TITLE VI

RURAL DEVELOPMENT

**SUMMARY OF RURAL DEVELOPMENT TITLE REFORM**

***Recommendations In Brief***

Streamline and increase funding for programs to enhance rural health
care and other public services that are vital to our rural communities.

***Problem***

Without sufficient infrastructure, rural communities struggle to
maintain basic services and an appropriate quality of life for rural
residents. Rural communities often face serious drinking water issues,
limited resources for first responder services, and difficulty
attracting broadband Internet providers. Rural communities must maintain
the services necessary to attract commercial businesses with good jobs
in order to slow the pace of out-migration. As Gabe from California
stated, "small cities in rural areas have a hard time being able to
provide that quality of life for its residents." USDA programs designed
to help mitigate these challenges sometimes overlap, leading to a
complex maze for rural residents to navigate.

Additionally, many rural residents live in remote or outlying areas,
making it more difficult for them to access needed services. For
example, extended travel times for ambulances and long distances to
reach emergency rooms can literally mean the difference between life and
death in the critical moments following a health emergency. Compounding
the situation, rural hospitals often struggle to attract and maintain
adequate health care providers and specialists.

While the unmet need is substantial in these rural communities, the
programs authorized by the rural development title can help these
communities to meet the needs of their citizens. USDA heard almost
unanimous support for these programs during Farm Bill Forums throughout
the country. For example, Ken from Wisconsin noted, "As I drove down
here, I passed scores of rural communities, farming communities, that
have benefited from the Rural Development Loan and Grant Programs....As
you know a strong farming community will support a strong farming
industry." And Rich, of Illinois added, "We also need a farm policy that
addresses the challenges faced by rural communities. To remain
competitive and productive, farmers and our rural neighbors need access
to 21^st^ Century broadband... (and) rural communities face challenges
to hold onto the businesses and services...for the next generation."

***Recommended Solution***

The Administration is recommending several proposed changes to Title VI
of the farm bill -- entitled "Rural Development." Following is a list of
the major components of the package.

1.  Complete the reconstruction and rehabilitation of all 1,283
    certified Rural Critical Access Hospitals within the five years
    covered by the farm bill. This proposal would invest \$85 million to
    support \$1.6 billion in guaranteed loans and \$5 million for
    grants. (For further information, see the proposal entitled "Address
    Backlog of Rural Critical Access Hospital Needs" on pages 117 --
    118.)

2.  Provide an additional \$500 million to reduce the backlog of
    applications for Rural Development water and waste disposal grants
    and direct loans, emergency community water assistance grants,
    Community Facilities loan and grant programs that assist rural first
    responders, broadband access loans, and distance learning and
    telemedicine grants. Reauthorize the Broadband Access Program and
    the Distance Learning and Telemedicine Program. (For further
    information, see the proposal entitled "Enhancing Rural
    Infrastructure" on pages 119 -- 121.)

3.  Consolidate the legislative authorities for certain rural
    development programs to add more flexibility. Create more measurable
    performance standards for the programs and make them easier for USDA
    customers to use. (For further information, see the proposal
    entitled "Streamline Rural Development Programs" on pages 122 --
    123.)

**ADDRESS BACKLOG OF RURAL CRITICAL ACCESS HOSPITAL NEEDS**

***Recommendation In Brief***

Complete the reconstruction and rehabilitation of all 1,283 certified
Rural Critical Access Hospitals within the five years covered by the
farm bill. This proposal would invest \$85 million to support \$1.6
billion in guaranteed loans and \$5 million for grants.

***Problem***

In the critical moments following a farm accident, heart attack, or
other health emergency, time wasted attempting to reach an emergency
room or other critical care facility can literally mean the difference
between life and death. Unfortunately, many rural residents live in
remote or outlying areas that lack reasonable access to critical health
care services. These essential services are more than a hundred miles
away for some rural residents.

In 2005, a committee report of the National Academy of Sciences
Institute of Medicine (IOM) found that rural first-responder emergency
services confront major challenges including sizable geographic
distances between patients and trauma centers. Additionally, the IOM
noted that rural hospitals struggle, even more so than urban hospitals,
to attract and maintain adequate numbers of certain health care
professionals.

