AGRICULTURE, RURAL DEVELOPMENT, FOOD 

AND DRUG ADMINISTRATION, AND RELATED 

AGENCIES APPROPRIATIONS FOR 2012 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND 

DRUG ADMINISTRATION, AND RELATED AGENCIES 

JACK KINGSTON, Georgia, Chairman 

TOM LATHAM, Iowa 

JO ANN EMERSON, Missouri 

ROBERT B. ADERHOLT, Alabama 

CYNTHIA M. LUMMIS, Wyoming 

ALAN NUNNELEE, Mississippi 

TOM GRAVES, Georgia 

SAM FARR, California 

ROSA L. DELAURO, Connecticut 

SANFORD D. BISHOP, JR., Georgia 

MARCY KAPTUR, Ohio 

NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full Committee, and Mr. Dicks, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

MARTIN DELGADO, TOM O’BRIEN, BETSY BINA, and ANDREW COOPER, 

Staff Assistants 

PART 6 

USDA RURAL DEVELOPMENT 

( 

Printed for the use of the Committee on Appropriations 


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PART 6—AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, 

AND RELATED AGENCIES APPROPRIATIONS FOR 2012 


pwalker on DSK5TPTVN1PROD with HEARING
AGRICULTURE, RURAL DEVELOPMENT, FOOD 

AND DRUG ADMINISTRATION, AND RELATED 

AGENCIES APPROPRIATIONS FOR 2012 

HEARINGS 

BEFORE A 

SUBCOMMITTEE OF THE 

COMMITTEE ON APPROPRIATIONS 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND 

DRUG ADMINISTRATION, AND RELATED AGENCIES 

JACK KINGSTON, Georgia, Chairman 

TOM LATHAM, Iowa 

JO ANN EMERSON, Missouri 

ROBERT B. ADERHOLT, Alabama 

CYNTHIA M. LUMMIS, Wyoming 

ALAN NUNNELEE, Mississippi 

TOM GRAVES, Georgia 

SAM FARR, California 

ROSA L. DELAURO, Connecticut 

SANFORD D. BISHOP, JR., Georgia 

MARCY KAPTUR, Ohio 

NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full Committee, and Mr. Dicks, as Ranking 

Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. 

MARTIN DELGADO, TOM O’BRIEN, BETSY BINA, and ANDREW COOPER, 

Staff Assistants 

PART 6 

USDA RURAL DEVELOPMENT 

( 

U.S. GOVERNMENT PRINTING OFFICE 

66–679 WASHINGTON : 2011 


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COMMITTEE ON APPROPRIATIONS 

HAROLD ROGERS, Kentucky, Chairman 

C. W. BILL YOUNG, Florida 1

JERRY LEWIS, California 1

FRANK R. WOLF, Virginia 

JACK KINGSTON, Georgia 

RODNEY P. FRELINGHUYSEN, New Jersey 

TOM LATHAM, Iowa 

ROBERT B. ADERHOLT, Alabama 

JO ANN EMERSON, Missouri 

KAY GRANGER, Texas 

MICHAEL K. SIMPSON, Idaho 

JOHN ABNEY CULBERSON, Texas 

ANDER CRENSHAW, Florida 

DENNY REHBERG, Montana 

JOHN R. CARTER, Texas 

RODNEY ALEXANDER, Louisiana 

KEN CALVERT, California 

JO BONNER, Alabama 

STEVEN C. LATOURETTE, Ohio 

TOM COLE, Oklahoma 

JEFF FLAKE, Arizona 

MARIO DIAZ-BALART, Florida 

CHARLES W. DENT, Pennsylvania 

STEVE AUSTRIA, Ohio 

CYNTHIA M. LUMMIS, Wyoming 

TOM GRAVES, Georgia 

KEVIN YODER, Kansas 

STEVE WOMACK, Arkansas 

ALAN NUNNELEE, Mississippi 

————— 

1 Chairman Emeritus 

NORMAN D. DICKS, Washington 

MARCY KAPTUR, Ohio 

PETER J. VISCLOSKY, Indiana 

NITA M. LOWEY, New York 

JOSE ́ E. SERRANO, New York 

ROSA L. DELAURO, Connecticut 

JAMES P. MORAN, Virginia 

JOHN W. OLVER, Massachusetts 

ED PASTOR, Arizona 

DAVID E. PRICE, North Carolina 

MAURICE D. HINCHEY, New York 

LUCILLE ROYBAL-ALLARD, California 

SAM FARR, California 

JESSE L. JACKSON, JR., Illinois 

CHAKA FATTAH, Pennsylvania 

STEVEN R. ROTHMAN, New Jersey 

SANFORD D. BISHOP, JR., Georgia 

BARBARA LEE, California 

ADAM B. SCHIFF, California 

MICHAEL M. HONDA, California 

BETTY MCCOLLUM, Minnesota 

WILLIAM B. INGLEE, Clerk and Staff Director 

(II)


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(1) 

AGRICULTURE, RURAL DEVELOPMENT, FOOD 

AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 

2012 

THURSDAY, MARCH 31, 2011. 

USDA RURAL DEVELOPMENT 

WITNESS 

DALLAS TONSAGER, USDA UNDER SECRETARY FOR RURAL DEVELOPMENT 

INTRODUCTION OF WITNESSES

Mr. KINGSTON. The committee will come to order. 

The first order of business, I think, is to fine me for being late. 

I will put $10 in the coffee pot for Mr. Farr to be celebrated at the 

end of the year. Hopefully, there will be other people late that we 

can get that money up more. 

But let me welcome our witnesses today, and I will let you guys 

introduce yourselves. And you can summarize your testimony because we have had it and reviewed it, but I will yield the floor to 

Mr. Farr. 

Mr. FARR. Well, thank you, Mr. Chairman. 

I think that this hearing is very, very important. We heard from 

the Secretary that rural America has essentially been in a depression for the last decade or so and that I think this is the agency 

within USDA that really deals with the infrastructure and financing of rural America and keeping rural America sound. 

And I have looked forward to this hearing. I am not going to go 

into any testimony or statement because of time, and I also have 

to excuse myself later on to go to a MilCon hearing, which is at 

the same time. 

So thank you, Mr. Chairman, and look forward to it. 

Mr. KINGSTON. Thank you. 

And Mr. Secretary, I don’t know who came up with the bright 

idea, but 10:00 a.m. seems to be the universal time for all committee meetings. So we are all kind of jumping back and forth. 

