U.S. GOVERNMENT PRINTING OFFICE

WASHINGTON : 

For sale by the Superintendent of Documents, U.S. Government Printing Office

Internet: bookstore.gpo.gov Phone: toll free (866) 512–1800; DC area (202) 512–1800

Fax: (202) 512–2250 Mail: Stop SSOP, Washington, DC 20402–0001

34–742 PDF 2007

S. HRG. 110–31

HEARING TO DISCUSS RURAL DEVELOPMENT

CHALLENGES AND OPPORTUNITIES

HEARING

BEFORE THE

COMMITTEE ON AGRICULTURE, 

NUTRITION, AND FORESTRY

UNITED STATES SENATE

ONE HUNDRED TENTH CONGRESS

FIRST SESSION

FEBRUARY 13, 2007

Printed for the use of the 

Committee on Agriculture, Nutrition, and Forestry

(

Available via the World Wide Web: http://www.agriculture.senate.gov 

COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

TOM HARKIN, Iowa, Chairman 

PATRICK J. LEAHY, Vermont 

KENT CONRAD, North Dakota 

MAX BAUCUS, Montana 

BLANCHE L. LINCOLN, Arkansas 

DEBBIE A. STABENOW, Michigan 

E. BENJAMIN NELSON, Nebraska 

KEN SALAZAR, Colorado 

SHERROD BROWN, Ohio 

ROBERT P. CASEY, Jr., Pennsylvania 

AMY KLOBUCHAR, Minnesota 

SAXBY CHAMBLISS, Georgia 

RICHARD G. LUGAR, Indiana 

THAD COCHRAN, Mississippi 

MITCH MCCONNELL, Kentucky 

PAT ROBERTS, Kansas 

LINDSEY GRAHAM, South Carolina 

NORM COLEMAN, Minnesota 

MICHEAL D. CRAPO, Idaho 

JOHN THUNE, South Dakota 

CHARLES E. GRASSLEY, Iowa

MARK HALVERSON, Majority Staff Director 

ROBERT E. STURM, Chief Clerk 

MARTHA SCOTT POINDEXTER, Minority Staff Director 

VERNIE HUBERT, Minority General Counsel 

(II) 

(III)

C O N T E N T S 

Page

HEARING(S):

Hearing to Discuss Rural Development Challenges and Opportunities ............. 1

Tuesday, February 13, 2007

STATEMENTS PRESENTED BY SENATORS 

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee on 

Agriculture, Nutrition and Forestry ................................................................... 1

Coleman, Hon. Norm, a U.S. Senator from Minnesota ........................................ 3

Klobuchar, Hon. Amy, a U.S. Senator from Minnesota ........................................ 3

Nelson, Hon. E. Benjamin, a U.S. Senator from Nebraska .................................. 2

Panel I 

Fluharty, Charles, President, Rural Policy Research Institute, Truman School 

of Public Affairs, Columbia, Mississippi ............................................................. 4

Hassebrook, Chuck, Center for Rural Affairs, Lyons, Nebraska ......................... 6

Holz-Clause, Mary, Co-Director, Agricultural Resource Center, Iowa State 

University, Ames, Iowa ........................................................................................ 10

Kelley, Vernon, Three Rivers Planning and Development District ..................... 8

Sertich, Joe, Chair Rural Community College Alliance, Chisholm, Minnesota . 12

APPENDIX 

PREPARED STATEMENTS: 

Casey, Hon. Robert P., Jr. ............................................................................... 38

Chambliss, Hon. Saxby .................................................................................... 39

Cochran, Hon. Thad ......................................................................................... 42

Salazar, Hon. Ken ............................................................................................ 45

Fluharty, Charles ............................................................................................. 46

Hassebrook, Chuck ........................................................................................... 79

Holz-Clause, Mary ............................................................................................ 84

Kelley, Vernon .................................................................................................. 89

Sertich, Joe ........................................................................................................ 98

DOCUMENT(S) SUBMITTED FOR THE RECORD: 

Harkin, Hon. Tom: 

Written questions for Mr. Kelley .................................................................... 107

Salazar, Hon. Ken: 

Written questions for all witnesses ................................................................. 108

Written questions for Mr. Sertich ................................................................... 108

Written questions for Mr. Hassebrook ............................................................ 108

Written questions for Mr. Fluharty ................................................................ 108

Kelley, Vernon: 

Written response to questions from Hon. Tom Harkin ................................. 109

Sertich, Joe: 

Written response to questions from Hon. Tom Harkin ................................. 113

Written response to questions from Hon. Ken Salazar ................................. 116

Pennsylvania’s Recommendations for the 2007 Farm Bill ................................... 119

Association of Farmworker Opportunity Programs, prepared statement ........... 131

Page

IV

Office of the Lt. Governor State House, Indianapolis, Indiana, prepared statement ...................................................................................................................... 137

Proteus, Inc., prepared statement .......................................................................... 141

ADDITIONAL MATERIAL(S) SUBMITTED FOR THE RECORD: 

Additional questions for Mr. Fluharty ................................................................... 144

Additional questions for Mr. Kelley ....................................................................... 146

Additional questions for Ms. Holz-Clause ............................................................. 147

Additional questions for Mr. Hassebrook .............................................................. 148

Additional questions for Mr. Sertich ...................................................................... 149

QUESTION AND ANSWER: 

Holz-Clause, Mary: 

Written response to questions from Hon. Tom Harkin ................................. 150

Written response to questions from Hon. Ken Salazar ................................. 155

(1)

HEARING TO DISCUSS RURAL DEVELOPMENT 

CHALLENGES AND OPPORTUNITIES 

Tuesday, February 13, 2007

U.S. SENATE, COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY

Washington, DC 

The Committee met, pursuant to notice, at 9:52 a.m., in room 

SR–328, Russell Senate Office Building, Hon. Tom Harkin, Chairman of the Committee, presiding. 

Present: Senators Harkin, Lincoln, Nelson, Salazar, Brown, 

Casey, Klobuchar, Lugar, Cochran, Coleman, Thune, and Grassley. 

STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM 

IOWA, CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY 

Chairman HARKIN. The Committee on Agriculture, Forestry and 

Nutrition will come to order. This morning we are having another 

in our series of hearings leading up to the Farm Bill, and this 

morning we are having a hearing on rural development. 

I will just make an opening statement and then I will introduce 

Senator Chambliss, and I know some Senators also want to introduce some of our guests and I will ask them to do that at that 

point in time. 

Typically, when the Farm Bill is discussed, rural development 

and the challenges and opportunities facing rural Americans and 

their communities are not especially high on the list of topics. In 

the reality, the Farm Bill is the single most important piece of legislation we deal with, having a broad focus on rural development. 

Despite their unique challenges, rural communities offer many 

advantages. Ironically, rural America is a wonderful place to live 

and raise a family, too often, it is a hard place to make a living 

and support a family. The new Farm Bill hold much promise for 

helping rural Americans capitalize on the strengths on their communities to increase economic growth, jobs, and the quality of life. 

We need to examine the Department of Agriculture’s numerous 

rural development programs to see what is working and what 

needs improvement. We also need to foster better coordination between the various Federal agencies, State and local governments, 

nonprofit and charitable entities, and private individuals and businesses. 

One innovation which has already proven its value involves a 

cluster of communities joining together to identify their strengths 

and their needs and then to work cooperatively with governments 

2

and businesses, educational, and nonprofit entities to carry out a 

rural development strategic plan. This is a sound approach and one 

I hope we can encourage in the new Farm Bill. 

We also have to opt to consider better focus in USDA rural development assistance toward those communities who have devised a 

plan to make the most effective use of Federal dollars. The experience thus far shows that certain strategies and Federal initiatives 

hold a lot of promise, for example, adding value to farm commodities and products, whether for energy or a host of other bio-based 

products helps to increase farm income, rural economic growth, and 

jobs, of course, while reducing our dependence on imported oil. 

The Value Added Agricultural Product Market Development 

Grants have worked well; I hope they can be strengthened. We also 

know that basic infrastructure is critical to the prospects of any 

rural community, from electricity, to drinking water and waste 

water treatment, and the high speed internet access which has now 

become a necessity. 

We put funding in the 2002 Farm Bill for the specific purpose of 

funding USDA’s backlog of approved applications for water and 

waste water programs, and I hope we can achieve a similar objective in this bill. 

One last thing, quality health care is, of course, also essential, 

and I commend the Administration’s proposal to help rural hospitals. I also support Senator Nelson’s proposed legislation to help 

small rural businesses to get started and succeed. And we must 

continue to support cooperatives as they carry on their tradition of 

improving farm income and rural economic opportunities. 

We also need to do what we can, and I am not certain I have 

an answer here, but I hope to explore it, how we hope move more 

venture capital for investment in rural areas. Community foundations can also help communities assemble more resources to help 

themselves. As we now know, there is a good deal of accumulated 

capital, though much of it remains untapped as a source of investment in those areas. 

So those are just some of the areas I hope we can explore with 

the witnesses today, and others, as we move forward to the development of the Farm Bill. So I look forward to the testimony of our 

witnesses, and the valuable contributions they can make to our discussion in the rural development title of the new Farm Bill. 

I will reserve time for Senator Chambliss to make his opening 

statement when we comes. I know that Senator Nelson and Senator Klobuchar wanted to make a couple of introductions before we 

proceed, and I would first recognize Senator Nelson for that purpose. 

STATEMENT OF HON. E. BENJAMIN NELSON, A U.S. SENATOR 

FROM NEBRASKA 

Senator NELSON. Thank you, Mr. Chairman. It is my pleasure to 

introduce Chuck Hassebrook who is the Executive Director of the 

Center for Rural Affairs in Lyons, Nebraska. The Center is a nationally recognized research, advocacy, and rural development organization that promotes family farming and ranching, small business and entrepreneurial rural development. 

3

Chuck also serves on the University of Nebraska Board of Regents and is its past Chair. He formerly served on the on the U.S. 

Department of Agriculture National Commission on Small Farms, 

and was Vice Chair of the USDA Agricultural Science and Technology Review Board. He currently serves on the Nebraska Rural 

Development Commission. 

Mr. Hassebrook is a University of Nebraska graduate, a native 

of Platte, Nebraska where his family is engaged in farming. He 

lives in Lyons, Nebraska with his wife Kate and sons Anton and 

Peter. 

It is my great pleasure to introduce a very, very good friend, very 

strong advocate for rural development, and a partner over the 

years while I was in the Governor’s Office and since I have been 

in the Senate, Mr. Chuck Hassebrook. 

Chairman HARKIN. Thank you very much Senator Nelson, of 

course we all know Chuck Hassebrook, and that is a great introduction. 

I will turn to Senator Klobuchar. 

STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR 

FROM MINNESOTA 

Senator KLOBUCHAR. Thank you, Chairman Harkin. It is my 

pleasure today to introduce Joe Sertich. Joe is from northeastern 

Minnesota where, actually, my grandpa was a miner and my dad 

grew up. And Joe is the President of the Northeast Minnesota 

Higher Education District, which is a network of five community 

colleges, and one of them is Vermillion College, where my dad went 

to college. 

You might think that Mr. Sertich looks young, but you should 

know that his son, as Senator Coleman knows—his son Tony is the 

Majority Leader of the Minnesota State House of Representatives. 

So we are very honored to have Mr. Sertich with us on the panel. 

Thank you. 

Chairman HARKIN. Thank you. Senator Coleman also indicated 

that he wanted to say something on behalf of Mr. Sertich. 

STATEMENT OF HON. NORM COLEMAN, A U.S. SENATOR FROM 

MINNESOTA 

Senator COLEMAN. This is a great Minnesota family, Mr. Chairman, really committed to the public services. These issues are critical. I just want to welcome Mr. Sertich to the Committee, and I 

look forward to hearing his testimony. 

