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Rural America getting the short end of funding?

Rural development funding questions asked, policies pushed as Senate Agriculture Committee holds farm bill hearing. Rural Policy Research Institute provides context for committee. 

As the debate over a new farm bill ratchets up it is worth noting that the legislation will affect not only agriculture and nutrition but rural development. Achieving a healthy crop and bottom line may be the driving focus of a farmer but those achievements are done within his community and all it entails -- infrastructure, hospitals, schools, commerce. Too often those community’s populations are shrinking while infrastructure crumbles and business opportunities are lacking.

And rural America is not getting even close to its fair share of federal funds to halt the decay, says Charles Fluharty, vice-president of the Rural Policy Research Institute. Fluharty said exactly that at a Feb. 15 Senate Agriculture Committee hearing, the first of a planned series of hearings on the farm bill. Fluharty urged legislators – who called the hearing to consider “policies that make investments in jobs and opportunities for farmers and rural businesses through new markets, entrepreneurship, regional strategies and energy innovation” according to the committee’s website – to allow two key numbers to be “seared into your consciousness: $28 billion and 1 percent.

“The $28 billion are additional rural community and economic development resources that would have been available in 2010, if non-metro counties received the same per capita federal funding resources as metro counties. … With Rural Development Budget Authority being further reduced, where is rural America to turn in the future?”

For more on RUPRI, see here.

It won’t be to U.S. philanthropic foundations. “Here, in the same year – 2010 -- of the $46 billion given by foundations, only 1 percent went to rural programming. This geographic inequity has grown no better over time, while rural community capacity shrinks and rural safety net needs grow exponentially.”

Shortly after his testimony Fluharty spoke with Farm Press about RUPRI, how rural communities can band together to better themselves, the need to combine various government efforts farm country, and why philanthropic tax breaks should be scrutinized. Among his comments:

On the genesis of the University of Missouri-based RUPRI…

“We were formed in 1990 by a bipartisan group of senators on the agriculture committee. Originally, it was Dale Bumpers from Arkansas, Bob Kerrey from Nebraska and Kit Bond from Missouri.

“Heading into discussions about the 1992 (farm bill)  -- and there was already a lot of good work and rigorous analysis being done by FAPRI on commodity programs – these senators saw there was an increasing relationship between agriculture and economic development. More and more farm families were working off the farm.

“So, they wanted to create something external to government that wouldn’t be controlled by any institution – not the USDA, not the agriculture committees, not advocacy groups – and would do analysis on the broader issues in rural America. Specifically, they wanted to look at domestic policy issues other than agriculture affect rural regions.

“At that time, I’d been an executive with the Indiana Beef Cattle Association and was about to go to work for the Indiana Farm Bureau. Instead, I came in to RUPRI.

“Over the last 20 years, we’ve been funded by Congress through ag appropriations to do external, non-partisan, objective analysis of the rural impacts of public policy. That includes everything from Medicare and Medicaid to transportation to entrepreneurship to health and human services.

“Because there isn’t really enough rigorous rural policy research in any one institution – we’re a small piece of a larger puzzle – we’ve built teams of researchers, practitioners and analysts across the country and world. That way when there’s a set of issues in public choice in Congress, the administration, in a governor’s office down to the county or regional level, we can put the best research together around that with those who can explain what these policies will mean in the dirt. We try to provide the view of what the rural differential impact of a specific public policy will be.

“We’re now in our third decade and we don’t search for a lot of headlines. We’re just trying to help public servants understand what the impacts their decisions have on rural America.”

Looking at some of your testimony before the agriculture committees since 2000, you’re repeating a lot of the same things. Is it frustrating for you to not see your concerns tackled by Congress?

“You’ve hit a soft spot for me because this is the fourth farm bill where we’re basically saying the same things. But we’re actually getting there…

“We’re blessed and take our autonomous, non-partisan status very seriously. There simply aren’t enough rural votes any more in either party. I’ve worked just as closely with Democratic as I have with Republican administrations.

“It’s a great advantage, I believe, for rural places and people that there’s a policy shop that both sides go to and trust to provide the straight story.

“The other beauty is the folks that care about the rural future still mostly treat it in a non-partisan way. But there are issues where there are divides – we’ve been in a very partisan political environment for the last 10 or 15 years. Generally, though, most rural elected officials realize they need to reach across the aisle to get things done.

“However, it is somewhat frustrating to know where we’re heading and what we need to do and yet see the policy development process in the ag committees, frankly, get there slower than it might.”