Mr. Aderholt, did you have any opening statement? 

Mr. ADERHOLT. No, I am good. Thank you. 

Mr. KINGSTON. Mr. Tonsager. 

Mr. TONSAGER. Yes, good morning. We appreciate this very 

much. 


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Chairman Kingston, Ranking Member Farr, Members of the subcommittee, it is my privilege today to present the administration’s 

Rural Development budget priorities. 

I am accompanied today by Mr. Jonathan Adelstein, Ms. Judith 

Canales, and Ms. Tammye Trevino, Administrators for Rural Development’s Utilities, Business and Cooperatives, and Housing and 

Community Facilities Programs. I ask that their statements be included in the record as well. 

Mr. KINGSTON. Without objection. 

OPENING STATEMENT

Mr. TONSAGER. As stated by the President, we are committed to 

out-educating, out-innovating, and out-building our competitors 

around the world. Additionally, we recognize that the future is 

made brighter by reducing the burden of future generations created 

by recurring budget deficits, and we must rise to that challenge as 

well. 

Rural America is the backbone of our great Nation. It is our 

farms and forests; our mountains, deserts, and plains; our small 

towns and smaller cities; and agriculture, coupled with off-farm 

manufacturing, mining, forestry, tourism, and services that drive 

our rural economy. Rural Development is committed to the future 

of these rural communities. 

Rural America offers many opportunities but is also faced with 

numerous challenges, many of which are regional in nature, with 

barriers such as lack of broadband capabilities, outward migration, 

a great need for increased capital market investments, and chronic 

infrastructure issues. Rural America must focus its resources on 

opportunities that provide the best return for its investments. 

As compared to their urban counterparts, rural Americans are 

more likely to be over the age of 65, earn lower average incomes, 

and are more likely to live in poverty. The President’s fiscal year 

2012 budget reflects his commitments to jobs, growth, and opportunity for rural America. With a proposed budget authority of $2.4 

billion and a proposed program level of $36 billion, the three agencies of the Rural Development mission area are full participants in 

that commitment. 

This budget sets clear priorities, and it makes tough choices. And 

we recognize that the subcommittee is a full partner in that effort. 

In view of the budget realities, I take particular pride in pointing 

out that four of our largest programs operate on a fee basis with 

no appropriated budget authority. 

The electric and telecommunication programs are two of the 

greatest public-private partnerships in American history and enhanced the quality of life and brought economic opportunity to 

rural communities. Through prudent management, they have long 

operated at a negative subsidy rate. 

In the past year, the Community Facilities Direct Loan Program 

and the Single Family Housing Loan Guarantee Program have also 

become negative subsidy rate programs. Last year, Congress enacted legislation putting the Single Family Housing Loan Guarantee Program on a fee basis, consistent with the President’s 2011 

budget proposal. 


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The Community Facilities Direct Loan Program is proposed for fiscal year 2012 at $1 billion, approximately three times its historic 

program level. This is the result of the negative subsidy rate, which 

reflects the current low interest rate environment and the good 

performance of our community partners. 

Rural Development continues to be an outstanding resource for 

taxpayers. This reflects the leveraging we generate through our 

loan and grant efforts. Most of our awards are loans and loan guarantees. With a portfolio totaling more than $148 billion, over 98 

percent of our clients are not delinquent on their loans. This is particularly impressive, considering that most of our programs are targeted to very low, low, and moderate income families. 

Rural Development has more than 40 programs designed to foster growth, incubate and grow businesses, and add new taxpayers 

to the payrolls. Our utility programs provide the essential infrastructure that is the foundation for growth. Our business programs 

finance entrepreneurs in traditional manufacturing and services. 

Our housing and community facilities programs directly create jobs 

in new construction and building rehabilitation while enhancing 

the quality of life in rural communities. 

We also help finance innovation, particularly in green energy. 

Our Nation continues to transition to a new, greener, and domestically produced energy system. Rural Development will have a 

growing role to play. 

Rural Development’s proposed budget supports the President’s 

call for responsible economies by accepting difficult choices. We are 

refocusing, realigning, retargeting our efforts, saving money for 

taxpayers, while supporting rural residents and communities and 

building their future. We are working to incentivize investments 

and find other partners to leverage assets and build a stronger 

rural America. 

It is our privilege to work with the subcommittee to help build 

a better future for rural America and the Nation, and we are committed to the future of rural communities, and we know that you 

share in that commitment as well. 

And Mr. Chairman, I am ready for questions. 

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Mr. KINGSTON. Thank you, Mr. Under Secretary. 

BROADBAND PROGRAM

Let me ask you this, and I have had some concerns about the 

broadband program. The Inspector General’s office issued a report 

in 2005 and then a follow-up report in 2009 about concerns with 

the program. And so, I wanted to ask you what was the status of 

your reaction to the IG report, also particularly as respects to the 

interim final rule released March 14th and those concerns? Where 

are you on those, and what changes have you made? 

Mr. TONSAGER. Well, I will respond, and I would like to also ask 

Administrator Adelstein to respond as well. 

We watch closely. The standing broadband program is primarily 

a loan program. Its uses, earlier on, were primarily near urban 

areas. So it wasn’t really penetrating into a rural market. 

The Recovery Act provided loan and grant combinations through 

the Broadband Investment Program—BIP—that was authorized to 

us. We attempted to learn from both of those. We have not been 

using the standing program. We went through this year and a half 

with the Recovery Act money, and we implemented and went out 

with the broadband program. 

Administrator Adelstein has worked to reform the existing program with the proposed changes. And if it is all right, I will ask 

Jonathan to speak to it as well. 

Mr. KINGSTON. Yes. 

Mr. ADELSTEIN. Thank you, Mr. Chairman. 

Thank you, Mr. Under Secretary. 

The Inspector General—IG—report was of concern to us. We, as 

a matter of fact, suspended the broadband program during the 

pendency of the Recovery Act because we wanted to, before we 

moved forward with any loans in this administration, address each 

and every one of the concerns in the IG report. And in fact, we 

have done so. 

As of March 24th, the IG indicated that, as a result of the publication of the regulation, that entire investigation has been closed 

to the satisfaction of the USDA IG. So we have addressed each and 

every concern that they raised, both through the way the program 

is being run and the way it was run previously. So we are starting 

with a clean slate essentially from the Inspector General. 