Chairman HARKIN. Thank you very much. We will now begin our 

testimony. We are going to try to ask you to limit it to 5 minutes. 

I know a lot of Senators have questions and want to get engaged 

in conversation with you, so if you could—all of your statements 

will be made part of the record in their entirety, and I would as 

that if we could just start with Mr. Fluharty, and work down. I 

hope that your clock is working. I will give you 5 minutes. If you 

go a few seconds or a minute over, it is not going to bother us that 

much. 

Mr. Fluharty, welcome, again to the Committee. You have been 

a witness here before many times in the past. We welcome you 

back. Please proceed. 

4

STATEMENT OF CHARLES FLUHARTY, PRESIDENT, RURAL 

POLICY RESEARCH INSTITUTE, TRUMAN SCHOOL OF PUBLIC AFFAIRS, COLUMBIA, MISSISSIPPI 

Mr. FLUHARTY. Thank you, Mr. Chairman, members of the Committee. I appreciate the opportunity to be here, as we begin deliberations, again, on a new Farm Bill. 

Mr. Chairman, you asked us to look at the opportunities and 

challenges in rural America, and I believe we have given that fairly 

synoptic coverage in our written testimony, which I would ask is 

entered in the record. And I hope members and staff have an occasion to review the dynamic challenges that are there. 

You and your colleagues have a very difficult task this year, as 

you all know. This title is very broad and it addresses a number 

of very critical national needs, and you are entering a year in 

which the baseline for this Committee is going to be an increasing 

challenge. So in my written testimony, I really tried to make a case 

for, despite those issues, the absolute necessity that RUPRI believes must be addressed: significant new investments and a different policy approach in the rural development title this year. 

Simply put, there are two major reasons for that. One is a domestic consideration, and the other is an international consideration. I would like to review those just briefly for you. 

There are two particular domestic challenges that I would suggest you must look at this time in our Nation’s history. One is the 

rural disadvantage in Federal fund flows for economic and community development. I have laid that out, I think, very clearly. It is 

an ongoing challenge. This year, it is a $550 per capita difference, 

urban versus rural. Those are new numbers. That is very, very significant. That is a multi-billion dollar challenge for rural economic 

development and entrepreneurship. 

The other is a unique challenge that results from your Federal 

designations and the growing interdependence of rural and urban 

areas. Counties are no longer adequate descriptors for this, and in 

everything from energy to food systems we need to think about the 

continuum of Federal commitment to rural strategies, from rural 

through urban areas. 

In fact, RUPRI believes that we are going through a set of socioeconomic and demographic changes that are as important as the 

great shifts in the 1950’s. We think they will have significant longterm rural implications for what is going on out there in the dirt. 

The second issue is international competition. Every developed 

nation that we work with in OECD is going through the very same 

challenges this Committee is, but many of these public programs 

in other developed nations, frankly, are taking approaches that are 

more systematic, continuous, and at a deeper level of public investment. And these are the competitors that our rural regions must 

contend with, not the next county. 

I will simply mention two. The EU has a major new rural 

broadband initiative that is going to essentially put broadband in 

every community in Europe. In addition, they just announced a 

multi-billion dollar European innovation fund that will link their 

universities to rural regions. We have neither of those right now, 

and that is significantly disadvantaging rural entrepreneurship in 

the United States. 

5

My colleagues on this panel are going to offer a number of wonderful examples of the opportunities that are out there. There is 

much going on. We would endorse everything that is going to be 

mentioned as a sector-specific opportunity, but as a public policy 

institute, I would like to close with three policy challenges that you 

have to confront. You have to deal with the disadvantage that rural 

areas have in your Federal commitment, overall, to economic development. 

Second, I would urge you to provide leadership to rethink essential public services. The Administration’s approach is excellent, in 

terms of funding to address backlog, but we must also look at 

broadband and broader community resources. 

Third, we really do need a new policy framework, and it needs 

to be a framework in which shared investments between the public, 

private, and philanthropic sector are scaled. There simply are not 

enough Federal dollars. 

So Mr. Chairman, in that regard, I want to commend the Committee. As you all know in the 2002 bill, you passed something 

called the Rural Strategic Investment Program. It was unfortunately not funded. There are problems with that in today’s market, 

but I would contend that it is the right model, and I would contend, 

if we can think about a scaled investment model that does three 

things: looks at regional frameworks in a very significant way, has 

laser attention to entrepreneurship and institutional innovation, 

and assures continuous commitment so that State and private dollars can be addressed in a Federal framework. I think we are well 

there. 

Mr. Chairman, the recent New York Times article on ethanol 

was wonderful, and I will read your quote there. ‘‘We need to think 

big and act aggressively.’’ Ethanol is a wonderful opportunity, but 

there are 2,000 rural communities that will not have an ethanol 

plant. 2,000 counties. There are many advocates for ethanol. There 

are 90 million rural Americans that need attention as well, and we 

need entrepreneurship beyond the ethanol juggernaut. We contend 

broader entrepreneurship is the future, and we believe a new 

framework is necessary.’’

Thank you, Mr. Chairman. Thank you, members of the Committee. I look forward to your questions. 

[The prepared statement of Mr. Fluharty can be found on page 

46 in the appendix.] 

Chairman HARKIN. Well, Mr. Fluharty, thank you very much for 

that wonderful opening statement. It sort of sets the stage, I think, 

for our other witnesses and for our discussion. 

I just want to also thank you at the outset for all the work that 

the Rural Policy Research Institute does. 

Mr. FLUHARTY. Thank you, Mr. Chairman. 

Chairman HARKIN. Great information that we get here on both 

sides of the aisle. 

I think I stole that quote from Dick Lugar, by the way. 

Mr. FLUHARTY. I am sure you did. 

Chairman HARKIN. Mr. Hassebrook, we will recognize you next. 

6

STATEMENT OF CHUCK HASSEBROOK, CENTER FOR RURAL 

AFFAIRS, LYONS, NEBRASKA 

Mr. HASSEBROOK. Thank you, Senator Harkin, and thank you, 

Senator Nelson, for that kind introduction. 

This Farm Bill presents an opportunity to invest in our future. 

There are proven strategies that work to revitalize our rural communities, largely based on small entrepreneurship and agricultural 

entrepreneurship. And if we invest in those strategies, we can set 

off a wave of development that revitalizes rural communities and 

creates genuine opportunity for rural people across this country. 

You know, small entrepreneurship really is key. We analyzed the 

most rural agricultural counties in our region, the Western Corn 

Belt and the Northern Great Plains. What we found is that about 

60 percent of all new jobs came from non-farm proprietorships. It 

was people creating their own job by starting a small business. And 

perhaps what is most exciting and encouraging about that is that 

when we survey rural high school students in our State we find 

that about half of high school students in rural areas want to own 

their own business. This is a strategy that has the capacity to draw 

our young people back to rural communities. 

With that, I am very pleased that Senator Nelson is introducing 

a rural micro-enterprise and entrepreneurship bill that would provide $50 million in mandatory funding to provide loans, training 

and technical assistance to rural small businesses. This legislation 

is modeled after a program in Nebraska that was initiated by thenGovernor Nelson. Last year, that program provided loans, training, 

and technical assistance to over 4,000 business, rural and urban 

and it has been a great success story. 

And when I measure the success of that program I think of the 

families. I think of families like the Gaster family out in Indianola, 

Nebraska, out in southwest Nebraska. It is an area that has been 

losing population, suffering from drought. It is a tough place to 

make a living. And Mr. Gaster always had this hobby of making 

wood and copper barrels. Well, they turned that into a business, 

and today they are selling wooden and copper barrels over this entire country, with clients, in part, from Hollywood movie sets. They 

have clients like 20th Century Fox, Disney, and the Smithsonian 

Institution. And it has been successful to the point that not only 

is supporting Mr. and Mrs. Gaster, but their son is coming into the 

business. 

My point is simply this: That is the kind of success that you can 

have when you invest in entrepreneurship. That is what we need 

to do, in my judgment. 

There are also opportunities for entrepreneurship on the farm. 

You know, I was struck by a consumer panel that Better Homes 

and Gardens pulled together a few years ago where they found that 

about two-thirds of consumers say they would pay a premium for 

pork if it is raised on a small farm that is humane and environmentally responsible. 

Now, those surveys usually overstate the demand, but let’s say 

it is a quarter of consumers. That is a huge opportunity for small 

and mid-sized farms. And one of the programs that has helped 

farmers tapped that opportunity is the Value Added Producer 

Grants Program. It is a program that you created in this Farm Bill 

7

in 2002. I think it is the great success story of the rural development title of the 2002 Farm Bill. I would urge you to reauthorize 

that and strengthen it. Strengthen it by committing $50 million in 

mandatory funding, and strengthen it by putting a clear statutory 

priority on projects that help strengthen small and mid-sized 

farms. 

Now, I am not proposing a means test. I am not proposing something exclusive. I am proposing a priority. When we analyzed the 

grants made under that program under the current Farm bill, we 

found that there are a lot of good projects funded, but when we 

graded projects for their relevance to strengthening small and midsized farms, we found that about 40 percent of the projects were 

graded an F for relevance in strengthening small and mid-sized 

farms. And I think a clear statement of priority in that regard by 

the Congress would really help strengthen that program. 

A couple of other points. One, we think it is vital that we infuse 

entrepreneurship across the titles of the Farm Bill. It is not just 

a rural development title issue. 

For example, in the research title, I would encourage you to include a program that provides mandatory funding for grants to be 

administered by the existing USDA rural development centers in 

places like Iowa State and Penn State, that they could turn around 

and then make grants to educational institutions, be they community colleges, be they the extension service—perhaps high schools, 

to provide entrepreneurship education to adult learners and to 

youth. The most exciting things I have seen in entrepreneurship in 

Nebraska is that we now have high schools that are teaching entrepreneurship. 

You know, that is a big deal to me, because our schools work 

pretty well in rural areas. They certainly do in rural Nebraska, and 

rural Iowa, and a lot of rural communities. But you know, I kind 

of sense that, over the years, we have taught a lot of young people 

to leave. And what we are doing with these programs now is, we 

will educate you to leave if you want to leave, but if you want to 

stay, we are also going to educate you in a way that gives you some 

of the skills you need to create your own future in rural America 

through entrepreneurship. And to me that is exciting and we have 

seen some great examples of it. 

One last thought I want to leave you with before closing. You 

might ask, those things sound neat, but where are you going to get 

the money for them? And what I would say is this, this Farm Bill 

will oversee about $50 billion a year in mandatory funding, most 

of it to address very real and very immediate needs. But if this 

Congress could just carve out 1 percent of that money to help create a future in rural America, $500 million a year for entrepreneurship, it could set off a wave of new opportunities in rural America 

that would result in, the next time you do a Farm Bill, maybe not 

having so much need for immediate assistance. 

So thank you and I appreciate your time. 

[The prepared statement of Mr. Hassebrook can be found on page 

79 in the appendix.] 

Chairman HARKIN. Mr. Hassebrook, thank you very much for 

your statement. Again, I thank you for all your leadership for the 

Center for Rural Affairs and for your many years of working with 

8

us here and testifying. And thank you also for all the help you gave 

us on the 2002 Farm Bill. 

The ideas that you just rolled out are very provocative and I am 

sure we will have questions about entrepreneurship and how you 

teach it and who does it. I think I know it. I do not know how to 

define it and how to do it, but kind of a, I will know it when I see 

it kind of thing. So maybe you can help us think through how we 

carry it out. 

Next, we will turn to Mr. Vernon Kelley. He is Executive Director of the Three Rivers Planning and Development District, and 

past President of the National Association of Development Organizations. 

He is the author or father of what is called the Tupelo Miracle 

in his area. 

Mr. Kelley, welcome to our Committee. 