A tour

On an eye-opening tour of Europe’s farm country…

“A few years ago, during the Bush administration when Tom Dorr was USDA undersecretary for rural development, we organized a trip to the EU. We brought either the elected president or the CEO of all the major ag organizations in the country, Dorr and several rural development directors. We did an entire study/tour week in Europe with that group – from northern Scotland to the south of France.

“The reason for the tour was to get guys out of buildings and onto farms in five or six European countries to see where they were with regards to rural entrepreneurship connection to agricultural policy. The point was not to adopt a European model but to suggest that in Europe, more and more, rural development and agricultural commodity producers are aligning to say ‘we’re in a very urban-centric policy arena and must work closely together. The same guys that farm are the same guys that need good healthcare, good roads, good entrepreneur financing programs, good education for the kids.’

“At the end of the trip in France, a state Farm Bureau president got up and spoke. He said ‘the reality is I’ve learned more on this trip than, probably, any other trip I’ve been on. Here’s what bothers me: every rural town in Europe than we’ve seen looks better than my (Midwest) hometown. We may not want to adopt European policies, but we have to figure out how U.S. ag and rural development can be more closely aligned.’

“Unfortunately, in the United States, we’re not quite as smart in thinking about how rural innovation relates to the future of agriculture. And since that trip, as every producer knows in everything from regional food to energy, we’re going to see agriculture increasingly being a tremendously viable development engine beyond agriculture itself.”

On the pace of policy development…

“As I said in my testimony, I honestly believe the people are way out in front of the policy development process. But it is coming around.

“Of course, to be honest, there is no money for the agriculture committees. They’re going to have to work smarter, going to have rethink things. We have far too many programs that don’t have goals – they’re just out there with an important constituency. But we can no longer afford them all and must think about how to align and integrate smarter.

“To do that will require: regional innovations, value chains, asset-based development strategies in multi-county regions in rural America and, clearly, entrepreneurship development.”


On policy recommendations…

Fluharty said the Senate Agriculture Committee should consider three specific policy recommendations. His first: Given current budgetary challenges, it is critical that this committee create a more innovative, streamlined, flexible, and regional approach to enable USDA RD (Rural Development) to administer the remaining suite of recently-downsized, but very effective economic development programs in a more integrated, aligned, and leveraged framework, and wherever possible, in a regional context.

“There are a lot of RD programs. There are over 40 different economic development programs in the RD suite. Many of your readers have likely used them for energy infrastructure, to build a critical access hospital, a community center or the like.

“There are Rural Business Opportunity grants, Rural Business Enterprise grants, the Intermediary Relending Program, the Rural Community Development Initiative, the Micro Enterprise Loan Program, on and on. These are mid-sized, ‘boutique’ policy – almost project design and development programs – that, frankly, are very hard to qualify for. It’s rather onerous to secure an RD loan.

“So, in a lot of cases, the last shot for an economic development director in, say, the Kansas region is ‘well, maybe we’ll have to go with the USDA.’ That isn’t because of the people running the programs – they’re great public servants. But the committee has created a statue situation that makes the programs really hard to qualify for, to seek grants under and to follow through on. If you’re a small county with a limited research staff and no grant writer (it’s too difficult).

“If you go to the Small Business Administration or the like, the process is a heck of a lot simpler and responds more quickly.

“We need to say ‘instead of all these programs, let’s figure out a way to give the state RD directors and the regional USDA program folks more flexibility to work with county commissioners and economic development practitioners. Let’s create a set of options that will streamline the process, make program application less onerous.’”

Fluharty’s second recommendation: The regional framework should advance asset-based innovation and entrepreneurship, and above all else, align much more effectively and efficiently with other programs at sister federal agencies addressing similar needs.

“Again, there is no money. We must think about linking various investment streams.

“For example, the Economic Development Administration (under the Commerce Department) has a program called Comprehensive Economic Development Strategy (CEDS). It used to be that a region had to fill out an application to get a grant. It was pro forma and you have to slap some stuff together showing some statistics and you’d get a grant.

“That has changed with the recognition that value chains and the global economy means rural regions really must think about competitive advantage. CEDS has gotten good – it’s rigorous, the private sector has bought in and local jurisdictions are, as well. Those projects are being built all over the country.

“So, why not align USDA grants to CEDS or a similar program where there’s some rigor? The reality is there are a lot of folks trying to bring projects to rural areas but it isn’t their full-time job. It isn’t like what’s happening in cities. And they’re trying to make good decisions with limited tools.

“We must align these programs better. And it’s starting to happen. The (Obama) administration has done a really good job trying to align Small Business, Commerce and the USDA. There have been several GAO (Government Accountability Office) studies that have backed that effort. My hope is the agriculture committees will provide USDA with the ability to be more flexible.”