We are just opening up a new window for funding for the program as of this month under new rules. Previous rules that were 

being operated under were based on legislation from Congress in 

2002, which did permit, in fact, required the agency to provide 

loans to places that might not have been as rural as the administrators might have liked in the previous administration. But nevertheless, they were obligated under the law to do so. 

The Congress, in its wisdom, in 2008 changed the law. We have 

implemented those changes, along with others, to encourage all of 

those loans to go to the most rural parts of the country, to 

prioritize areas that have no service or areas that largely lack service so that we can address all of the concerns of the IG, and the 

IG said we have done so. 

Mr. KINGSTON. How much of that money then is spent in those 

underserviced areas now? Do you have the breakdown on it? 


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Mr. ADELSTEIN. Well, right now, we have not, in this administration, done any loans under that program. So, previously, I still believe most of the loans did go to rural areas. There were a handful 

that were highly publicized that went to areas that were more suburban because the law permitted that. The law, in fact, required 

that. 

Right now, we are starting with a clean slate. So we don’t have 

under our current regulation any loans out, just because we opened 

up the window this month. 

Mr. KINGSTON. You have probably seen this national broadband 

map that shows in the blue the areas that are serviced. And of 

course, that is most of the country. And then you have probably 

seen the breakdown of the States that go along with it. 

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New Jersey, 100 percent. New York, 99.8 percent. Texas, 99.6 

percent. Georgia, 99.4 percent. In fact, the lowest one is American 

Samoa at 19 percent, followed by Puerto Rico, 66 percent. And then 

on continental United States, West Virginia at about 86 percent. 

And so, I have to question, you know, right now, is this really 

where we need to be spending our money? Particularly since the 

FCC just announced last month a $1 billion program for 

broadband. 

And it is one of these sexy things that is kind of like art education. You can always go out and talk about art education, and 

it is great. I mean, it is a lot more exciting than talking about 

math and science. But do we really need to continue this? 

Mr. ADELSTEIN. There is no other Federal program that provides 

financing assistance to rural communities to provide broadband for 

those percentages you talked about that aren’t covered today. As a 

matter of fact, the map gives us a kind of a road map of where we 

want to focus our resources and where we would like to close those 

gaps. 

We have talked to our State directors about working in their 

States with the Governor and others to try to fill those holes. They 

need financing assistance in order to do it. And the reason is, that 

it is a more difficult business case to make in rural areas. There 

are fewer customers per mile. It is more expensive to serve, and 

there is less revenue to provide for that. 

So getting a loan program and something we are going to get 

paid back on—we are very proud of our record of being repaid— 

allows them to get better terms and lower interest rates than 

would otherwise be available in the private market. So we think it 

is a really important program to complete this process of getting 

broadband out to those parts of the country that are identified on 

the map as not having broadband today. 

Mr. KINGSTON. You know what my concern is—and I actually 

have run out of time. So I will continue this with you next round, 

and I appreciate it. 

Mr. Farr. 

Mr. FARR. Thank you very much, Mr. Chairman. 

RURAL HOUSING SERVICE

I would like to talk a moment about rural housing. About 300 

families in my district have become homeowners in the last 20 

years, thanks to USDA’s Section 502 direct loan mortgage program, 

the Section 523 and that program that is in Section 523 that is the 

self-help program. We have worked with some of the housing authorities, the non-profit housing authorities. 

Twenty-five people and their families are now working on constructing their own homes with self-help loans. In fact, the Mayors 

of the City of Hollister, which is the county seat of San Benito 

County in California, grew up, one of them in the self-help house, 

and the other told me that he built his house with the USDA’s selfhelp program. 

The question is why is the budget going to eliminate these successful programs as of March 4th, when we have a backlog in California for Section 502 loans, for self-help housing totaling over $17 


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million. And as I understand, that $17 million to be borrowed and 

repaid to low and very-low income families. 

It has been a job creator because of the materials that go into 

those houses and so on. And it seems that there is a drastic cut 

in this program, and I want to know why. 

Mr. TONSAGER. As you will note from my testimony, we propose a $2.4 billion budget authority and a $36 billion program level. A 

lot of what we do is lending. 

Mr. FARR. But you only requested $211 million for fiscal year 

2012—— 

Mr. TONSAGER. For program—— 

Mr. FARR [continuing]. For Section 502 direct mortgage loan program? 

Mr. TONSAGER. That is correct. 

Mr. FARR. That is a cut from what it previously was? 

Mr. TONSAGER. Yes. It is substantial. 

Mr. FARR. With the demand out there, why cut the program? 

Mr. TONSAGER. The administration made the decision to aggressively seek to assist with reduction in the Federal deficit. What we 

are asking for is about 18 percent less budget authority than we 

have had previously. 

Mr. FARR. But why? I mean, as I understand it, you can say, 

well, they can go to the market. But you don’t—with your program, 

you have essentially your interest rates are below market rate, and 

you are getting the poorest people or the lowest-income people in 

the country to get housing. That is a pretty nifty thing. 

Why would we want to cut that market, which you also pointed 

out or Mr. Adelstein pointed out that the private sector won’t go 

there in their lending? 

Mr. TONSAGER. The challenge for us has been, as we have looked 

at the need to reduce the deficit, we had to go to the programs that 

have the greatest budget authority cost. In this case, it was our 

Multi-Family Housing Program, and it was the Single Family 

Housing Direct Loan Program. 

Mr. FARR. That have the greatest, what, budget cost? 

Mr. TONSAGER. Budget authority cost. Our 502 guarantee program, which we proposed an increase for, has no budget authority 

cost. 

Mr. FARR. But that 502 or that authority doesn’t allow you to 

have low-interest market rates, does it? 

Mr. TONSAGER. That is correct. We will be actually offering more 

housing ownership opportunities than we ever have before with 

this budget using the guarantee program. 

Mr. FARR. But not necessarily to the same class of people? 

Mr. TONSAGER. Exactly. That is correct. 

Mr. FARR. I mean, this is the issue. Why do we go after—I can’t 

believe this administration would rob from Peter to pay Paul and 

take the most vulnerable people in rural areas. I mean, the Secretary has talked about trying to stabilize and have a rural strategy, a rural economic revitalization. Access to capital is essential 

to do that. Why wouldn’t you want to keep people down on the 

farm rather than drive them away? 

Mr. TONSAGER. I think we have had to make difficult choices in 

the proposed budget. We wanted to make sure we could address 


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homeownership opportunities. Our plan is to use the 502 guarantee 

program to go as far down as we can into the low-income category. 

We maintained a component of the 502 direct category and also to 

address very-low income needs. There is an incremental loss of the 

ability to serve that particular category. 