STATEMENT OF VERNON KELLEY, THREE RIVERS PLANNING 

AND DEVELOPMENT DISTRICT 

Mr. KELLEY. Thank you, Mr. Chairman, honorable Committee, 

distinguished staff. I appreciate the opportunity to come today before you as you are considering the rewrite of the 2002 Farm Bill. 

I am probably the only panelist that actually represents rural 

governments and local governments where the rubber meets the 

road and where the pain really hurts, the people that are your constituents and represent your constituents, and I appreciate the opportunity to be here. 

I will warn you, I do not see, so the clock is not going to help 

me. That is the 100 percent truth and not a joke. So if I have to 

stop, you will just have to stop me. 

Chairman HARKIN. You do not mind if Chuck Hassebrook just 

gives you the elbow, there. 

Mr. KELLEY. That would be a tough one, because I am speaking 

from my heart, Mr. Chairman. 

Three Rivers, we cannot claim the Tupelo story, but what we can 

claim unquestionably is partnership building. We work for eight 

counties, and the local governments were created in the 1970’s, and 

I have over 30 years experience in economic development with local 

governments and rural governments. 

We have built an area in north Mississippi, if you stick a pin in 

the center of it and do a 50–mile circle, there are more manufacturing jobs historically there in that 50–mile circle than anywhere 

else in the State of Mississippi. We have done such by becoming 

the upholstered furniture capital of the world. We are now facing 

foreign competition, and in the last decade, have lost over 10,000 

jobs in my region, in manufacturing jobs. 

And since July, and our workforce partnership that serves 27 

counties as partners with the community colleges, businesses, and 

industry, as well as local governments in promoting workforce and 

on the job training—we have lost over 3,000 jobs. That is in 7 

months. 

Rural America is suffering, and we are suffering in our end of 

the State. We have been partners in several successful endeavors, 

and I think partnerships are the only way to accomplish it. As one 

of our board members on our Regional Solid Waste said so effecVerDate 0ct 09 2002 12:37 May 21, 2007 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 C:\DOCS\34742.TXT SAG2 PsN: SAG2
9

tively 1 day before his council in Tupelo, our largest city of 30,000, 

‘‘If I have to depend on the gates around on the city of Tupelo to 

make a living selling boats, I can close my office. I depend on the 

region.’’

We not only have to depend on the region now, but we compete 

nationally and globally. If you have read The World is Flat, you understand that what now happens across county lines happens 

across the oceans. We are successful in putting these partnerships 

together. We are the only region that I am aware of that has community colleges that serve as our one-stop coordinators and centers 

in our workforce area. We are very pleased that they are our partners. And without partnerships and building in the region, of your 

businesses and your colleges, as well as your local governments, 

you cannot be successful. 

We put the first regional landfill together owned by local governments in the South. And 6 years consistent we have had the same 

tipping fee with local governments, industries, and businesses all 

paying the exact tipping fee, as opposed to private facilities where 

local governments get a bargain and they rake small businesses. 

We are proud of that partnership. We have put a partnership together in businesses with our lending. Thanks to IRP and some 

rural development assistance, as well as other Federal programs, 

we have, since 1985, made over $69 million in loans in our region, 

with over 11,000 people working there today in these loans. During 

this 21–year period, we have less than 1.5 percent loss rate over 

the combined total. 

We work with our banks, because without them we could not be 

successful. With these banks, we double that money, because we 

are always in a second lending position and made the banks our 

partners in economic development. 

One of our newest ventures in partnership is called the DUL Alliance. It is three counties and three municipalities that have ignored local boundaries and crossed lines in expenditures and revenue advantages, putting together a mega-industrial site to seek a 

major impact in industries such as an automobile facility. It is now 

one of the top five sites in the Nation by the consultant’s recognition, and we hope to be very successful to help offset some of this. 

The point I am making is it has got to be in rural America regionally. No longer can the 5,000 town compete because it is not 

competing against the 10,000 town. No longer can rural America 

compete with the Atlantas, and the Memphises, and the Nashvilles 

individually, they have to group together. 

Mr. Chairman, I would like to request that this Committee continue its efforts on the Rural Strategic Investment Program, an 

outstanding concept, and you are to be commended for it—and to 

broaden it, and expand it, and hopefully initiate this nationwide. 

What I would also like you to consider in the Farm Bill rewarding partnerships—and I am going to have to go quick—rewarding 

partnerships where local governments work together. I want you to 

consider the infrastructure nationally, as almost all local government programs are loans. Where Federal Government grants go to 

major metropolitan areas, my local governments are having to borrow it and pay it back. 

10

And Mr. Chairman, I wish the Committee would consider the 

structure of economic development in rural agencies similar to 

mine that have been very successful with nominal financing 

throughout the years in helping the local governments join together 

and be successful in economic development. 

Mr. Chairman, I appreciate the opportunity. I wish I had an 

hour to talk to you, because my heart bleeds and loves rural America. God bless each of you for your efforts in helping rural America 

and your constituents back home, and God bless America. 

[The prepared statement of Mr. Kelley can be found on page 89 

in the appendix.] 

Chairman HARKIN. Well, Mr. Kelley, thank you very much for 

your profound statement, and also for the written statement, which 

I had gone over last evening. And thanks for being here today. 

Now we turn to Ms. Mary Holz-Clause, Co-Director of the Agriculture Marketing Resource Center at Iowa State University, and 

as I said, Associate Vice President for Extension, and Director of 

The Value Added Agricultural Program and Agriculture Marketing 

Resource Center. 

Welcome to the Committee. 

STATEMENT OF MARY HOLZ-CLAUSE, CO-DIRECTOR, AGRICULTURAL RESOURCE CENTER, IOWA STATE UNIVERSITY, 

AMES, IOWA 

Ms. HOLZ-CLAUSE. Thank you very much, Senator Harkin, and 

all Senators, for the opportunity to talk with you this morning. 

In addition to a few other of those titles, my husband and I are 

also family farmers in west central Iowa. I am going to speak with 

a lot of passion and from the heart when I talk about the Value 

Added Producer Grants today. They really are making a significant 

impact in rural America. The more than 46 farmer-owned ethanol 

plants in the U.S. are fueling our Nation’s energy supply, and the 

95 biodiesel facilities are making a significant difference. 

However, we all know a lot about the excitement of the renewable fuels, but I want to talk about some other Value Added Producer Grants recipients. One of those is a farmer in central Iowa. 

His name is Kelly Biensen. Kelly raises certified Berkshire pork 

products and markets those on both coasts. Kelly received a Value 

Added Producer Grant a couple years ago, and just last year, to 

give you an example, he and the other 20 pork producers in Iowa 

are just getting commodity prices, and an additional $1.6 million 

because of the assistance that they received from the Value Added 

Producer Grant. They used the VAPG money to leverage and work 

in market development. This is an example of the impacts that are 

happening in rural America with the Value Added Producer 

Grants. 

Another couple of example a Value Added Producer Grant is 

being used by a Texas marketing group that are now doing a value 

enhanced into a market that did not exist for them prior to receiving a grant. They used their funds and developed a market in Mexico. 

A California cooperative group, created a tracking system so they 

were able to further develop their export market for raisin products. 

11

The stories go on and on, and you can look at those in the official 

comments. Our producers have, for the most part, have some pretty 

marvelous examples of how they have taken those funds and leveraged that money to further develop either markets or coming up 

with new market strategies. 

For instance, many ethanol producers have used funding from 

VAPG to develop hedging scenarios so that they can assure that 

they can be successful in the future. The program has made a significant impact on the farmers and the rural communities out 

there. 

Closely tied to the Value Added Producer Grants is the Agricultural Marketing Resource Center. The Agricultural Marketing Resource Center is a virtual value added center, which means that it 

is all web-based. And on that website, generally there will be 

around a million to two million hits per month of farmers who are 

coming on and getting information, information on how to do business plans, feasibility, marketing studies. There is also background 

on about 250 different commodities and products. So this Agricultural Marketing Resource Center is truly a center for the whole 

United States. 

We have had inquiries on how to increase the market development for pomegranates, and how to develop quality management 

systems for wild salmon fishing in Alaska. Armed with the resources that we have, and partnering with the University of California, Davis, and Kansas State University, our producers are getting the assistance they need. We are working very closely either 

with service providers or producers in your States to answer their 

value added questions to explore or helping producers. 

Some of the studies that are going on right now include looking 

at the economics of producing ethanol from sugar beet pulp. Another one is looking at the impact of the current state of innovations and competitiveness for bioenergy in California. Researchers 

at Tuskegee University looking at the opportunity for meat goat 

production in the United States. The University of Nebraska is 

doing a project right now on specialty cheese production and looking at that marketing opportunity. 

At the Agricultural Marketing and Resource Center, we have 

tried to focus it so that it is there for all U.S. producers and farmers. I have included in my testimony some quotes of people who 

have used the Center. I thought one that was particularly interesting was a wine grower who had been growing and been involved 

in the wine business for 27 years. And he wrote to us after we had 

created a winery financial area, and he said, ‘‘Thank goodness. Finally somebody is putting that together.’’

And that is what the Agricultural Marketing Resource Center 

really wants to focus on, is to have those tool, those things, that 

producers need. If you go on the web, there is much information 

about production. We have done a wonderful job through our extension services and others of telling people how to grow things, but 

what we really want to focus on is, how do we turn that production 

into viable markets? 

In conclusion, as I mentioned at the very beginning when I 

talked about the pork group, as I told you, they had made some 

significant metrics—$1.6 million additional money last year, but 

12

what was really amazing is perhaps a little harder to quantify. It 

is what the group has learned about the business, and marketing, 

and about themselves, and the attitude now that they say, you 

know what? There is a future out there in rural America. We can 

do this. We have the skill sets. We do have the confidence to go 

forward and do that. 

So I know that you are going to be very busy, and have many 

questions, and many deliberations, and many demands put upon 

you, but I would encourage you to ensure the seamless continuity 

of this program—the Value Added Producer Grants, and encourage 

you both to reauthorize the Value Added Producer Grants in the 

next Farm Bill, and provide full authorized funding right now for 

the upcoming appropriation process. 

Thank you very much. 

[The prepared statement of Ms. Holz-Clause can be found on 

page 84 in the appendix.] 

Chairman HARKIN. Thank you very much, Ms. Holz-Clause, for 

being here and your great statement. 

Now we will turn to Mr. Sertich, President of the Northeast Minnesota Higher Education District, and Chair of the Rural Community College Alliance. 

STATEMENT OF JOE SERTICH, CHAIR RURAL COMMUNITY 

COLLEGE ALLIANCE, CHISHOLM, MINNESOTA 

Mr. SERTICH. Chairman Harkin, and members of the Committee, 

I thank you for the opportunity to testify today. 

As we heard in the gracious introduction by Senator Klobuchar, 

I am Joe Sertich, President of the Northeast Minnesota Higher 

Education District in Chisholm, Minnesota. The district consists of 

five comprehensive community colleges in six towns: Iron Rapids, 

Eveleth, Virginia, Ely, International Falls, and Hibbing. 

What Senator Klobuchar did not say is, long before she was a 

U.S. Senator, we recognized her father as an outstanding alum of 

Vermillion Community College in Ely. 

Ely, by the way, some like to think of as the end of the road. The 

people there call it the beginning of the road. As a matter of a fact, 

if you were to walk out the backdoor of our college and walk to the 

North Pole, you would cross one tarred road, and that would be the 

Trans-Canadian Highway. So it is remote. It is rural. 

We also have had an opportunity, thanks to the Rural Renaissance Initiative of Senator Coleman—and thank you for your welcoming comments, Senator—to host two town meetings, one in 

Hibbing and one in International Falls where the Senator comes 

out and utilizes us in the way we see us as a community center. 

