[GreenYes] Farm Bill Article

["Christine McCoy" <cmccoy@rcap.org>]

Thought some of you might be interested in this article.

Farm Bill Does Precious Little to
Help Rural Communities Prosper
By Patricia Sinicropi, Rapoza Associates
May 14, 2002

Congress finally passed the Farm Security and Rural Investment Act of 2002,
referred to as the Farm Bill, re-authorizing agriculture and rural
development programs for the next six years.  Total spending for farm
subsidies and other programs benefiting farmers and agriculture producers is
expected to exceed $80 billion in new mandatory money at the end of a
ten-year period.  This is in addition to the more than $100 billion already
set aside for farm spending over the same period.

Of the $180 billion of spending this Farm Bill authorizes, only $790
million, or .4 percent, is set aside for non-agriculture related rural
development needs.  This figure was arrived at by repealing the Fund for
Rural America which would have continued $160 million in rural development
spending.  By repealing this program, Congress actually provided $630
million in new spending for non-agriculture programs for rural America.
While this figure is an increase from the 1996 Farm Bill, it is woefully
inadequate.

The Farm Bill is Congress’ policy statement not only on matters relating to
America’s food and agriculture industry, but also on matters relating to
rural America as a whole, and therefore it means a great deal to those
involved in rural community development.  The 2002 Farm Bill clearly
continues Congress’s belief that the health and welfare of rural America is
intrinsically tied to the health of America’s farming community,
particularly large farms.  With less than 10% of rural jobs dependent on the
farming economy, this view ignores a large segment of rural America and its
economic and social problems.

More than 90% of the new spending authorized by this Farm Bill goes to
farmers and agricultural producers in the form of loans and loan guarantees,
direct payments for crops, and grants for value-added and industrial
agriculture production, including $17.1 billion in grants and direct
payments for environmental and land conservation measures; $1.1 billion for
Trade measures; and $1.3 billion for research. Approximately $6.4 billion is
authorized for food and nutrition programs for our nation’s poor, including
the re-establishment of food stamp benefits to legal immigrants who have
lived in this country for five years or longer.

The remaining amount, or $790 million, is available for non-agriculture
related rural community development activities.  The allocation of mandatory
funding reflects the real interest of Members.  In examining the programs
that received this spending, one clearly sees several themes emerge that
reflect Congressional thinking on matters important to rural America. For
rural community development organizations involved in an array of rural
development activities, there are several initiatives of interest.

Clean and Safe Drinking Water Top the Priority List
High on Congress’ priority list is concern over water and its availability
to rural households.  This is understandable given that nearly 1 million
rural households are still without running water, especially in the South.
Due to Senate leadership, Congress set aside $360 million to fund the
backlog in pending water and sewer loan and grant applications at the U.S.
Department of Agriculture, which translates into approximately $750 to $800
million in program level funding.

Congress also authorized several other provisions to address the shortage of
resources for small rural communities water and wastewater systems.  These
authorizations include a set-aside in discretionary spending to help
communities facing emergency drinking water shortages, a revolving fund to
be operated by qualified non-profit organizations to provide small loans for
items such as small system repairs or extensions; and grants for
refurbishing decentralized water well systems.  In addition, many of the
conservation programs that received an increase in funding, like the
Conservation Reserve Program, are also designed to address clean water
concerns and to ensure that water supplies remain clean of pollutants, often
the result of chemical and pesticide run-off from agricultural lands.

Equity Capital for Rural Business Investments Receives Attention
The lack of private equity capital in rural communities also emerged as a
high priority item, at least for Senate members.  While the House bill did
not contain any funding for equity investing, Senator Harkin, Senate
Agriculture Committee Chairman and Senator Daschle, Senate Majority Leader,
were able to keep a Senate passed initiative in the final package.  The
Rural Business Investment Program will license close to sixty Rural Business
Investment Companies to provide venture capital financing to small rural
businesses.  It is funded at $100 million in mandatory funding, for up to
$280 million worth of debenture financing and $44 million in grants for
technical assistance.

The program’s design is a hybrid of the Small Business Investment
Corporation Program and the New Markets Venture Capital Program both of
which are operated by the Small Business Administration.  Community
development corporations familiar with either program will easily understand
how to operate an RBIC (Rural Business Investment Corporation) licensed
under this program. However, the law requires USDA to contract the
day-to-day operations of this program to another federal agency, which will
likely be the SBA, so it is unlikely the program will be operating anytime
soon.  It is also unclear, given SBICs poor investment track record in rural
areas, that SBA has the experience necessary to run a successful equity
program targeted to these communities.  We’ll have to see.

Availability of High Technology Gets a Boost
Technology needs for rural communities also prevailed.  The original House
version contained funding for expanding satellite television to more rural
households, the Senate version contained funding for broadband.  The final
package contained monies for both:  $80 million for expanding satellite
television and $100 million to expand broadband Internet availability to
rural communities. Eligible entities could include community development
organizations that have the capacity and expertise to be able to furnish
broadband services to underserved rural areas.