Mr. FARR. Will you be able to serve the self-help loans or that 

backlog in California? 

Mr. TONSAGER. We have proposed elimination of the self-help 

program, which is, again, a major important program. But again, 

it is a budget authority cost that we have had to examine more 

closely. 

Mr. FARR. Okay. That is all gobbledygook talk. What about helping those people that are waiting on that list? Can your other program serve them? 

Mr. TONSAGER. We can use the 502 direct program to the degree 

we have budget authority. 

Mr. FARR. And they can afford it? 

Mr. TONSAGER. We will be able to focus on the 30 percent measurement for income and try to help those below the 30 percent, 

those who have a cost greater than 30 percent of their income. So 

that is generally the break point. 

Mr. KINGSTON. The gentleman’s time has expired. 

Mr. Aderholt. 

Mr. ADERHOLT. Thank you all for being here this morning. 

FARM LABOR HOUSING

I wanted to ask a question. I know that Mr. Farr had asked 

about the housing issue of Rural Development. It is my understanding that Rural Development administers the Farm Labor 

Housing Program, and this is where housing facilities for migrant 

farm workers are constructed for those workers to stay in a modest 

rental rate while they do farm work in an area before migrating 

to another area to do more agricultural labor. I believe that is Sections 14 and 16. 

I know that U.S. citizens and permanent residents are the only 

people eligible for the housing. My question is, are these residents 

screened through like an eVerify system? 

Mr. TONSAGER. If it is all right, I would like to ask Administrator 

Trevino, who runs the programs, to give you the details. 

Mr. ADERHOLT. Sure. That would be great. 

Mr. TONSAGER. Tammye. 

Ms. TREVINO. Congressman, thank you for the question. 

Currently, we do not have access to the Electronic Income 

Verification—EIV. We are asking for that authority from Congress. 

It is a proposal that is coming through from the next generation 

of a rental housing working group that has been formed by the 

White House, and it is one of the things that we have asked for. 

That, because it is owned by I believe the Social Security Administration or one of those agencies, we do not have access to it. We 

have to have statutory authority in order to do it. 

Mr. ADERHOLT. Do you have any timeline as to when this might 

occur? 


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Ms. TREVINO. I was just asked to prioritize that yesterday, and 

so we are asking for that and some Community Reinvestment 

Act—CRA—reform and some energy. 

Mr. ADERHOLT. In the meantime until that does get implemented, how are ways that you can implement or what are things 

you can do to implement protocol to make sure that it is not used 

for those that are here illegally? 

Ms. TREVINO. We have the guidelines, and they are shared with 

every owner of one of our properties. And if we find that they are 

not following the guidelines, then we take compliance action. 

Now we have created a new program that is going to be Web 

based, and it is based on civil rights complaints that we have gotten. So it is a civil rights training. And it clearly identifies under 

what conditions you can refuse to rent to certain individuals. So 

that is something that we haven’t tested yet. It is going into the 

test phase now. So we realize that there are some limitations that 

we have had in being able to verify incomes, and so we are trying 

to take as many corrective actions as we can. 

Mr. ADERHOLT. What is the bidding process for these projects? 

Ms. TREVINO. Through a Notice of Funds Availability—NOFA. In 

terms of who applies for Section 515 and 514? Yes. 

Mr. ADERHOLT. If someone wants to construct one of these 

projects, what is the—— 

Ms. TREVINO. Yes. We have a competition. We announce a 

NOFA, and we take applications. And then they are ranked and 

scored. 

Mr. ADERHOLT. Is that open to all contractors? 

Ms. TREVINO. Yes. It is open to anyone who is an eligible applicant. 

Mr. ADERHOLT. Okay. Is the same true for contracts to manage 

the properties? 

Ms. TREVINO. No, sir. The owners, the developers of those 

projects choose their servicing agents, the asset management company. 

Mr. ADERHOLT. Whoever won the bid on the contract? 

Ms. TREVINO. Right. And then we normally—there are certain 

agencies that provide that service, and most of them go with one 

of those that has a lot of experience that is already doing it. If 

there is anyone new, we just monitor them a little closer to make 

sure they know what they are doing. 

Mr. ADERHOLT. Okay. And again, Mr. Farr had alluded to this 

fact that rural areas tend to lag behind the rest of the country in 

economic recovery. And I guess what particularly my question is, 

do you see that being the case currently, as opposed to, like, say 

historically that has been the case, but are we seeing that during 

this time of economic downturn and having a very fragile economy? 

Are we seeing that as of today that rural areas are hit the hardest? 

Ms. TREVINO. Yes, sir. 

WATER AND WASTE CIRCUIT RIDER

Mr. ADERHOLT. Okay. I want to, if I can, just quickly get in one 

question, to ask about the Circuit Rider Program and the rural 

water loans and grants. And just, Mr. Adelstein, I don’t know if 

you would be best to answer that. And just doesn’t USDA have a 


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program to assist local utilities with source water protection plans? 

Is that the case? 

Mr. ADELSTEIN. Yes, we do. 

Mr. ADERHOLT. And just briefly, how does that work? 

Mr. ADELSTEIN. Well, the Circuit Rider Program is an essential 

way that we help our small rural water systems that may not have 

the expertise themselves in every aspect of their system to do it 

themselves. So we provide in the budget request $14 million this 

year for the Circuit Rider Program that we give out in a grant to 

a private organization to basically train and help in the field, small 

rural water systems to have the expertise and specialty knowledge 

that they need and to get them trained. 

Because for these small communities, they just don’t have the 

budgets themselves, and they don’t always have the expertise. So 

we are able to provide that centrally through the Federal Government and getting it out in the field through the private sector, nonprofit organizations that provides that assistance. 

Mr. ADERHOLT. Okay. Thank you. 

Mr. KINGSTON. Ms. DeLauro. 

Ms. DELAURO. Thank you very much, Mr. Chairman. 

And thank you all very much. 

SECTION 502 SINGLE FAMILY HOUSING

I just want to follow up on my colleague Mr. Farr’s questions. 

Just—I think he may have gotten the numbers mixed up—to correct the record, the 502 direct loan program, that was funded at 

$1.1 billion. The administration has requested $211 million. So we 

are looking at it is about a 79 to 80 percent cut in that program. 

And as you pointed out, mutual and self-help housing program, those have been eliminated in this budget. That was at $41 million. 