I am also privileged to serve in the elected position as Chair of 

the Rural Community College Alliance, a membership organization 

of over 100 rural community colleges, advocating for the 957 rural 

serving community college campuses across this country. 

The Arrowhead region of northeast Minnesota, including the Iron 

Range has relied on a natural resource-based economy for over 100 

years. In the early 1980’s, mining accounted for 50 percent of the 

jobs and 60 percent of the income in northeast Minnesota. Today, 

mining represents 10 percent of both. 

13

Seven years ago, massive layoffs occurred. Higher education saw 

these developments as an opportunity to serve as a catalytic intermediary for the region which was ripe for change. At the same 

time, community colleges saw the need to pool their resources to 

save administrative costs. The Minnesota State Colleges and Universities Board of Trustees chose to create the Northeast Higher 

Education District effective October 1st, 1999. The mission is to 

provide quality higher education to the communities throughout 

northeast Minnesota by developing a regional structure that will 

preserve college autonomy, but will also align programs and services to better prepare residents for learning, employment, citizenship, and life. 

We quickly realized that new governance for rural northeast 

Minnesota must go well beyond the community college. By seeking 

new partnerships with the region’s business and governments we 

created a new commitment to the future of the region. 

The Northeast Higher Education District was selected as one of 

36 participants in the Ford Foundation-funded Rural Community 

College Initiative. 

The Blandin Foundation provided inter-community leadership 

development and startup financial resources to the Itasca Technology Exchange in Grand Rapids. The Northland Foundation was 

an initial investor to brand this regional initiative as True North. 

Iron Range Resources share a workforce development position with 

the District, because workforce has been identified as a major challenge in the region. 

These are examples of how a region must work together to survive in this global economy, based on local assets and strategic investments. Technology was used as a tool to create living wage jobs 

across the region. In addition to attracting Blue Cross Blue Shield 

to the region, new healthcare training programs have spurred new 

investments by healthcare providers. And a heavy emphasis on creating new information technology firms, the business community is 

plugging gaps in the region’s support network for new businesses. 

This technology strategy was in direct response to outsourcing 

and offshoring Minnesota companies and others across our country 

were moving toward. Our goal was to create insourcing opportunities, proving our rural regions could compete. 

In northeast Minnesota, we referred to insourcing recruitment 

strategies as ‘‘lakeshoring,’’ which highlights the quality of life benefits available to workers seeking employment in information technology fields. 

Eight years later, our economic health has improved with new 

economic projects under development. Rural community colleges 

throughout the country are taking more proactive roles in developing their communities and regions, and most of these institutions 

are 2–year granting community colleges. 

A new international collaboration was formed in 2006 when representatives from the United States and Canada came together to 

identify common approaches to rural issues. My rural Community 

College Alliance colleagues are also members of the American Association of Community Colleges, and we work to coordinate our efforts together. 

14

Because community colleges give students the skills desired by 

local industry, they have become the educational institution of 

choice for many rural businesses. Rural communities must not be 

left behind. Community colleges are in a unique position as placebased institutions utilizing their capacity to serve and assist rural 

regions. 

Across rural America, innovation driven by entrepreneurial 

thinking must be encouraged and implemented. Now is the time for 

all regional leaders to play forceful roles in community development. Your rural community colleges are ready to step up and assist in this leadership challenge. 

Thank you again, Mr. Chairman, and members of the Committee, for this opportunity to testify today. I appreciate your continuing leadership, and look forward to answering your questions. 

[The prepared statement of Mr. Sertich can be found on page 98 

in the appendix.] 

Chairman HARKIN. Thank you very much, Mr. Sertich. 

Thank you all for being here today. We will start a round of 5 

minute questions. Five minute or 6 minute? Five minute. Whatever 

it says there, anyway. 

[Laughter.] 

Chairman HARKIN. One of the common themes I hear coming 

from all your testimonies and your written statements is this idea 

that somehow we have got to get away from this, what I call, categorical or silo approach to rural development and the need for 

more framework that is regional in nature that will leverage existing funding of Federal, State, local, private, philanthropic. 

That all is very good. We have tried some regional approaches in 

the past. We have had regional councils of governments and things 

like that, and I am not certain it really worked very well. We have 

had some of these things in the past, since I have been on the Agriculture Committees, but nothing ever seemed to be the glue that 

held everything together. 

And so, as I go down the line, I just want to say, what one or 

two things come to your mind right away, that could we do differently than what we have done in the past that would foster this 

kind of regional approach? 

What programs need to change from how they do it right now? 

What do we need to do on the ground? Just give me one or two 

things that leap to your mind that—if you could write Farm Bill, 

what would you change to make that regional approach work? 

We will start with Chuck Fluharty. 

Mr. FLUHARTY. Mr. Chairman, I am just a farm boy from Appalachian Ohio, fifth generation on the farm. I love agriculture in my 

soul. I spent a lot of years in an agriculture association as an executive. 

Mr. Sertich’s testimony is very instructive. In my area of eastern 

Ohio, we lost our mills, we lost our mines, and our small farms 

could not compete. We did not have the regional framework Mr. 

Sertich talked about, and our region lags horrible. 

Let me just share with you what we are competing with. The European Union, each year, spends a billion dollars on something 

called the LEADER Program, and that is a French acronym, but 

15

it essentially links agricultural commitments to regional strategies 

for shared investment. 

It is a billion a year, and working in OECD countries, Mr. Chairman, you can see in the dirt how that works. The private sector 

links to philanthropy and it links to sub-regional development. 

The key seems to me to be the shared investment strategy. And 

everyone here has talked about a model in which funding streams 

come together. I will say three things: 

As I shared in my testimony, our rural development programs 

are excellent, but they do not have a vision. We do not have a policy goal right now in rural development. We have great programs. 

They are successful. If our goal is regional support, we are going 

to have to change a bit how we fund programs, because we are 

going to have to incent regional leadership to do this. It is a new 

model. It is working in a lot of regions simply because the private 

sector did it. I would argue that we need to think systemically 

about how we do that across rural America. 

I think our Governors, I think our legislators, and most of our 

sectors are trying to do this. It is simply not been integrated, Mr. 

Chairman. 

Chairman HARKIN. Well, again, we need some advice from all of 

you. You are the experts on what programs we need to change. 

Mr. Hassebrook. 

Mr. HASSEBROOK. Well, what I would say is put some money 

into—put some money into leadership development at the grassroots level, and engaging people in each small town in this process, 

because if you put together a regional plan, but the people involved 

in it are just agency folks and regional leaders, and you do not 

have leaders in each community that are invested in that and take 

it home and live it, that will not work. 

So that is the key to me is, how do you engage local people in 

the local small communities. 

Chairman HARKIN. Mr. Kelley. 

Mr. KELLEY. Thank you, Mr. Chairman. 

I partially disagree. I think it has worked in areas. I think it has 

worked in north Mississippi. And I think our Senator Cochran coming from the senior center would acknowledge that. 

But I think what has to happen is fund the program. Turn 

around and give some credit for partnership. Cannot do it by themselves, Pontotoc cannot compete with the work by themselves. They 

cannot put internet services throughout the region by themselves. 

Right now, there are no incentives toward working together. In 

fact, it is almost a disincentive, as well as the incentives, grantwise, to carry out plans are in metropolitan U.S.A., now it rural 

America where most of the RDA programs are loan programs. 

My water and sewer systems are just totally depreciating [sic] in 

our small towns when all they can get is loans, where metropolitan 

areas get $3 billion a year in grants, CDBG, that they can 

prioritize and work within the existing system of EDA districts like 

myself that have proven over the years that they can build partnerships and work, and build the partnerships between local governments and community colleges. 

16

Chairman HARKIN. Yes. I think we really need to take a look at 

what you have done down there. I am not familiar with it, but I 

think we really need to take a look at it. 

Ms. Holz-Clause. 

Ms. HOLZ-CLAUSE. One very specific program that I think would 

be a relatively easy fix is that Rural Cooperative Development Center funding is only for 1 year at a time. And what this group does 

is, these Rural Cooperative Development Centers, help people, and 

they go after these on a competitive bid, but they help businesses 

develop business plans, marketing plans. As many of you know, 

you cannot develop a business in a year time period, and so just 

in that situation, just allowing them to be able to have at least a 

2–year time period to expend their money for the Rural Cooperative Development Center would allow those centers to be around 

for at least 2 years, to stay with businesses, and help them develop. 

But that is a relatively simple thing and can make a big difference, 

because there will be staying power there.21Another one is, I 

guess, just providing funding for some things. For instance, the 

Northern Great Plains Economic Development Authority was authorized, but that never got any wings underneath it. And that 

would have allowed for a regional approach to economic development. So perhaps just being a little more aggressive about what is 

already in there and making sure that it is being enforced. 

Thank you. 

Chairman HARKIN. My time has run out. Mr. Sertich, I will get 

you in my next round. 

Senator Chambliss is unable to attend. He has another Committee and would like to have his statement entered in the record, 

and that will be done without objection. 

[The prepared statement of Hon. Saxby Chambliss can be found 

on page 39 in the appendix.] 

Now, this is the order that I have: Senator Nelson, Salazar, 

Casey, Klobuchar, Thune, Lugar, Coleman, Lincoln, Cochran, 

Brown. 

Senator Nelson. 

Senator NELSON. Thank you Mr. Chairman. 

Mr. Hassebrook, as you mentioned, the Nebraska Micro-enterprise Partnership Fund has worked well in Nebraska. What has 

been done to really connect it with goals and a vision as to what 

we want it to accomplish? How do we connect the program in Nebraska to a vision for rural Nebraska, and how has that worked to 

bring in grassroots acceptance and partnerships? 

Mr. HASSEBROOK. Well, I think the key has been that the Nebraska Micro-enterprise Partnership Fund has had an active board 

that included broad representation. It put together plans and priorities in terms of how they want to drive this out, and then made 

sure that they did a good job of funding programs that reach across 

the State. 

This program has been a success. For example, I mentioned that 

last year it served 4,000 businesses. Well, those 4,000 businesses 

are responsible for keeping and, maintaining, and creating 7,500 

jobs, and they were served at a cost of $330 a job. Now, to anybody 

doing economic development, $330 a job is a bargain. 

17

And so I think the key has been, again, the broad board that sets 

goals, sets strategies, and then keeps the focus on small entrepreneurship. 

Senator NELSON. I appreciate your pitching the bill which I am 

introducing today, which I hope some of my colleagues will take a 

close look at. Can you give us some idea of how that would work 

and how we have taken the experience in Nebraska to try and 

apply it to a broader base? 

Well, the bill that Senator Nelson is introducing is a bill that essentially works through intermediaries. It would fund programs 

that could be run by public institutions, they could be run by nonprofit corporations, what have you, around the country, who would 

then turn around and provide loans, training, and technical assistance to micro-businesses, businesses with fewer than five employees. 

And I cannot stress enough the training and technical assistance, 

because in our experience, when Central Affairs runs one of these 

programs, we make loans, but in fact the business planning that 

we help people do enables them to get twice the volume of loans 

from banks and other lenders than we actually lend. So it is really 

the training and technical assistance to these businesses that is 

most helpful. 

And the last thing that I think is really critical about this bill 

is that, if you just put the money out there for existing programs, 

there are some States in some areas of the country that do not 

have programs and would not be served. So one of the most important features of this bill is that it creates a program that would 

provide assistance that would help new programs get started in 

areas that are currently underserved, which I think is critical. 

Senator NELSON. And it is not overrun with staff, right? 

Mr. HASSEBROOK. In fact, there is very little staff. There is about 

one-and-a-half staff in the Micro-enterprise Partnership Fund in 

Nebraska. 

Senator NELSON. You might think we rehearsed this in advance, 

but we did not. 

[Laughter.] 

Senator NELSON. I just learned a long time ago that it is better 

to have somebody else qualify your expert witness. 