Comprehensive Rural Development Funding is Available
The conference report also provides $100 million for the Rural Strategic
Investment Program (RSIP).  The RSIP is a compromise between the Strategic
Planning Initiative passed in the House Bill, and the Rural Endowment Act
that was passed in the Senate.

The Rural Endowment Act was designed as a comprehensive community
development initiative to help communities create permanent community assets
geared toward improving the quality of life of rural residents, whether the
asset is a local investment fund for business development activities or
improved housing stock. The program would have provided up to $6 million in
matching grant assistance over a five-year period to help implement a
comprehensive community development strategy. Rural areas, including tribal
communities, as small as a single community of 2000 residents or as large as
a region of 70,000 residents could receive an Endowment grant.  The
Endowment was also open to an array of eligible entities that could apply on
behalf of a community effort, including a unit of local government,
multi-jurisdiction planning and development organizations, private
non-profit community-based organizations, tribal organizations, or a
consortium of any of these entities.  An application submitted by a
partnership between a government entity and a private non-profit
community-based organization would have received a preference for funding.

The Endowment relied on an outcome-oriented community-driven process that
placed a premium on flexibility, entrepreneurship and community
collaboration.  It recognized that each rural area, large or small, faced
unique challenges that called for unique solutions.  As such, the Rural
Endowment would have allowed communities to determine themselves how best to
develop a comprehensive community development strategy that fits their
needs.

The RSIP, on the other hand, is highly process-oriented and restricted
mainly to government entities.  The RSIP wastes a lot of time. The RSIP
requires the Secretary of Agriculture to establish a National Strategies
Board appointed by Members of Congress that would develop a national rural
investment strategy that would govern grant decisions under the program.
The national board would then certify regional investment boards that would
submit development plans for approval by the national board.  The regional
investment boards’ membership is required to be at least 50% representatives
of local government and required to cover a region of not more than 50,000.
Each board must develop a plan that must be approved by the national board.
So, after the national board is named, regional boards get organized and
write a plan that is approved by the national board, money for rural
community development might flow.

The size of grants available under this program is $3 million with no
private match required.  Eligible activities for funding under this program
is mainly geared toward basic services and infrastructure projects.  And,
while the RSIP legislation does not prohibit community-based private
non-profit organizations from applying to be the fiscal and administrative
agents for a regional board, the conference report language and overall
program framework indicates a preference for economic development districts
and regional planning councils.

Unfortunately, the Rural Strategic Investment Program provides for none of
the flexibility or openness that was contained in the Endowment initiative.
It duplicates ongoing functions of the federal government, by devoting
millions of dollars to new boards, bureaucracies and plans.  It will
ultimately fund regional economic development districts with a vague set of
program responsibilities and with no regard for targeting areas of need or
economic distress.  It will be years before there are results from the RSIP,
if there are results at all.

Value-added Agriculture as a Rural Development Strategy
In addition to non-agriculture rural development initiatives, Congress
included funding for value-added agriculture production in part as an
economic development mechanism for local rural economies.  Congress included
approximately $650 million to increase value-added and bio-energy
agriculture production.  Agricultural products such as ethanol and
bio-diesel fuels provide expanded opportunities for farmers and agriculture
producers to increase the value of their crops and farming operations.  This
in turn should result in increased job opportunities at relatively higher
skills and wage levels for rural communities in which these operations
exist.

Another example of a growing agricultural sector that Members view as
important economic drivers in local rural economies is the area of niche
farming and specialty crops.  Many small farmers, especially in the
Northeast and mid-Atlantic regions, are thriving from strong truck farming
and pick-your-own operations.  These farmers are taking advantage of growing
consumer demand for fresh fruits and vegetables as well as for organically
grown local produce in grocery stores and in local restaurants. After many
years of not receiving any assistance for fruits and vegetable crops,
Congress has finally opened the door to supporting these operations.

Many rural advocates believe that value-added agriculture and smaller
community-based farming operations provide more support to the local economy
of the communities in which they operate and are therefore critical
community businesses.  These investments can provide new economic
development opportunities for rural communities prepared to take advantage
of them.

A Lot of Programs, But Little Spending Action
While Congress created many new programs to address important needs in rural
areas, the lack of overall spending on these and other critical needs
demonstrates a continued lack of political will on the part of many in
Congress to really help rural America prosper.  Rural communities suffer
from a lack of transportation, little access to healthcare, and very few
jobs to keep young people from fleeing to the cities.  The Farm Bill comes
around every five or six years and spends a great deal of money on an
industry that provides fewer than 10% of the jobs in rural communities.
Congress has followed this spending pattern for over seventy years and yet
rural areas continue to lack the most basic living standards – economic
opportunity, clean water and adequate housing.  This Farm Bill will spend
over $180 billion on farm subsidies and only .4% of this spending will help
the 90% of rural residents who don’t rely on these subsidies for their
livelihoods.

Rural America deserves better.



------

Christine McCoy
Director of Environmental Programs
Rural Community Assistance Program
1522 K Street, NW
Suite 400
Washington, DC  20003
Phone: 202/408-1273 ext. 104
Toll Free: 888/321-RCAP
Fax: 202/408-8165
Email: cmccoy@rcap.org

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