Question is how will USDA continue to offer affordable housing to 

low-income families in rural areas if these two programs are cut severely or eliminated? 

Mr. TONSAGER. We will use our resources the best way possible 

with the 502 guarantee program. 

I would like to ask Administrator Trevino to respond, if that is 

all right? 

Ms. TREVINO. Congresswoman, thank you for your question. 

It has been a challenge determining what was going to be cut 

and what wasn’t. And one of the things that I was tasked with was 

to try to figure out which programs were more cost effective. We 

have done a study on the direct program, and we have seen that 

it is more intensive in terms of resources and in terms of time. 

We have currently, in the last year or so, tried to take steps to 

make this more cost effective and make that program more efficient. I cannot show that efficiency right now. It would take me 

probably another year to implement the regulation that we currently have going through, another year after that to show results. 

So if we want to show what is most cost effective, that is not one 

of them. I think that it has the potential to get there, but I can’t 

show that cost efficiency now. 

Ms. DELAURO. Well, but in terms of need, because this is your 

ERS report—— 

Ms. TREVINO. Right. 


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Ms. DELAURO [continuing]. Has stated that the home ownership 

guarantee is the worst targeted of all Rural Development guarantee programs, does not adequately serve rural, less populated 

communities with more economic stress. 

Do you have data at your department that indicates otherwise 

from ERS’s report? 

Ms. TREVINO. What I can tell you is that last year in the 502 

guarantee program, about 30 percent of the 133,000 loans that we 

made went to low-income individuals. 

Ms. DELAURO. Well, then let me just—what would be interesting 

information, I think, is what are the eligibility requirement for single family direct program? How does that compare to the guarantee? What is the average annual income for each? 

Ms. TREVINO. Okay. The guarantee—— 

Ms. DELAURO. Because that is a way in which we can discern 

what is happening to lower-income people. 

Ms. TREVINO. I understand. 

[The information follows:] 


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smartinez on DSK6TPTVN1PROD with HEARINGInsert graphic folio 57 66679A.035
47 

Ms. DELAURO. I am going to throw this on the table for an answer. What was the backlog for Section 502 loans at the end of fiscal year 2010? Of that number, what percentage came from very 

low and low-income families? 

Ms. TREVINO. We did not have a backlog last year in the 502 program. Is that what you asked for? 

Ms. DELAURO. Yes. 

Ms. TREVINO. ARRA—the American Recovery and Reinvestment 

Act—kicked in last year also. So we were able to meet demand. 

Ms. DELAURO. Okay. But you had the ARRA piece. ARRA is—— 

Ms. TREVINO. No longer. I understand. Right. 

Ms. DELAURO. It is gone. Right. So that would—— 

Ms. TREVINO. And we understand that there is a portion of that 

segment of the population that is probably not going to get served. 

Ms. DELAURO. Mm-hmm. Mm-hmm. 

Ms. TREVINO. Again, the choices that we make—— 

Ms. DELAURO. Well, what would be very interesting is, and I 

have just said, the various eligibility requirements, the income levels because you said you provided assistance. But again, I wanted 

to know what is the—with regard to the average income for each 

of these categories, and what you did with ARRA with the 502 program, what then was the what percentage came from very low income families? I would like to have that information. 

Ms. TREVINO. Okay. That is a very good question. Average incomes in the guarantee program are about $44,000. And in the direct program, they are about $28,000. 

Ms. DELAURO. Okay. So we have got a significant difference 

here, and what happens to those $28,000 income level families in 

the absence of this, of self-help, and this effort, which I think is a 

big concern. 

I am going to ask you, don’t be offended by this. But if we are 

going to go the guarantee route, why don’t we just take all of these 

and put them under HUD? 

Ms. TREVINO. I don’t believe that any of the rural—a major portion of the rural population would not be served if they were under 

the Housing and Urban Develpment—HUD. We have created that 

niche in rural America. We know what they are looking for. We 

know how to target them and how to help them. 

Ms. DELAURO. I appreciate that, and I appreciate the work there. 

But it would appear from the numbers that we are talking about 

that we are not, in fact, going to be able to service that population 

that we have in the past, that niche area, and particularly with 

this kind of program for low income. 

My time has run out. So I thank the chairman. 

Mr. KINGSTON. Mrs. Lummis. 

Mrs. LUMMIS. Thank you, Mr. Chairman. 

BROADBAND AND TELECOM SERVICE

I am going to focus on this first round of questions on the RUS 

program. So I want to start with telecom. 

I just got back from Saudi Arabia, and I was amazed to find that 

in even the empty quarter, what they call it, in the most remote 

areas of Saudi Arabia, they actually have better telecom services 

than they do in the State of Wyoming. And I have found that to 


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be true, whether I was in Saudi Arabia or elsewhere in the Middle 

East or in Eastern Europe. It is just amazing how far behind we 

are in Wyoming. 

And so, I want to talk about our U.S. programs here first. What 

is the current level of demand among telecommunications providers 

for RUS loans and grants? 

Mr. TONSAGER. I will ask Administrator Adelstein to respond, 

please. 

Mr. ADELSTEIN. We anticipate this year having, if we had a $690 

million budget, which the President requested, we already have 

over $600 million in loans in-house, and we anticipate getting well 

over $1 billion because the year is—we are only in part of the year 

of fiscal year 2011. 

So we are oversubscribed most likely for the telecom loan program. The broadband loan program, as I indicated earlier, we just 

opened up the window, and we do anticipate major demand for 

that. We had $28 billion in applications for the ARRA, Recovery 

Act broadband program, and we were only able to fund $3.5 billion 

of those. So there is something of a $23.5 billion backlog in terms 

of demand for broadband loans. 

Now not all of those are going to be eligible for our program, but 

you can see there is a huge unmet need out there. And I am from 

neighboring South Dakota, as is our Under Secretary, and I spend 

a lot of time in Wyoming. And I think that I know exactly what 

you are talking about. I mean, you can’t get cell service. Broadband 

is limited in rural parts of the State. 

Mrs. LUMMIS. Yes. 

Mr. ADELSTEIN. I think the small rural providers do a great job 

under very difficult circumstances, and there has been some scrappy ones in Laramie, for example, that provide wireless service. But 

it is very tough going out there because the business case is harder 

to make. 

And I do believe they need these Rural Utilities Service—RUS— 

programs to be able to make it work, to be able to compete globally. 

As you indicated, other countries are investing on a national level, 

and they are competing with us, and those jobs are being 

outsourced out of the United States through broadband networks. 