Comments submitted during USDA's Farm Bill Forums urge the department to
expand assistance to these hospitals. Kathy of Washington State said,
"Rural communities without a strong healthcare infrastructure cannot
attract new industry or new residents... The success of the Critical
Access Hospital program in addressing serious operational budget crises
must be matched with programs recognizing the growing back log of
unfunded maintenance and replacement needs. A strong healthcare
infrastructure is necessary as we care for our growing population of
retirees and keep rural communities attractive to growing families and
businesses."

***Recommended Solution***

The Administration proposes \$1.6 billion in direct and guaranteed loans
to complete the reconstruction and rehabilitation of all 1,283 currently
certified Rural Critical Access Hospitals within the five years covered
by the farm bill.

Since fiscal year 2004, the USDA Community Facilities Programs have
provided \$260 million in loans and loan guarantees to support 53 rural
critical access hospitals. Because the credit subsidy costs for
Community Facilities direct and guaranteed loans are very low (6.4
percent for direct and 3.7 percent for guaranteed), it would take a
relatively small amount of investment to address this problem.

The Administration's proposal would require \$85 million in mandatory
spending to supplement funding for the USDA Rural Development Community
Facilities programs. With a mix of direct and guaranteed community
facilities loans, \$80 million in budget authority will support \$1.6
billion in loans needed to meet the identified capital need of these
hospitals over the life of the farm bill. The additional \$5 million
would be available for grants to meet needs not covered by the loan
programs.

***Background***

Congress enacted the Medicare Rural Hospital Flexibility Program as a
part of the Balanced Budget Act of 1997 to encourage the creation of a
rural critical access hospital system. Under this program, a hospital
with a critical access designation can get higher reimbursement rates
under Medicare, which can include a component for capital improvements.
As of January 2007, there were 1,283 certified Critical Access
Hospitals. These critical access hospitals, as a group, need financial
assistance for capital investments to remain viable. USDA rural
development experts estimate that the capital needs of these hospitals
are approximately \$1.6 billion.

**ENHANCING RURAL INFRASTRUCTURE**

***Recommendation In Brief***

Provide an additional \$500 million to reduce the backlog of
applications for Rural Development water and waste disposal grants and
direct loans, emergency community water assistance grants, Community
Facilities loan and grant programs that assist rural first responders,
broadband access loans, and distance learning and telemedicine grants.
Reauthorize the Broadband Access Program and the Distance Learning and
Telemedicine Program.

***Problem***

Without sound infrastructure, a rural community cannot provide the basic
services required to ensure a good quality of life or encourage
sustainable economic development. Rural communities, especially the
smallest rural communities, have substantial unmet needs for basic
infrastructure assistance. Many of these rural communities are facing
serious drinking water issues as they work to meet increasingly
stringent quality standards. These communities often lack the resources
to find better water sources, thoroughly clean the drinking water they
distribute, and properly treat the waste water produced by the
community. Some of the most rural states lack the funds to provide
enough assistance to these communities to meet this challenge. As a
result, the USDA Water and Waste Disposal programs are sometimes the
only source to get the assistance they need. Currently, these programs
provide the majority of assistance through grants, loans, and technical
assistance, funded by an annual appropriation of approximately \$530
million. The current backlog of applications is more than \$2 billion,
often forcing communities to wait years to get the assistance they need.

Rural communities often depend on USDA Rural Development programs to
receive needed assistance in developing and improving assets that assist
first responders. These assets include police cars, fire and ambulance
trucks, and police and fire stations. The distances between first
responders in rural areas, especially in remote areas, can be
considerable. If a rural community lacks basic first responder assets,
the public health and safety of its residents and those living in the
surrounding area are at risk. These small rural communities lack the
resources to obtain these first responder assets on their own. The Rural
Development Community Facilities program provides grants, loans, and
loan guarantees to help rural communities obtain vital first responder
assets. In fiscal year 2006, the Community Facilities programs provided
\$240 million in assistance to finance first responder projects. While
this level of assistance has been helpful, the unmet need is
substantial.

Rural communities are also finding it difficult to obtain broadband
Internet services. These communities are often too small and remote to
attract the attention of the major private providers, and they lack the
funds to bring broadband Internet services to their communities on their
own. Rural communities that are fortunate enough to receive some form of
access often experience lower quality service at double or triple the
price charged in urban communities. Without quality broadband access,
these communities and their residents are not able to keep pace with the
rest of the country, which is increasingly becoming reliant on broadband
Internet. Without high speed Internet services, many rural communities
are unable to attract commercial development.