As you look forward to the future, what other kinds of programs, 

you mentioned one or two—what other kinds of programs would attach vision to what you are attempting to try to do? In other words, 

what kind of achievable goals can you set, and then measure success toward those goals, as we have in this program? 

Mr. HASSEBROOK. Well, are you talking about the program that 

you are proposing? 

Senator NELSON. Well, any other program that might—I think 

you mentioned about $500 million across the board. 

Mr. HASSEBROOK. I think the key is that we have to measure the 

number of opportunities that we are creating, and then we need to 

measure the quality of those opportunities. 

Again, for example, one way you measure is you look at how it 

has impacted people’s lives. The program in Nebraska, the Microenterprise Partnership Fund, when we analyze the businesses that 

have participated, and their situation going into the program, and 

18

their situation 3 years later after participating, we found that their 

business assets had grown substantially, their personal assets had 

grown substantially, their incomes had grown substantially. 

And that is the kind of measure that you need to do. You need 

to look at how many jobs you are creating, whatever the program. 

I cannot stress enough self-employment as being one of the best 

forms of jobs. But then you have to look at how it impacts people’s 

lives. Are their lives better as a result? And I think that is a key 

to measuring success, because we want to create quality opportunities that help people build assets and improve their lives. 

Senator NELSON. The goal is to get them in a position where they 

can go borrow money themselves through the commercial banking 

and lending arrangement to where they have made their own income, they have their own profitability as well as the quality of life 

combination; is that accurate? 

Mr. HASSEBROOK. Exactly, and, in fact, banks see this program 

in Nebraska as a great asset, because, first of all, the loans made 

through this program cannot be made to people who could get a 

loan from a bank, but what they do is they create a pipeline of customers by helping new businesses start. They create a pipeline of 

new customers for the banks. 

Senator NELSON. Thank you, Mr. Chairman. 

Thank you, Chuck. 

Chairman HARKIN. Thank you, Senator Nelson. 

Senator Salazar. 

Senator SALAZAR. Thank you very much, Chairman Harkin. 

And thank you, for the witnesses, for your testimony here today. 

I have a comment and then a question to Chuck, and then to Ms. 

Holz-Clause. First let me just say that I think that, for all of us 

who sit on this Committee, this is a great opportunity for us to 

focus in on that part of America which is really, in many ways, a 

forgotten America. 

I would imagine that for the last 50 to maybe 100 years people 

who have sat on this Committee have taken a look at the Farm Bill 

as the opportunity to address those areas of our country which continue to struggle on the vine. 

I know in my own State of Colorado, even though the 1990’s 

brought a big boom to our State, it was really confined mostly to 

about 12 of the 64 counties, which meant that the rest of the State 

was in decline, while overall, the State appeared to be doing very 

well. And I think with most of my colleagues here we have that 

kind of reality in the States that we live in. 

My question to you, Chuck, is, first of all, with respect to the disparity in funding that our government provides to metro areas 

versus rural America, you said that it is a $550 disparity. To me, 

that is unconscionable. How is it that we can create support for our 

people in this country and then to have this disparity that you 

have described. My question to you is, how do we fix that? I would 

like you to be as specific as you can on that. 

Mr. FLUHARTY. Sure. 

Senator SALAZAR. And my question to you, Ms. Holz-Clause, has 

to do with Agriculture Value Added Programs. Obviously it was 

part of the 2002 Farm Bill. It is something that you described as 

working well in your community and your experience. We have 

19

been talking about Value Added Programs, and many places you 

might say for a very long time, and it seems like we have had some 

affect, but I think there is a lot more that we might be able to do. 

So my question to you is, how can we take what we have and 

improve upon it and make it more effective? 

Chuck, would you go first? 

Mr. FLUHARTY. Thank you. I am going to come back to systemic 

issues, because I think there is a solution. The most recent data 

is a $300 disadvantage, just for community and economic development, per capita. Just run it out times 90 million rural Americans 

and you see the challenge. 

Part of that is the CDBG formula, in which MSAs get a place entitlement. There are a lot of maps in my testimony. Let me tell you 

why they are important. 

There are 40 million rural citizens in your MSAs. Those rural 

citizens are not eligible for your non-metropolitan grants for entrepreneurship. In CDBG moneys in those MSAs usually go to your 

urban and suburban areas. We have 40 million potential entrepreneurs trying to get ahead, who you do not target at all right 

now with CDGB, first thing. 

Second, the purpose of a systemic commitment would be for this 

Committee to finally say this disadvantage will get addressed, but 

it gets addressed to advantage the programs these panelists are 

mentioning. 

Senator LUGAR IS HERE. I will just give one great example. The 

State of Indiana, and it is to Chuck’s point of how we integrate research with the various titles in the bill. The State of Indiana has 

engaged in a phenomenal enterprise, as Martin Jiske, the President of Perdue, created a Center for Regional and Rural Innovation, and a discovery park. The administration in Indiana created 

a Center for Rural Affairs. They took general revenue money and 

linked their small city CDBG which Governor Nelson did a phenomenal job of linking for regional collaboration when he was Governor of Nebraska. 

Fire trucks are very critical. First responders are very critical. 

But the bottom line is, if small city CDBG gets eaten up by an entity over time and we never get scale, we cannot build budgets. We 

cannot build long-term investment plans regionally. It is a structural failure right now in how this government invests long-term 

in the 90 million people in rural America that want to build a business. It is a structural failure. 

Senator SALAZAR. I would appreciate you working with us as we 

move forward on the Farm Bill to address that disparity. 

Mr. FLUHARTY. I appreciate that. 

Senator SALAZAR. Will you address the Value Added Programs? 

Ms. HOLZ-CLAUSE. Thank you, Senator. 

Certainly, as I look at the Value Added Producer Grants that 

have gone to Colorado producers, I was going to say there have 

been some, but there have not been as much as other regions of 

the country. And I think it goes back to what we talked about at 

the very beginning, and that is that we have to create a culture of 

entrepreneurship. We need to be starting that discussion and we 

need to be having entrepreneurial education in our high schools so 

that we are creating a long-term attitude among our producers, 

20

among our farmers, through our FFA programs, through 4H, to encourage that entrepreneurship. 

And then from there, too, is having a greater infrastructure in 

place. For instance, your cooperative development center in Colorado is the Rocky Mountain Farmers’ Union Center. Again, I told 

you, thy are just going year-to-year with funding. And so what we 

need to do is have a more systemic service providers there through 

the extension service and so forth that are funded that can help 

producers to really imagine what the possibilities can be. And so 

I think we—what I was going to say is that we have to develop a 

lot stronger infrastructure than we have in place: stronger SBDCs, 

Small Business Development Centers, stronger EDA Centers. 

And again, part of that is education and full funding of a lot of 

those programs that are probably in existence now. 

Thank you. 

Senator SALAZAR. Thank you, Mary. My time is up. 

Chairman HARKIN. Senator Casey. 

Senator CASEY. Mr. Chairman, thank you very much for putting 

this panel together and for this hearing. I want to thank those who 

have testified already for your insight and for the real world experience that you bring to these issues as we do our work on the reauthorization for the Farm Bill. 

I have a couple of questions. I did want to put, and I will submit 

it for the record, but as a highlight, of some of the recommendations that were made by the Pennsylvania Department of Agriculture. We all have to bring our States into these hearings. And 

I just wanted to highlight a couple of the recommendations that the 

leadership of our State has provided. 

One of the recommendations, and I ask the panel members to 

react to this in addition to the question I am going to ask, one of 

the recommendations was a single definition of ‘‘Rural community,’’ 

that can be applied to all rural development programs. 

The second one is creating a new rural tourism development subtitle. 

Third, and I know other States may have these priorities as well, 

funding projects in non-rural areas if the primary beneficiaries of 

the projects are rural citizens. 

So they are among recommendations that come from my State, 

and I would ask you to respond to that. And then the second, the 

basic question I have though—well, maybe two, if I have time—revolves around access to capital, and I know that has come up in 

different ways, generally, but in particular, if you could speak to 

the question of access to capital in the context of health care, because one of the problems we have had in Pennsylvania is, other 

than Philadelphia, and Pittsburgh, and some of our major urban 

areas, and their being the two, we have a State of a lot of rural 

communities and a lot of small towns. For them to go to the 

marked and borrow money for a new MRI machine, or some kind 

of new technology, or some kind of expansion of their hospitals it 

gets very difficult. I also want to talk about cuts, but we will get 

to that in a moment. 

But if you could respond generally to those recommendations, 

and then second to the question of access to capital either generally 

21

or specifically in the context of healthcare. I will open it up to anyone that wants to jump in, any and all. 

Mr. HASSEBROOK. Well, I would jump in on the question of tourism. I think there are great opportunities in tourism in many 

places rural America, in part, in the 21st Century, access to 

uncrowded, natural space is going to be a premium. And I think 

that one of the things that we need to think about in this Farm 

Bill is, as we design our conservation programs, to design them in 

ways that get multiple benefits, including rural development benefits. 

So for example, we are talking about a cooperative conservation 

partnership initiative that would provide the opportunity for communities to partner with USDA. So for example, if they want to 

use natural space as an asset to draw more tourists and support 

more businesses in their community, that would be considered by 

USDA, and there might be some additional incentives for landowners to participate and some additional cost-share funds for communities to put that together. I think that is a way that we could 

get more bang for the buck, by designing conservation programs to 

serve multiple ends. 

Senator CASEY. Thank you. 

Mr. FLUHARTY. Senator, just quickly, I caution the Committee. 

There are 68 different rural definitions right now in Federal statute. They are there because, in different sectors, unique needs need 

addressed. One of the challenges I see is, if we build rural regional 

from this Committee, we will fail. It needs to go into the dirt and 

be rational. 

There are different rural regions. As I said, rural America does 

not exist. There are very, very diverse rural Americas. What is 

going to work in South Dakota is not going to work in Pennsylvania. 

Second, in terms of capital, it is essential that we get linked 

funding flows. Under Secretary Dorr makes a phenomenal point, 90 

percent of rural America’s lands have equity at that level. 

Now the question is, how do we move those to common investment strategies that makes sense for those people in the dirt. It 

can be a patient capital fund. The challenge is, when you look at 

new markets, the banks have not been able to get that money on 

the street as well as the VC and entrepreneurship firms have. We 

need flexible markets to allow regions to express in everything 

from local food systems to heritage in the arts, the way to go do 

that. 

There is capital out there. We are not pulling it out. And, in that 

regard, what community and regional foundations are, in terms of 

match for seed capital development, is a phenomenal opportunity, 

to Senator Harkin’s case that philanthropy can cede a great deal 

of this in regional models to start it. 

Senator CASEY. Thank you. 

Anyone else on those? 

And the last question—oh, I am out of time. We will talk about 

cuts another time, Mr. Chairman, but I am sure that will go longer 

than 15–16 seconds, maybe. 

[Laughter.] 

Chairman HARKIN. Thank you. 

22

Senator Thune. 

Senator THUNE. Thank you, Mr. Chairman. I appreciate you 

holding this hearing. Thank you, panel, for your excellent testimony and insights. 

This is an issue which I am extremely interested in. And if you 

look at what has happened in the last several decades, in the middle of the 20th Century, nearly 40 percent of the rural population 

lived on farms, and about a third of the rural workforce was laboring in production agriculture. 

Currently, we have fewer than 10 percent of rural people living 

on farms, and only about 6.5 percent of the rural workforce is directly employed in farm production, which means we have a lot of 

people in rural areas no longer living on farms or deriving their 

livelihood from farms, although I would argue they all do indirectly. 

And what we are facing in my State and a lot of other States is 

just chronic out-migration of young people. We are just losing 

them, and that is our greatest resource. 