They could just as easily be in-sourced into rural America with 

good broadband networks that we help to finance. 

Mrs. LUMMIS. You know, I am hearing another—when I inquire 

about this, I am hearing another reason, and so I will ask this 

question. Have you witnessed a pullback from private sector lenders in this area? 

Mr. ADELSTEIN. Absolutely. 

Mrs. LUMMIS. Okay. 

Mr. ADELSTEIN. There is no question. We have talked to them. 

They said some of the major private lenders are shutting down, 

given the uncertainty. 

BROADBAND PROGRAM AND REGULATORY ACTIONS

Mrs. LUMMIS. Yes, and the uncertainty that I am hearing about 

is regulatory uncertainty. And because it is making lenders 

squeamish about backing these projects. So let me ask a little bit 

about how closely you work with the Federal Communications 


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Commission—FCC—regarding the effects changes to the Universal 

Service Fund would impose on RUS borrowers or vice versa? 

Mr. ADELSTEIN. Well, I am a former commissioner of the FCC. 

So I am very familiar with that. 

Mrs. LUMMIS. Oh, good. 

Mr. ADELSTEIN. We are working with them on all the data they 

request. We are the leading expert in the Federal Government on 

rural telecommunications finance, which is what they are dealing 

with here. And the chairman, Julius Genachowski, has indicated 

he wants a data-driven process, and they have requested from us 

data about our borrowers and their financial situation so that they 

can take that into account in making regulatory changes. 

Mrs. LUMMIS. And I may want to follow up with you specifically 

on this because it just continues to be a huge problem in my State. 

So thank you very much. 

ELECTRIC PROGRAM FUNDING

Now I am going to switch to RUS as it relates to generation. Will 

baseload coal generation be excluded from RUS loans in the fiscal 

year 2012 budget? 

Mr. ADELSTEIN. Yes, they are excluded. 

Mrs. LUMMIS. And that is because? 

Mr. ADELSTEIN. Well, due to risk associated with baseload construction in financing, we determined that there should be a separate subsidy rate for those investments. RUS has worked with Office of Management and Budget—OMB—under the previous administration to develop an agreed-upon subsidy rate. That is several years old now. 

So that prevention of RUS engaging in coal-based generation predates this administration. So we don’t have it in the budget as a 

result of that. 

Mrs. LUMMIS. Okay. My time is about up, Mr. Chairman. I have 

other questions, but I will wait until the next round. 

DUPLICATIVE PROGRAMS

Mr. KINGSTON. Well, we will start the next round now. And I 

want to start out with you, Mr. Adelstein. I still don’t understand 

why you need to have $1 billion in the FCC and then have all the 

money in RUS now. 

Originally, when the administration and the stimulus program 

was putting about $3 billion in each pot, I felt like, look, you already have RUS. Why do you want to start new programs anyhow? 

RUS should be handling it. But now you have two. I just don’t understand why—your missions are so close, why in the heck do the 

taxpayers have to pay for two sets of administrators and employees? 

And frankly, I know you can justify it because—excuse me, you 

can justify it in Washington terms. Because we have 44 Federal job 

training programs, 66 early childhood development programs, and 

each person can say why their program is so unique. You know, on 

the jobs program, I always say, hey, if one of them works, you don’t 

need the other 43. This one is a duplication. 

Ms. DELAURO. Food safety. 


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Mr. KINGSTON. And yes, as my friend would say, I think the Government Accountability Office—GAO—report said there were 15 

food agencies on food safety. So I have got to tell you. I don’t get 

it, and I am going to work very hard to get answers to this. But 

I will let you start at it. 

Mr. ADELSTEIN. Let me give you my best shot. 

Mr. KINGSTON. Because I can tell you, right now, I can’t zero out 

FCC, but I think we can do it here. And I am real, real close to 

proposing that. 

Mr. ADELSTEIN. Well, let me explain as a—— 

Mr. KINGSTON. And I am doing it out of frustration. I would rather have RUS do it, but I can tell you, I am just against duplications 

in Government. We always get these GAO reports, and everybody 

says, ‘‘Oh, God, that is bad.’’ And we pound the ground. But you 

know, 6 months later, Democrats or Republicans, nothing ever happens. 

Mr. ADELSTEIN. Well, these programs, I would say, are not duplicative in any way, shape, or form. I mean, the Government Accountability Office—GAO—looked at duplication across the Federal 

Government and did not indicate these programs were duplicative. 

And it is because they are, frankly, not. I mean, we are providing 

financial assistance, loans that are going to be repaid to the Federal Government to the extent that we can make sure that they are 

well underwritten, to help private businesses to build out. 

The program at the FCC is not taxpayer financed. It is an exchange from a fee that is paid by rate payers that is then redistributed across the industry to those high-cost providers, Universal 

Service, which is a continuation of what AT&T did back in the ’30s. 

And it is a longstanding way of doing things that was formalized 

in the ’96 Communications Act. 

But it is very different. Those are basically assistance to help 

those companies be able to provide comparable service at comparable rates, but it does not provide a dime for capital infrastructure loans. No assistance for that. 

It does provide assistance to the revenue that enables a small 

rural company to pay back the loans. And that is, I think, what 

Congresswoman Lummis was referring to, that there is an issue 

there about how those two interplay. But the fact is that if you are 

a small rural company and you want to provide broadband to a 

place it doesn’t exist, it is very hard to get capital in the private 

sector, as the Congresswoman from Wyoming indicated. It is almost impossible now. They are virtually shut down. 

We are the last game in town to provide financing. 

BROADBAND ROAD MAP

Mr. KINGSTON. But you know, getting back to this map, and Mrs. 

Lummis, you didn’t see it earlier when I held it up. But I will— 

let’s see. That is what the market penetration is right now. 

The lowest State in the country is 86 percent. For every dollar 

we spend, 40 cents is borrowed right now. Do we really need to 

continue this at all? And frankly, if somebody goes out to Colorado 

a lot, I go with my family, I mean, you can’t get—you know you 

can’t get cell phone service in the mountains because they block it. 


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I am sure that one day the technology will change, just like it 

did on the tunnel going over the Capitol. But you know, it is not 

life and death. And this Washington kind of elitist attitude, ‘‘Oh, 

these poor rural people. We have to bring them broadband, and 

then they will have jobs, and then they will have telemedicine.’’ 

And then everybody will be happy and utopia. 

And I represent a rural area, not as rural and not as vast as 

your territory. But I have just got to question this map and our—— 

Mr. FARR. The map lies. 

