the value of the property tax exemption they receive. The data was examined at both the individual hospital and statewide levels. The overall value of charity care provided in the state exceeded the total local revenue loss from the property tax exemption. However, the bulk of charity care expenditures occurred in a small number of large, regional hospitals, while a significant number of the remaining hospitals provided insignificant charity care. Total charity care for an individual hospital exceeded the value of the property tax proceeds forgone 82.2% of the time, with charity care less than 5% of net revenue. Thus, if the property tax exemption is intended to reimburse nonprofit hospitals for indigent care, a better and more equitable system is needed to link tax exemption to the value of charity care provided.