And what is left behind is 340 of our Nation’s 386 persistent poverty counties are in rural America. So we have got some very difficult economic conditions in that part of that country. And I believe be that part of the focus of the Farm Bill ought to be, how 

do we revive and bring rural America back to vitality? In addition 

to the things we do with the commodity title of the Farm Bill and 

things that directly impact agricultural production. 

But I have a couple of questions that I would like to pose in that 

regard. One has to do—the Value Added Producer Grants Program 

was something that—that was an amendment I offered to the 

House version of the Farm Bill in 2002. It seems to me, at least, 

that there have been some good projects that have been funded 

under that, but I guess the question that I have, and perhaps Ms. 

Holz-Clause can answer this, is are there, other than the issue of 

funding, which is obviously an issue that we have to address—are 

there statutory changes that can be made to that program that 

would make it more effective? 

Ms. HOLZ-CLAUSE. Again, I would go back to—one of the statutory is to look at having a longer time period for that money available for the producer recipients. Oftentimes, that has a year to a 

2–year time limit on that. As you know, business development oftentimes takes longer than that. And so we are not able to maybe 

see and quantify the types of results that are there, because the 

producers are required to use that money within a short time period. And so I think that could allow for more judicious use of that 

funding. 

Another area is perhaps putting, when people are recipients of 

that, requiring some types of education, perhaps board education, 

so that all the board members understand their fiduciary responsibilities. 

Again, there have been some magnificent results from that program. There have also been some that are not as successful. So 

what can we do to help educate those individuals who are in that 

business? And again, part of it, too, is, I think if we look longer 

term now we have seen more successes recently. When the program was young, I think both producers did not understand, perVerDate 0ct 09 2002 12:37 May 21, 2007 Jkt 000000 PO 00000 Frm 00026 Fmt 6633 Sfmt 6633 C:\DOCS\34742.TXT SAG2 PsN: SAG2
23

haps, the program, and some of the value added businesses maybe 

were not ready for applying for the money when they did. 

And so now that the program has been in existence, producers 

look at that and say, well, our business is not quite ready for it this 

year. We will wait until next year. Which then enhances and increases the success that they will use that money judiciously and 

wisely, and also better market development. 

So those are a few suggestions I would have specific to that program. Thank you. 

Mr. HASSEBROOK. I would place a priority on projects that 

strengthen small and mid-sized farms. Perhaps set aside a small 

percentage, 10 or 15 percent, for projects that address the needs of 

beginning farmers, minority farmers. Put a small amount of money 

toward outreach and assistance, because oftentimes small groups of 

producers who are not trained to write grants have a hard time 

getting access to the program. 

And one last thought on that, maybe a modification allowing up 

5 or 10 percent of the funds to be used for innovative projects that 

strengthen family farms, but are not technically value added. 

For example, there are groups of farmers in Iowa trying to put 

together machinery cooperatives, because by owning equipment together, mid-sized farms can get their machinery costs down to levels of big farms. They need some help to do that, though. It takes 

some legal help in different things. And if we could use just a little 

bit of this money for say, any innovative idea out there to strengthen family farms, whether it is technically value added or not, that 

would be good. 

Senator THUNE. Eighty-eight programs and 16 agencies that target rural economic development—it has already kind of been mentioned—in this Farm Bill, is there a way, and I know there are jurisdictions that run the gamut of this when it comes, but it just 

seems like, if you are somebody who wants to access some of this 

assistance, you would not even know where to start, really. 

Is there a way that we can bring some efficiency and structure 

in a place where people could do one-stop shopping, for lack of a 

better phrase? 

Ms. HOLZ-CLAUSE. That is an excellent idea, and actually, in the 

Agricultural Marketing Resource Center, we have started to do 

that, because as we work with farmers we discovered that. So at 

least that is something that is in process right now. 

But you have definitely outlined, kind of, the frustration that 

farmers’ have as they are looking for those opportunities. 

Mr. FLUHARTY. Senator, let me say that it is not just farmers. 

Under Secretary Dorr and the Administration have moved in a significant way by rationalizing the grant formulas. 

But we are working very closely now in Mississippi and Alabama 

with Governor Riley and Governor Barbour in their Department of 

Labor wired labor project with the community colleges of Mississippi and Alabama. That wired project builds regional dynamics. 

Commerce and EDA builds regional dynamics. Rural education 

builds community college dynamics. We have not figured out a way 

to link those flows in a logical cross sector way. 

The reason is rural development does not have a congressional 

mandate to be clearer about advantaging in a regional framework. 

24

Their programs are in stove pipes. This Congress could mandate 

some of that, and I would argue that it should go to other departments, because the people in the ground do not care. They just 

need to link up and do good things. 

Senator THUNE. Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator Thune. 

Senator Lugar. 

Senator LUGAR. Thank you very much, Mr. Chairman. 

Many journalists are beginning to discover the energy transformation in rural America, but it is very difficult for some of us 

around this table to discover this data. 

And I appreciate so much your idea about reasonable organizational, or even State-wide programs, but I just wanted to ask, out 

of curiosity, for any of you who have sources of information or reports that have been written that would help frame these issues. 

For example, ethanol is being produced at least in 15 States from 

corn, biodiesel in many of the same States. However, the promise 

of cellulosic ethanol, as the President mentioned it, could be a 50–

State situation. And in due course, and in arguments about how 

many years and how fast the research, still the possibility of all 

sorts of things coming from farms into energy is likely. 

Now, in addition to that, some have integrated the process. Fair 

Oaks Dairy, in Indiana, for example, 17,000 cows, need a lot of 

farm land for the feed to begin with. They produce a lot of manure, 

and from this comes methane, so they heat, not only their own situation, but prepare it to send back to the electrical grid system, 

and trade, at least, electricity power, and that probably is not the 

end of it. It is sort of the beginning of the thought of how many 

different things can occur on the farm if there is sufficient capital. 

But likewise, a grid system, some place for the milk to go, the integration of all this is tremendously important. 

On the same farm, why, they are putting up some windmills. The 

beginning, once again, of something in which not all States have 

the air current or volume to do this, but many do. 

Finally, let me just ask, is there any research on what this may 

mean to a single county or region? For example, clearly, money is 

coming in to county seats that have not seen very much. Are the 

bank deposits being left there, or in fact are they going somewhere 

else? In other words, is there likely to be a base of local capital 

coming from these situations as there is likely to be—some integration in terms of school finance or hospital finance, if wealth comes 

from new energy resources. 

I say this as somebody who is trying to probe in my own State, 

to sort of trace where the flow goes. It is all so new, and it is very 

different. Some accounts say, after all, not many jobs are created 

by an ethanol plant, maybe 35, 40, 50. So not a huge amount. And 

yet a lot of money is involved, some to corn farmers, for example. 

But I am curious whether any of your institutes are tracing this 

giving us some idea of what the potential is quite apart from the 

actual, which is quite dramatic, because it informs a lot of issues, 

it seems to me, in terms of the political realities of what we are 

talking about today. 

In other words, this is a discovery, on the part of most of America of rural America, of new wealth, new prospects, new reasons 

25

why people stay, why they prosper. Until then, this is a subject 

around this table, and about ended there—plus our witness, but 

now it is more interesting. 

Can any of you inform me of where I can find out more information that you have produced? 

Ms. HOLZ-CLAUSE. Senator Lugar, you certainly have kind of got 

my passion here. And outlined, as you talk about, farms of the future, to be holistic so they are integrated systems and that we are 

using all of these aspects. 

Through our Center for Agriculture and Rural Development at 

Iowa State University we are tracking just exactly what you are 

talking about. I do not have those figures in front of me, but we 

will certainly get those to your staffers. 

As you said, those 35 jobs of ethanol production then reverberate 

with a multiplier probably about 110 other jobs. And we are also 

tracking the difference between the farmer-produced ethanol 

plants, which use indigenous investment versus outside investment, and the impact that is having on demand. I am sorry I do 

not have that for you but I will get that for you. I believe, also, 

they are working very closely with their colleagues at Perdue on 

that project. 

So thanks for asking it. It is really a vision that we have to have, 

looking at that from a holistic perspective. I will challenge all of 

you, as you are looking through the new Farm Bill, though, to also 

think about the impact that this new bio-economy is going to have 

on the infrastructure: the roads, the railroads, and those types of 

things, which are going to be so crucial for our changing bio-economy. 

Senator LUGAR. Yes. 

Mr. HASSEBROOK. Senator, I do not have the data, but I would 

make a couple of notes that are very relevant to the issue that you 

raised. 

One is that, one of the good things about ethanol plants is the 

quality of jobs. When we looked at them in Nebraska, the bottom 

paying job tended to be about $13 an hour, which is a pretty good 

job in rural Nebraska, and that is a positive. 

On the issue of ownership—wealth creation does tend to follow 

ownership. When Congress helped get the ethanol industry started, 

it provided tax incentives for all producers. With oil prices much 

higher now and profit margins much better, I think it may be time 

to consider whether those incentives ought to be targeted to 

projects that are locally owned and keep wealth in the community, 

as well as projects that are producing feedstock in a manner that 

is environmentally responsible. 

Mr. FLUHARTY. Senator, we were doing economic impact analysis 

10 years ago with your office on ethanol. At that time, it was six 

to eight jobs. At the scale now, it is 25 to 30. But the reality is, 

what do we do with innovation to build that into a regional asset 

base? 

Wind energy is going to be in some places, cellulosic ethanol in 

another. The true, deep question is, how do local leaders, when an 

LLC is brought to them, know whether or not that is a wise regional investment? That is where our Research Title and Land 

Grant universities have to come in, with public goods. 

26

These are going to be regional and cross-sectoral challenges, and 

the asset dynamics will be different in ever region. That is why a 

systemic commitment to regional entrepreneurship seems to me to 

be critical and can link to our research universities. 

I do not believe the answers to those questions are there for local 

governments, regional governments, and State leaders, and they 

are all asking this. We just came away from NCSL’s Agriculture 

Committee Chair’s meeting. Every Ag chair in every State in local 

legislatures is saying, where are we with this? It is a huge challenge and the answers are not there yet, but it is a unique opportunity. It will be a regional opportunity, I would argue. 

Senator CASEY. Thank you, Mr. Chairman. 

Chairman HARKIN. Very probing. Thank you, Senator Lugar. 

Senator Lincoln. 

Senator LINCOLN. Thank you, Mr. Chairman. I certainly appreciate your dedication to this issue. And I want to say to our panel, 

thank you so much, not just for the information you bring to the 

Committee, but more important, your passion. 

I am a product of rural America and very passionate about it. 

Mr. Kelley, my great-grandfather was actually a deputy sheriff in 

Yazoo City and his name was Kelley. 

But I think for so many of us that have grown up in Rural America we realize the positive aspects for the future of this country, 

and what it means to reinforce rural America. I know, just in raising my children, I have recognized so much of what I have gained 

growing up in a small community, and now trying to recreate that 

in different environments is enormously difficult. And so it is important that we sustain them in a way that we can keep them 

going. 

Just a couple of comments, and hopefully you will add more. I 

know a lot of what I wanted to talk about and ask about you have 

touched on a good bit. And I know, Mr. Fluharty, and certainly 

anybody else, CRS indicates that there are more than 88 programs 

that are administered by 16 Federal agencies that target rural economic development. 

You mentioned the multiple different definitions of Rural America and how different regions definitely have their differences. And 

I guess some often argue that we focus too much here in Congress 

trying, and sometimes failing, unfortunately, to fund smaller, targeted programs, when perhaps we should consolidated, dedicate a 

larger share of those Federal dollars in a more streamlined and 

flexible set of resources. 

Of course, we talk about CBDG. That is the most flexible money 

out there, quite frankly. And we fight every year in Congress to reinstate those dollars and to make sure they are there and reinforce 

how important they are because of that flexibility. 