Mr. KINGSTON [continuing]. I don’t know why the map lies, but 

these numbers don’t. In fact, let’s see what Wyoming is. Let’s see 

if I can find it on here. 

Montana is 99.98 percent. Okay. Somebody help me with Wyoming here. It has got to be higher than that. Okay. Okay, Wyoming 

is 97.5 percent. 

I just don’t get it, I have got to tell you. I mean, the dang country 

is going broke, and we all know that. And is this what we really 

have got to be spending money on right now? 

My time is up. So Mr. Farr. 

RURAL AMERICA SITUATION

Mr. FARR. I think this is a great discussion. But let’s put this 

into perspective. I mean, I look at this map, and I look at my area. 

I mean, California is a huge State, and most of the people live in 

big urban areas, the L.A. and San Francisco market. But you get 

out into rural California, and it is as rural as any place in the Nation. 

For example, where I live, we don’t even have any access to utilities. You are off the grid. You want power? You have got to generate. You want water? You have got to go get it. You want sewer? 

You have got to build your own septic. 

Nobody is going to come into places like that, and I think if you 

look at the history of the USDA, they were the first Federal agency 

that was out there doing rural America, doing economic development. Look at the titles of these Administrators—housing service, 

business service, utilities service. They went to places where nobody ever went before, and in many cases, I think if you are going 

to try to push them into HUD, in all respects, HUD was essentially 

an urban—to serve urban needs, not to serve rural needs because 

rural needs are being served out there by these services. 

I mean, why do you even have to have rural utilities? You would 

think that phone services would get there. They are not going to 

go there. There is no money to be made. So you have had to subsidize this, and I think what is lacking here, and I think you are 

on the right—we are all kind of searching for this, is that why 

don’t we try to have a better policy? 

And I think this is where the shortcoming—the Secretary was 

here talking about how rural America has been dying for a long 

time. Everybody is leaving it. Kids are leaving because they can’t 

get access to broadband. The schools are not as great as they are 

in some of the big urban areas. They get a good education. They 

don’t want to go back to that area. 

These places are falling apart. Nobody is investing in it. We need 

a rural strategy if we want to keep—and to Mr. Aderholt’s point, 


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I mean, if you want to do this documented labor, I mean, this is 

why the California delegation is pretty much interested in these ag 

jobs. Seventy percent of the people harvesting everything you eat 

every day are undocumented. 

So if you are going to have this, and that is why we need to solve 

this immigration problem, there is nobody else to take those jobs. 

Senator Feinstein tested this and went out and put signs all over 

that these jobs were available. And they are paying $12 an hour. 

They are paying better than Wal-Mart and Starbucks. And they get 

benefits. 

You know, nobody would take the jobs. They are too damned 

hard. It is difficult to go out on rainy days and harvest crops. So 

we need a better strategy, and I think the problem is that we need 

to work on new collaboratives with State and local government and 

really have a rural strategy. 

So the thing that I am concerned about is that these are the people that are the first responders to the poverty needs in rural 

America. Poverty needs are the ones, those are the people that are 

staying there. They are not going to encourage their kids to stay 

there and grow up in poverty. But unless we make these areas a 

little more attractive. 

And I wish we would have rural tourism. We ought to have that 

in here. That has got to be a market strategy. Everybody loves the 

outdoors. You can’t get into the outdoors without going to rural 

America. 

HOUSING REPAIR LOANS AND GRANTS

So there are some things lacking that we need to build on. But 

I want to ask in this moment left that you have Section 504, which 

is essentially again trying the idea of why should people stay in 

rural America? This is the repair loans to the low-income homeowners in America to eliminate safety hazards and eliminate other 

kinds of issues, you know, modernize your house. 

So your budget doesn’t propose any funding for repair loans, and 

I understand you cut that almost by two-thirds for repair grants? 

Mr. TONSAGER. Yes. That is—— 

Mr. FARR. Nobody is remodeling their house in rural America, or 

no low-income people can afford them, or what? 

Mr. TONSAGER. No. The challenges remain, and there are enormous challenges in rural America on all fronts. We strongly advocate for a full tool set, and if moments allow, I would really like 

to make the case overall for the agency about what we do. 

The funding for the Section 504 grants, again, it is a subsidy cost 

issue. Ninety-eight percent of our borrowers are successful. We 

know that it takes grants to serve categories of people who don’t 

have much money. But because of the challenges presented to us 

about the deficit, the struggle we have in trying to help reduce the 

deficit, we are forced to make very difficult choices on programs we 

really care about. 

Mr. FARR. But it seems like those choices are really to hurt the 

most vulnerable, which is the reason that—— 

Mr. TONSAGER. As I mentioned—— 

Mr. FARR. Congresswoman DeLauro is head of the committee 

that has HUD under it. I mean, and her question about why not 


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move this all to HUD, your response was, well, HUD doesn’t serve 

rural America. Now you are cutting off access to the very most vulnerable who we are trying to help stay and develop some economic 

strategies for rural America. 

Mr. TONSAGER. It is correct. It is as challenging a thing as I have 

ever been faced with to have to deal with the choices we have to 

make regarding the budget authority we have. We have proposed 

an 18 percent decrease in our budget. It is a painful cut. It hurts 

real people. 

The great bulk of our programs are loans at approximately the 

rate the Government borrows money, and those cost no budget authority to the Federal Government. So the only places I have left 

are those places that have budget authority costs that I have to 

pick from. And there is really multi-family housing—— 

Mr. FARR. Well, let me just end. Time is up. But I would hope 

you take back to the Secretary—he came before this committee. He 

is a former Mayor of a small town, Governor of a small State. He 

came here talking about having a rural strategy for America, looking at all the grants by all the departments. We have yet to see 

that strategy. 

I don’t know what is different now than it was before he took office. But we need a much more comprehensive approach of how we 

are going to save rural America, and it ain’t coming from these 

cuts. 

Mr. KINGSTON. Mr. Aderholt. 

FARM LABOR HOUSING

Mr. ADERHOLT. Let me just follow up with Ms. Trevino about the 

housing, the issue that we talked about with the Section 514 and 

516. And I am not sure I made myself clear when I asked the question, but when you were talking about—when you gave your answer, were you talking about income verification or citizenship 

verification? 

Ms. TREVINO. Oh, I was talking about income verification. 

Mr. ADERHOLT. Okay. What about citizenship verification? 