Stakeholders voiced strong opinions about the importance of broadband
access during USDA's Farm Bill Forums. Karen of Vermont said, "Access to
information in the agricultural arena includes commodity prices,
information about weather...techniques for dealing with plant or animal
disease...and more. We want our farmers and other rural residents to
have this advantage. Without broadband, they are at competitive
disadvantage...More and more technology-driven opportunities exist for
rural-based entrepreneurship, but it is broadband that makes those
opportunities reality."

The USDA Broadband Access program provides loans for the establishment
and enhancement of broadband Internet access in rural areas. In
addition, the Distance Learning and Telemedicine programs provide
assistance, primarily through grants, to the smallest and most remote
rural communities. In these communities, loan and loan guarantee
programs sometimes are not effective when the communities and their
residents lack the ability to repay the loans required to finance
providing such services. While there has been adequate funding available
for the Broadband Access loan program, the Distance Learning and
Telemedicine grant programs have been significantly oversubscribed. For
fiscal year 2006, USDA funded \$25 million in Distance Learning and
Telemedicine grants out of \$40 million in eligible applications.

***Recommended Solution***

The Administration proposes to provide a one-time infusion of an
additional \$500 million in mandatory funding to reduce the backlog of
Rural Development water and waste disposal grants and direct loans,
emergency community water assistance grants, Community Facilities loan
and grant programs that assist rural first responders, broadband access
loans, and distance learning and telemedicine grants. Additionally, we
propose reauthorization of the Broadband Access Program and the Distance
Learning and Telemedicine Program.

This recommendation is grounded in the positive comments echoed across
the country about USDA's rural development programs. For example, Sharon
of Missouri said, "USDA Rural Development serves as a catalyst and
supporter. It has created the enthusiasm needed to make our community
come alive...USDA has been the engine that helped our rural community
grow." Paul of North Dakota said, "I\'d like to assure you that USDA
Rural Development programs are making a big difference...USDA...has
helped with...a \$2 million water, sewer and gas line replacement
project...at the Indian-owned United Tribes Technical College. The lines
were in such bad shape that the future of the college was in jeopardy.
Now...the college has been able to double its enrollment, teaching more
than 800 Native Americans new skills and trades." Wayne of California
said, "We have worked with and been a partner of USDA Rural Development
for many years...investing in projects to overcome rural poverty,
improve housing, and strengthen community development...We believe that
federal funding for something as time-proven as this service should be
increased and receive the attention it deserves."

***Background***

The significant unmet need for rural infrastructure was recognized as a
serious problem during the consideration of the last farm bill. Section
6031 provided \$360 million to address the backlog of USDA Water and
Waste Disposal loan and grant applications.

USDA's community facilities program strives to ensure that health care
clinics, police and fire stations, schools, and child care centers are
readily available to all rural Americans. Rural Development can make and
guarantee loans to develop essential community facilities in rural areas
and towns of up to 20,000 in population. In FY 2005, the program awarded
\$52.9 million in grants and loaned \$621.2 million for essential
community facilities for public use.

Water and environmental programs are authorized under the Consolidated
Farm and Rural Development Act to make direct loans and grants to
develop drinking water and wastewater systems, including solid waste
disposal and storm drainage, in rural areas and in cities and towns with
a population of 10,000 or less. Funds are available to public entities,
such as municipalities, counties, special-purpose districts, and Indian
tribes. In addition, funds may be made available to nonprofit
corporations and cooperatives. In FY 2005, this program awarded a total
of \$485.8 million in grants and \$924.3 million in loans and loan
guarantees for essential water and wastewater facilities for rural
residents and towns.

## Section 6103 of the 2002 farm bill established the Rural Broadband Access program---authorizing loans to provide access to broadband service to areas with a population of 20,000 or less. The goal of this program is to ensure that rural consumers benefit from the same quality and range of telecommunications services that are available in urban and suburban communities. USDA has loaned approximately \$850 million to provide access to broadband services in rural communities since the start of this program in 2002. 

## 

In addition, changes in technology have presented new opportunities for
delivering medical care in rural areas. Telemedicine is one innovation
currently used to strengthen the likelihood of continued health care in
rural communities. Section 6203 of the 2002 farm bill extended the USDA
Distance Learning and Telemedicine loan and grant authority through
2007. This program provides funding for "end user" equipment to expand
and improve medical services and educational opportunities through
distance technology, allowing isolated rural hospitals and schools to
utilize expertise that is located in more urban areas of the country.