Fluharty’s third recommendation, which he says is the “most critical” of the bunch:Given past, current and future RD funding reductions, this committee must ensure a sufficient level of rural debt, venture and equity capital, as well as an appropriate and flexible suite of federal instruments through which they are delivered, to meet rural financing need. In addition, the committee should also explore why there continues to be a glaring lack of rural investment by our nation’s major foundations.

“The Economic Research Service just released their Farm Household Income report. It showed that in 2010 the median farm household income was $54,000. Almost $50,000 was earned off the farm.

“Those operating larger farms with $250,000 in sales earned 75 percent of their income off the farm. Even on the largest farms it’s still 20 percent.

“In 2010, if the federal government had returned the same level of tax resources to rural areas, per capita, that urban areas received, we’d have had $28 billion more for economic and community development. That’s a very stark differential.

“And that discrepancy is bound to get worse. The budget authority for RD has gone down and down and down. We all recognize – just as the folks working on direct payments do – we’ll have to move to risk-management because of a lack of money.

“The reality, though, is that folks trying to build rural economies have been squeezed for the last decade. That’s a huge disadvantage and we’re talking about the main federal programs for economic and community developments.

“These numbers mean almost $600 per person less is provided to rural America.”

More discrepancies

On foundations and the ‘red-lining’ of rural America…

“Can we say the foundations now working on economic development might be something rural America could fall back on? Well, in 2010, the major national foundations gave $46 billion. Only one percent of that went to rural America. One percent! That’s a rural red-lining.

“Some foundations have argued for years that the government is red-lining certain populations. Well, that one percent is a de facto red-lining of rural America.

“This is huge because you’re talking about the public trust. These foundations, their boards, executives and donors are receiving huge tax advantages for creating a public good. But the reality is if your proportion of that public good as a rural region is only one percent of total national philanthropy we must ask if the public trust is being violated. Is it worth the proportion of tax revenues we’ve lost in the tax structure? Well, it certainly is if you’re getting that money – but rural America is getting one percent.”

On another disparity…

“Unlike metropolitan areas, rural areas don’t get Community Development Block Grants (CDBG) as a right. If you have a population of 50,000 you have a ‘place entitlement’ to money from the federal government. Without that population you must compete at the state level. At this point, rural areas need community development much more than do central cities. 

“Outside CDBG, what is going on in other federal programs? Again, there is a $600 per capita disadvantage and the philanthropic sector is giving rural areas one percent of their total payout. It’s obvious why rural America isn’t doing as well.

“Let’s look at rural Kansas and the Bronx in New York. In the Bronx, massive federal monies and large foundations are producing multiple grants for multiple developments of urban centers. Rural Kansas has none of that.”

So maybe the farm bill should be considered along with, say, the transportation bill?

“Exactly! We aren’t cross-walking investments nearly well enough in rural regions.

“We have to figure out how to align federal government programs better. That way there won’t be 22 programs that require you to apply 22 times to get into them. That is getting better.

“At the state level, legislatures and counties must work smarter.

“Third, we must create something that’s much more regional in scale. There just isn’t enough money for every town and county to this. I wish there was but we must make smarter decisions.

“All this is beginning to happen. Southeast Kansas communities are banding together to do it. The Kansas Farm Bureau has been fantastic on this and they’ve been out in front on it. As an outgrowth of these things, the national Farm Bureau actually now has an RD department doing good work.

“Similar work has just begun in a 10-county area of northwest Missouri. (Agriculture Secretary Tom) Vilsack and I were there about a month ago, in St. Joe, and 500 people showed up.

“One key is to find rural leadership to move in that direction.”

Why Fluharty is encouraged and what rural citizens should do to change the dynamic…

“Before, I was asking that this regional approach be adopted because it was the right thing to do for rural America. Now, it’s the only thing to do. So, it will be seen more and more.

“Rural agriculture must get involved to push this. They need to engage the farmer advocacy and commodity groups – Farm Bureau, Farmers Union, NCGA, NCC, all of them. Agriculture is key because the reality is there isn’t a collective voice for rural America like there is for agriculture. I’d argue that agriculture needs to pick up the flag and lead the charge. Each of these issues affect the ability of the next farming generation’s to stay in rural towns.

“Rural America must engage with their elected officials, especially heading into the next farm bill. I’m very encouraged by the commitment of (Kansas Sen. Pat) Roberts, ranking member, to this.

“We must keep the pressure on the government and ask about the huge discrepancy between per capita money provided to rural areas and urban areas. That number is disturbing and shows there’s something very wrong. You could argue that a $200 or $300 difference is acceptable. But $600? No way.”

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