Just a little bit more on, and you have already touched a good 

bit, but the patchwork of programs as an obstacle to establishing 

consistent funding streams for regional rural development, or is it 

just that they are underfunded? And incentives for regional approaches, are they more important? 

I know we have created several commissions. The Delta Regional 

Authority, which I am so grateful to Senator Cochran for his hard 

work and consistent dedication to that over the years, because it 

27

would not have happened if I had not have hung in there and said 

this is something that is really necessary and needs to happen. But 

maybe you will touch on that, if you do not mind. 

But then the Value Added Producer Grant Program, we are very 

grateful to you all for expanding on that, Ms. Holz-Clause. How we 

build on an already successful program. I hope that we can certainly talk about that. And I would just go back to another thing 

that you had talked about, and that is, the rural areas have so 

few—really, no research staff. Mr. Fluharty, you have touched on 

that a lot, grant writers. 

We have had to, in our Congressional Office, actually set up a 

special projects team that is devoted to helping our rural communities look at where they go for different things and actually provide them assistance. We are not allowed to write the grants for 

them, but send them in the directions where they can go to find 

that assistance, and it is difficult. 

I know also, from my State office, what they tell me is that incomplete applications are really some of the biggest reasons why 

we have not been as successful as we should be with the Value 

Added Producer Grant Program. 

So you might touch on whether or not we should be devoting 

more resource to the Agricultural Marketing Resource Centers, 

which have been under-utilized, underfunded, unfortunately, and 

allow them to provide more virtual technical assistance, or do we 

look toward local universities and nonprofits to provide technical 

assistance? Is that a more thorough way of developing that kind of 

assistance that our rural communities need, or do we do both? 

Much of that we have already talked about, but hopefully there is 

some more we can expand on. 

Mr. SERTICH. Mr. Chairman, Senator Lincoln, I would like not to 

answer specifically each of your questions, but to talk about the 

flexibility and the streamlining that is so important. 

And you have 957 rural-serving community colleges across this 

country who are already actively engaged in economic development 

initiatives. When I talk with my colleagues, college presidents, 

around my State and around the country, our jobs in rural communities and at rural colleges is very different than those in the metropolitan areas. 

And so I think it would be helpful if we are looking at a rural 

strategic investment program that we position those institutions, 

not as yet another layer, but a place where we can do the convening, provide the technical assistance, do the research, write the 

grants, and most important, be responsible for the planning that 

needs to happen as regions self-define. 

Senator LINCOLN. We have a great consortium of community colleges come together, six of them, that have been very effective in 

the grants they have received from the Department of Labor because they have worked collaboratively. 

Ms. HOLZ-CLAUSE. Another area, Senator Lincoln, which you 

have touched upon, but which we could use a lot greater resource, 

would be the land grant systems. Almost every county has a county 

extension office. And again, I am going to support and encourage 

you to provide more funding to that, because those are resources 

that are already in existent—generally trained people very well. 

28

But not every county is able to be staffed at the level they need 

to provide that. 

So they could assist folks with the development of Value Added 

Producer Grants. So naturally I am going to suggest that you provide more funding to the Agricultural Marketing Resource Center, 

but also to look at providing, as I said, perhaps more assistance 

through the small business development centers, oftentimes, can 

help businesses with that, too. 

So out of rural America, as you know, it has just been underfunding of the types of infrastructure and resources that we need 

that can help producers——

Senator LINCOLN. You do not think those two are redundant. You 

think they both need——

Ms. HOLZ-CLAUSE. They actually can compliment each other. I 

was going to say, in our counties, those groups work together very 

well, because, again, they both have resources that they are able 

to bring to that. 

Mr. KELLEY. Senator Lincoln, I will claim kin to you, by the way. 

With honor, I might add. 

I think when you look at the name, the Rural Development Administration, you have got to understand that rural development in 

rural America is a long-term process. It is not short-term. It is not 

quick fix. When we thought that things did not work maybe in the 

old 111, Senator Cochran knows that we have been working Well 

Springs 6 years, 6 years on that partnership. 

It takes time, and it takes continuing solid funding to build these 

partnerships to hit that success. It also takes financial assistance. 

As rural America’s strong program, CDBG, is great, but it is a hitand-miss program where you can go after some money this year 

and you may get it and you may not, because you have to get 51 

percent below the mod or you cannot address it. 

We have no way in rural America to address long-term infrastructure needs. And business and industry expect local governments, through their partnership with their Federal partners in 

Washington, DC to provide the necessary infrastructure for economic development in rural America. 

Senator LINCOLN. I cannot thank you enough for accentuating 

patience in this and the time that it takes to get there. 

Thank you, Mr. Chairman. 

Chairman HARKIN. Thank you, Senator. 

Senator Cochran. 

Senator COCHRAN. Thank you very much, Mr. Chairman. 

I am glad to be here today to welcome my good friend, Randy 

Kelley, as a witness to our Committee. 

I was just thinking back in time, the Rural Development act was 

enacted back in 1970 or 1971. It was right about then because I 

was drafting a statement for my candidacy for 1972, and I was trying to think up things to say to show my potential constituents 

what my priorities would be if I were elected to Congress. 

And one of the statements I included in that announcement was 

that I would work for the full funding of the Rural Development 

Act. Now, I did not know what that meant, in terms of 

[Laughter.] 

29

Senator COCHRAN. In terms of dollars and sense. I was aware of 

what the Rural Development Act was. It authorized the Federal 

Government for the first time in many areas of infrastructure development to take a more active and direct role. It had been up to 

State and local governments prior to that, basically, to provide 

water and sewer systems, and infrastructure enhancements that 

Mr. Kelley addressed. 

And we have made a lot of progress over the years, not just because I got elected in 1972. But then all of a sudden I wake up 1 

day, Mr. Chairman, and you and I are sitting on the Appropriations Committee, and we have been active in the Subcommittee on 

Agriculture Department Appropriations, chairing in some cases, 

being ranking in some cases, and we have seen a lot of really. But 

I would invite the attention of the Committee to Randy Kelley’s 

statement. 

I had forgotten his name was Vernon. I was thinking, well, I 

know Randy Kelley, but I do not know about Vernon Kelley. 

[Laughter.] 

Senator COCHRAN. But he has had a lot of experience in rural 

planning and development. He has been involved in Three Rivers 

planning and development district a long time. It was incorporated 

in 1971. His statement refreshes my memory. 

So contemporaneously with the Rural Development Act, we had 

local district-wide organizations being organized to try to help ensure that our priorities were identified and the Federal funds, 

when they did become available, were channeled to the most productive uses. And I think this is a testimony to the success of those 

programs. We have got to continue to make them better and find 

ways to enhance them, but I think getting back to the basics is also 

important. And that means we should fully fund the Rural Development Act and make sure that we provide the resources, and that 

is basically what goes through all these statements. 

We have good organizations. Talented people are involved, and 

we need to be sure they have the resources and can share those 

in the communities where the needs are the greatest. 

We have some great success stories in the Tupelo region of Mississippi, and we are going to have some more as time goes on. And 

it is because of hard work by people like Randy Kelley. So I am 

glad to be here today and welcome him and thank him for his contribution to the hearing. 

And I guess my question is, what else can we do, after the appropriations process—and I think what we can do show some restraint 

and let there be more flexibility at the local level. Would you agree 

with that? Is that something we should strive for and not tie the 

hands with too many regulations and restrictions so that we are 

not trying to fit round pegs in square holes? 

Mr. KELLEY. Senator, we would like to thank you for your service 

for over 30 years, not only to the State of Mississippi, but to rural 

America, in general. It has been quite an honor and a privilege, 

and you have done an outstanding job since 1971. 

We agree. One of the first things is, just find it. You all have had 

some of the right ideas, and a lot of them, not just a few. You have 

been on the right track, but you have had difficulty funding them 

30

and, as a result, rural America has had to bear the burden of the 

cost in loans. 

In loans, it is people in Pontotoc County, Arkansas, and in Forest 

City, Arkansas, and in South Dakota, and Iowa, that these small 

infrastructure projects that they need, they do not have the tax 

base. It is more costly to provide infrastructure in rural America. 

Three Rivers operates an internet system, the only wholesale DSL 

BellSouth distributor in the State other than BellSouth. We did 

that because our local governments did not have high speed interned. 

Do you know that we cannot do that in north Mississippi more 

than three miles from the central office? In Boone you have dialup. Three miles. 

Infrastructure is costly in the long-term, and rural America 

needs the continued support that your great leadership has provided, but they need some assistance in full funding, and recognize 

that it is not fair for metropolitan areas to get grants and us to always have loans. Thank you. 

Mr. FLUHARTY. Mr. Chairman, if I could follow and thank you for 

your service, and also thank Randy, and raise the structural issue 

Senator Lincoln raised. 

Because of HUD, urban regions have huge abilities with very 

flexible funds to have significant capital to let local people make 

decisions about asset-based development. We do not have that in 

Rural America. If we did that, everything else would follow. 

Senator COCHRAN. Mr. Chairman, I know my time is expired, 

and you have 

Chairman HARKIN. You have been waiting a long time, so go 

ahead. 

Senator COCHRAN. I have built up equity over time. 

[Laughter.] 

Senator COCHRAN. Well, I think we ought to take to heart what 

we just heard and look for specific language that we could use in 

improving the requirements and the demands that are made by the 

Rural Development Act on local administrative agencies like those 

represented here by this panel. 

And I appreciate Mr. Fluharty’s comments, and Randy’s, and I 

have learned a great bit from this panel. This is an excellent panel, 

Mr. Chairman. Thank you very much for coming and organizing 

this hearing. 

Chairman HARKIN. Great panel. It is wonderful to hear all these 

ideas and listen to Senators talk. I had forgotten about that Rural 

Development Act, and that came about that time. I just asked my 

staff, I said, how far underfunded are we? And they said, a lot. 

[Laughter.] 

Chairman HARKIN. I am trying to get a handle on that. 

I turn to Senator Grassley, my colleague from Iowa. 

Senator GRASSLEY. Thank you, Mr. Chairman. And you have, obviously, as just said, a very good panel, and you have good people 

I have worked with for a long period of time, Ms. Holz-Clause and 

Mr. Hassebrook. Maybe some of the rest of you I have worked with, 

but I remember them better, obviously, because she is from Iowa, 

and he is from just a little bit outside of Iowa. 

31

First of all, I was going to bring up something that has been 

brought up by several members. So I am going to bring up the 

Value Added Program, but this is a program that I worked on in 

the 2000 Crop Insurance Bill, and then working with Senator Harkin, he and I worked to reauthorize that program and expand it. 

And now the Administration has cut that back, and I was going to 

ask, and you have already commented on it, but I wanted to bring 

up the impact of that program, and more importantly, the impact 

of the changes to the President’s budget in it. Although I suppose 

that presidents before have suggested not spending as much money 

as we wanted to spend, but obviously it is going to harm the program. And I think since you have spoken to that I will move on 

to another question that I was going to ask about the payment limitations in the President’s proposals or any proposals. And I have 

been working with Mr. Hassebrook on this for years, and will be 

working again this year on that issue. 

For instance, what about if you just take the President’s approach of anybody with adjusted income over $200,000? Any of you 

that would like to comment on whether proposal would help, hurt, 

or have no impact on rural communities by cutting off payments 

to those above the AGI $200,000? 

Mr. HASSEBROOK. Well, I think the most effective approach is to 

do what you, Senator Grassley, proposed, and that is simply tightening the existing payment limitation rules. 

You and I first got to know each other way back in the 1980’s, 

working on Federal tax reform when we were dealing with tax 

sheltering opportunities and the damage that did to agriculture. 

The problem with the $200,000 AGI test is that it creates a powerful incentive for people to, basically, expand their operations so 

that they get more depreciation, more deductions, more interest 

write-offs, what have you, to keep their income down below 

$200,000. 