**STREAMLINE RURAL DEVELOPMENT PROGRAMS**

***Recommendation In Brief***

Consolidate the legislative authorities for certain rural development
programs to add more flexibility. Create more measurable performance
standards for the programs and make them easier for USDA customers to
use.

***Problem***

Historically, when a problem develops in rural America, new programs
have been developed to address them. As a result, USDA Rural Development
has two loan guarantee programs that can provide assistance to construct
renewable energy systems, six grant programs that facilitate commercial
business development, and two separate program areas that are designed
to assist rural communities in developing rural infrastructure and
community assets. These programs generally adopt different approaches to
rural development. Because rural development activities are separated
into individual legislatively mandated categories, it is difficult for
USDA to embrace emerging rural development opportunities, such as
renewable energy. This situation has also created a complex and
confusing maze of programs for customers to understand and access.
Finally, these disbursed authorities make it difficult for USDA to
measure the performance and effectiveness of its activities.

***Recommended Solution***

To facilitate the coordination of rural development activities, the
Administration proposes consolidation of certain existing statutory
authorities, by grouping authorities to reflect the customers that
either directly benefit from the programs or are essential to their
operation, as follows:

1.  *Create a Multi-Department Energy Grants Platform*. This would start
    the process of consolidating the renewable energy grant and research
    programs of USDA into one platform and increase interagency
    coordination. The first step of this consolidation would be to move
    USDA Rural Development renewable energy grant and research program
    authorities into the Biomass Research and Development Act of 2000.
    This Act has an existing coordinating forum that includes USDA, the
    Department of Energy (DOE), and other Federal agencies. By moving
    these programs into this Act, USDA and DOE can more effectively
    coordinate their research and development activities to better serve
    the needs of rural America. Key Rural Development programs that
    would be consolidated under this authority include the Renewable
    Energy Systems and Energy Efficiency Improvements grant program,
    with proposed mandatory funding of \$500 million over ten years. In
    addition, mandatory funding for the competitive grant program under
    the Biomass Research and Development Act of 2000 would be increased
    to \$150 million over ten years.

2.  *Create a Business Loan and Loan Guarantee Platform*. Such a
    consolidation would make it easier for guaranteed lenders to
    participate in these programs and eliminate confusion. This proposal
    would consolidate into the existing Business and Industry authority,
    the authorities to carry out NADBank, Intermediate Relending
    Program; Prioritize funding for the construction of biorefinery
    projects in the Business and Industry loan guarantee program; and
    consolidate the Section 9006 energy loan and loan guarantee program.
    Additionally, USDA recommends expanding the 9006 loan guarantee
    limits for cellulosic ethanol projects to \$100 million with
    additional authority to exempt these cellulosic projects from the
    cap on guarantee loan fees and investing \$210 million to support
    \$2.17 billion in guaranteed loans for the construction of
    cellulosic ethanol facilities over 10 years.

3.  *Create a Business Grants Platform*. This proposal would consolidate
    the authorities for the Rural Business Opportunity Grants, Rural
    Business Enterprise Grants, Value Added Grants, Rural Economic
    Development Loans and Grants, and the Rural Cooperatives Development
    Grants programs into one legislative authority. Specialty crops
    projects would receive priority in the Value-added Grants portion of
    this platform.

4.  *Create a Community Programs Platform*. This proposal would
    consolidate the authorities for the water and waste loans, loan
    guarantees, and grants (including the assorted supplemental
    authorities such as the Emergency and Imminent Water Assistance
    Grants), the Community Facilities loan, loan guarantees, and grants,
    High Cost Energy Grants, Tribal College Grants, Economic Impact
    Grants, and the Rural Community Development Initiative Grants
    programs.

This streamlining of services was recommended in farm bill comments
submitted to USDA. For example, Paul of Iowa said, "Federal programs
that provide funding for rural development should be consolidated and
streamlined for easier access by regions and communities. These programs
also should assist communities in meeting infrastructure needs, from
basic services to the latest in telecommunications..."

***Background***

These consolidations are consistent with other consolidation efforts
within Rural Development, such as the Rural Housing Assistance Grants,
which consolidates a number of housing assistance grants into one
account. Grouping like grant programs together or loan and grant
programs that work in tandem is an efficient way to provide flexible
funding to meet the differing regional needs and demands of rural
America.