So putting that $200,000 income limit in the Farm Bill would actually have, I think, the unintended consequence of providing an 

even greater stimulus for very big farms to grow, in the event their 

income is above $200,000——

Senator GRASSLEY. So it would have the opposite effect of what 

we were hoping to do of not paying big farmers to get bigger? 

Mr. HASSEBROOK. Exactly, because they will have to get bigger 

to keep their income down for tax purposes. 

Senator GRASSLEY. So you say that it would be negative, that approach. What about any payment limitation? Negative, positive, or 

neutral as far as rural development is concerned? 

Mr. HASSEBROOK. I think it is very positive for three reasons. 

One is that keeping farms out there is a part of rural development, 

and until we have a payment limitation, the farm programs do at 

least as much to help big farms bid land away from beginning 

farmers and smaller farmers as they do to keep them out there. 

And the second is, as long as we spend money on hundreds of 

thousands of dollars of payments subsidizing big farms to drive 

their neighbors out of business, we are not going to have the money 

to invest in our future in rural development. 

Senator GRASSLEY. I would invite anybody else to comment. 

32

Ms. HOLZ-CLAUSE. Mr. Hassebrook made a very good point that 

we have to create an opportunity for beginning farmers. And I 

think there have been some State programs that have attempted 

to do that, but there has not been, that I am aware of, a large Federal initiative that creates that environment. 

Part of that too is allowing the opportunity, myself, as a family 

farm, how do we transition this to the next generation? Quite 

frankly, we do not know how to do that yet, because there are so 

many tax disincentives for that to occur for us, too. I am not a creative tax person, so I do not know how to do that, but we have to 

create opportunities for beginning farmers, for young farmers, for 

transitions of family farms. So that is a huge challenge for you and 

a huge opportunity, because if we do not, quite honestly, what if 

the average age of the American farmer—age 57, already. When I 

started quoted that statistic 30 years ago, it was 46. 

So we have to be much more creative and innovative for beginning farmers and creating new opportunities for farmers. Quite 

honestly, a lot of these payment limitations has done just exactly 

what you have said. It has allowed the larger the farmer—and kept 

the young farmers from trying to get back into farming. 

Mr. FLUHARTY. Just quickly, Senator, as a farmer, and a rural 

development policy soul, I believe the critical issue is to ensure we 

recognize that for all of our farmers, about 90 percent of their family household income, comes off of the farm. In the largest two categories of farms, that number is 28 percent. 

The reality is, this Committee must retain the link between rural 

development and agriculture, whether it is in distribution or renewable energies, or it is landscape and local food systems. Mr. 

Chairman, I would argue this is the chance to fully fund what we 

started in 1970 and recognize its criticality to agriculture. 

Globally, when we work with OECD nations, every nation is linking agriculture now to rural development. And I would just urge 

this Committee to take up that charge and not cede that rural development future to any other Committee of this Congress. 

I think this issue is a challenge. The deeper issue is ensuring 

sufficient funding to keep those rural economies strong, because 

they are central to our farmer’s future with their families. 

Senator GRASSLEY. Thank you, Mr. Chairman. 

Senator COCHRAN. [Presiding.] Thank you, Senator Grassley. 

Senator Lincoln, if you have any other questions, you have the 

floor, if you would like it. 

Senator LINCOLN. Great. I would just like to, quickly—when you 

talk about the proposal that is out, particularly on payment limitation, the AGI of $200,000 there does incorporate both farm income 

and non-farm income, so you present a problem in terms of, I 

think, there, making sure that you are keeping the resources in 

rural America that need to stay there, because if you are going to 

limit the amount that agriculture producers can access in terms of 

safety net programs by incorporating in that number that non-farm 

income, I think you present a real problem of creating or undoing 

the foundation that is necessary in rural America. So I would certainly say that is an issue for me, without a doubt. 

The other is the regional aspect, and we have talked an awful 

lot about regional aspects. For us, those issues are very different. 

33

Many of our young farmers are large farmers because they have to 

be. I know that my contemporaries, the few that are left in farming, have to farm at an economy of scale that allows them to be 

productive as well as competitive in the global marketplace. And 

that means a larger farm, and therefore, with the capital investment that they have to make, a much more costly farm in many 

instances. 

I think those are important things to add to that discussion, and 

I will continue to add them, but there are definitely compromises 

that can be made and ways that we can use those tools to enhance 

rural development. And to, again, encourage small farmers. I am 

not against that at all, that is for sure. I just want to make sure 

they can be competitive, because, for what we grow, it is very difficult. 

The last thing I just wanted to add was a question. When we 

talked about the Value Added Producer Grant Program, it is huge, 

and it is very important, and I think it is a great tool. We have 

watched how we have been able to bring together some of our 

smaller minority farmers in a cooperative to be able to access different types of marketplaces, particularly in terms of food processing and moving in that next step, and adding the value added—

keeping some of those facilities in our country. And also providing 

them U.S. produce as opposed to the imports that they have been 

bringing in to use in that processing. 

It has been difficult. We have had to provide the one-stop shopping in our congressional office to see all the different places where 

these minority farmers and small farmers can access those programs. But in thinking about that, and looking at how much more 

I would hope the Agricultural Marketing Resource Center could do, 

do you think it would be more helpful for each State to get a value 

added allocation, since there is so much competition in that sense? 

And again, I know I am a huge, huge, supporter of our county 

extension service. I keep telling my colleagues that, for after school 

programs, there are some tremendous that already exist if we just 

fund them, 4–H comes to mind. But nonetheless, should we look at 

an allocation per State, in terms of that? Would that be helpful, do 

you think? 

Mr. HASSEBROOK. I do not like that approach very well, because 

I have seen some programs that get allocated by State. As long 

as—they just have to sign the dotted line to get the money. They 

oftentimes do not really use it for—they use it closely enough to the 

intended purpose to get by and that is about it. 

Maybe a better solution, the one that we proposed, is that up to 

five or 10 percent of the money be allocated to grants particularly 

targeting low participation States and areas that have not had a 

lot of participants. That would be specifically used to do outreach 

on the program and to help producers put together proposals. So 

that, in every State, particularly those States where you have not 

had high participation, you have somebody out there sort of promoting the program and helping to put together proposals. I think 

that solves the problem. 

Senator LINCOLN. It is a great opportunity to partner with the 

colleges and universities there that can help do those grant programs and provide that kind of assistance. 

34

Ms. HOLZ-CLAUSE. In fact, I know right now that rural development is taking two or three staff people and having them go to 

those States right now where there has been low participation just 

to work with farmers and inform the. And service providers are 

also a very important conduit to the farmers. And so we are working with the cooperative development centers, the extension offices, 

Departments of Agriculture, and again, to try and get more good 

projects coming from those areas, as well. 

I would agree that there should probably be a percentage that is 

targeted toward minority and low participation States. 

Senator LINCOLN. That would be great. 

Mr. SERTICH. Senator, also, at the heart of what my story is here 

today, is to really take the private business and industry, to take 

governments, and to take higher education, and put them together 

in a meaningful way. 

And so what you are proposing when you ask the question, how 

can we do this best? Is to be sure all three parties are at the table. 

And I do not think any one of them necessarily has to be designated as the lead. Let’s let these self-defining partnerships 

around initiatives, and Minnesota is a good example, with a lot of 

renewable energy and other value adds, they are going to beg 

workforce issues. And who better than a community college to be 

at that table to produce the skilled training that will ensure that 

those enterprises can become or remain globally competitive. 

Senator LINCOLN. Well, thanks, Mr. Chairman, it is a passion, 

and we are grateful to all of you for your input and look forward 

to continuing to work with you. 

Thank you. 

Senator COCHRAN. Thank you very much, Senator. 

Senator Grassley, do you have any other questions or comments 

that you would like to make? 

Senator GRASSLEY. Only to comment on something that Mary led 

up to, and was going to be my last question, and she said we do 

not have a Federal program, or we do not have tax laws that make 

it easy to pass on land from one generation to the other. Iowa has 

this program, and several other States do, of tax exempt use of 

Federal bonds that let States give lower interest loans to young 

farmers. It helps a few people get started farming. Is there any advantage to something like that on the Federal level? 

Mr. HASSEBROOK. I think so. You know, the reason that works 

in Iowa is because those bonds are federally tax exempt, and that 

provides enough of an incentive for people to lend to beginning 

farmers. 

I think one of the best things the Federal Government can do—

well, in the last Farm Bill, you said that it is OK—Congress said 

it was OK for the USDA to guarantee land contract sales by private landowners to beginning farmers. 

If we can make a change in tax policy that would do away with 

the prohibition on USDA guaranteeing one of these loans made 

with tax exempt bonds to a beginning farmer, then you could go 

to a landowner who is trying to sell their land and say, look, if you 

sell this to a beginning farmer and you finance it yourself through 

a land contract, you are guaranteed repayment, and all of your interest is tax free, that would provide a powerful incentive for those 

35

landowners to sell to beginners. Now, the key there is to change 

the Federal tax policy. 

Senator GRASSLEY. I believe that is it, Mr. Chairman. 

Senator COCHRAN. Thank you very much, Senator. 

Thank you all who participated in the panel this morning. I 

think this is an excellent selection of witnesses, and I congratulate 

Chairman Harkin on organizing this Committee. 

The hearing record will remain open for five business days to receive statements and additional questions from the members of the 

Committee, and submitted testimony that we may receive. 

Thanks again for your participation. We appreciate it very much. 

The hearing is adjourned. 

[Whereupon, at 11:38 a.m., the Committee was adjourned.] 

(37)

A P P E N D I X

FEBRUARY 13, 2007

38


34742.001
39


34742.002
40


34742.003
41


34742.004
42


34742.005
43


34742.006
44


34742.007
45


34742.008
46


34742.009
47


34742.010
48


34742.011
49


34742.012
50


34742.013
51


34742.014
52


34742.015
53


34742.016
54


34742.017
55


34742.018
56


34742.019
57


34742.020
58


34742.021
59


34742.022
60


34742.023
61


34742.024
62


34742.025
63


34742.026
64


34742.027
65


34742.028
66


34742.029
67


34742.030
68


34742.031
69


34742.032
70


34742.033
71


34742.034
72


34742.035
73


34742.036
74


34742.037
75


34742.038
76


34742.039
77


34742.040
78


34742.041
79


34742.042
80


34742.043
81


34742.044
82


34742.045
83


34742.046
84


34742.047
85


34742.048
86


34742.049
87


34742.050
88


34742.051
89


34742.052
90


34742.053
91


34742.054
92


34742.055
93


34742.056
94


34742.057
95


34742.058
96


34742.059
97


34742.060
98


34742.061
99


34742.062
100


34742.063
101


34742.064
102


34742.065
103


34742.066
104


34742.067
105


34742.068
106


34742.069
107


34742.113
108


34742.070
109


34742.114
110


34742.115
111


34742.116
112


34742.117
113


34742.118
114


34742.119
115


34742.120
116


34742.121
117


34742.122
118


34742.123
119


34742.071
120


34742.072
121


34742.073
122


34742.074
123


34742.075
124


34742.076
125


34742.077
126


34742.078
127


34742.079
128


34742.080
129


34742.081
130


34742.082
131


34742.083
132


34742.084
133


34742.085
134


34742.086
135


34742.087
136


34742.088
137


34742.089
138


34742.090
139


34742.091
140


34742.092
141


34742.093
142


34742.094
143


34742.095
144


34742.096
145


34742.097
146


34742.098
147


34742.099
148


34742.100
149


34742.101
150


34742.102
151


34742.103
152


34742.104
153


34742.105
154


34742.106
155


34742.107
156


34742.108
157


34742.109
158


34742.110
159


34742.111
160


34742.112
161

Æ