Ms. TREVINO. We also have regulations that we follow. We use 

the same rules that HUD uses in terms of verifying eligibility, both 

for income and citizenship. 

Mr. ADERHOLT. Okay. And then, and what would be the situation 

there? Would you still have to have authorization to use eVerify if 

it is for citizenship verification? 

Ms. TREVINO. No, sir. 

Mr. ADERHOLT. So you can do that? 

Ms. TREVINO. We could, yes. 

Mr. ADERHOLT. And is that being implemented? 

Ms. TREVINO. Yes, sir. We follow the rule that HUD uses, and 

that is what we had proposed several years back. 

Mr. ADERHOLT. So the residents are being screened in that regard? 

Ms. TREVINO. Yes, sir. 

Mr. ADERHOLT. Okay. All right. Thank you. 

Thanks, Mr. Chairman. 

Mr. KINGSTON. Ms. DeLauro. 

Ms. DELAURO. Thank you. 


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I have got a couple questions here. I am going to just try to get 

them all done in my allotted time here. 

RENTAL ASSISTANCE

Ms. Trevino, do you do rental assistance? 

Ms. TREVINO. Yes, ma’am. 

Ms. DELAURO. Okay. If you can get back to me on the H.R. 1 

cuts to rental assistance, what I would like to know there, unless 

you have it off the top of your head, if the cuts in H.R. 1 are enacted, what would be the impact of the 212,000 units that are up 

for renewal in 2011? Would this mean that half the families in 

those units would not be given relief? 

So I would like an answer on that, if you can? 

Ms. TREVINO. Yes, ma’am. In our 2012 budget, we are actually 

proposing a bigger decrease than H.R. 1. But we have a strategy 

for how we are going to get there. If we have to implement that 

now, we probably would not be prepared to do so, and we might 

find ourselves short of renewing some of those contracts. 

Ms. DELAURO. Right. Because the funding level in 2008 fully covered all 104,000 housing units that were up for renewal. There are 

an estimated 212,000 up for renewal now. So what you are saying 

is that given—and these are low, very low income tenants for 

USDA—that you are not going to be able to do the renewal of all 

of those 212,000? 

Ms. TREVINO. In the 2012 budget, we will not renew all 212,000. 

Ms. DELAURO. Okay. Is that a further cut from H.R. 1? 

Ms. TREVINO. Yes, ma’am. 

Ms. DELAURO. H.R. 1 cuts below what you are doing? 

Ms. TREVINO. Yes, ma’am. 

Ms. DELAURO. Okay. So that means that you are not going to do 

it there, and then H.R. 1 would bring us below that number in 

terms of the 212,000? 

Ms. TREVINO. H.R. 1 will bring us below the 212,000. 

Ms. DELAURO. Right. And in addition to which what your 2012 

budget will do. So we are going to be much below the 212,000? 

Okay. If you can tell us what that would be, that would be helpful. 

Ms. TREVINO. Okay. 

[The information follows:] 

Rural Development believes that the budget request for rental assistance is sufficient to renew 204,503 rental assistance contracts. 

Rural Development is exercising asset management and loan servicing authorities 

on the portfolio of properties that are currently in default for monetary and nonmonetary reasons. By using existing authorities for servicing non-monetary defaults, 

Rural Development expects that at least 300 of these defaulted properties will move 

out of the Section 514 and Section 515 portfolios, allowing retirement of the 8,200 

rental assistance contracts associated with them. 

In addition, changes will be made to the timing of the renewal of contracts in the 

last quarter of the fiscal year. Historically, rental assistance contracts are renewed 

and funds obligated 60 to 90 days prior to the exhaustion of funds in the current 

contract. However, in the last quarter of fiscal year 2012, about 4,000 contracts will 

not be renewed as far in advance of the exhaustion of funds in the existing contract. 

Ms. DELAURO. I am just going to throw this question out, if you 

can get back to us on this? On the self-help housing grants, other 

options for self-help housing other than USDA if the program is 

eliminated there. 


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You have provided coverage in these areas, and it has been very 

effective. I think that is what several of us are trying to say here. 

But we see you going out of this business, and that is really very, 

very troublesome to me and I think to others here. 

BROADBAND COVERAGE

I want to just see if I can address a broadband issue. I think it 

is important to note that the United States is 14th in the world in 

broadband. So that tells you how advanced we are. I don’t have the 

list of countries of who is 1st through 13th, but I think it would 

be interesting to look at that to see who is outpacing us in 

broadband. 

And again, a nation which has taken roads and communications 

and electricity across the country, making serious public investment in these kinds of efforts in order to provide for economic development, which is what this does. Provides for economic development and jobs for people in the United States and in rural America. 

I might add just a comment on the FCC. The FCC has said that 

it has some funding for broadband from the Universal Service 

Fund, but the commission itself has said that the USF ‘‘fails to effectively and efficiently target support for broadband in rural 

areas.’’ 

Now you can ask the questions why about that, but clearly, the 

work of RUS is critical in this area in terms of telecommunications 

and in broadband. Can you outline some of the conditions that 

USDA focuses on in reviewing applications for rural broadband 

loans and grants? How difficult is it to determine and define what 

are unserved and underserved areas? Can you provide us with 

some examples of success stories involving the use of rural 

broadband loans and grants? 

You zero this out in 2012 with a justification that there is going 

to be adequate funds to carry us over prior years. Can you explain 

why there is so much carryover? Is it because there are applications still pending and so that the funds have yet to be distributed? 

If your office was subjected to significant cuts, would that impact 

your ability to review applications and distribute funds to improve 

rural broadband service? 

Can you explain the difference between the loans provided in the 

Rural Electrification and Telecommunications Program account 

and those provided in the Distance Learning Telemedicine and 

Broadband Program account? 

Mr. ADELSTEIN. Certainly I will—— 

[The information follows:] 

We will work with our Technical and Management Assistance providers and SelfHelp grantees to help identify other sources of assistance or to provide assistance 

in transitioning out of the program. 

Mr. KINGSTON. You have 5 seconds. [Laughter.] 

Mr. ADELSTEIN. I could do that for the record. I could give a 

brief—— 

Ms. DELAURO. We beg the chair’s indulgence here. It is an area 

that the chair is very, very much interested in. 

Mr. KINGSTON. Yes, I wanted to add on one more because I want 

to make sure that the gentlewoman knows, and I am sure you do, 


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that the Universal Service Fund—USF—is moving away from telephones and getting into broadband, which is one of the things that 

bothers me in terms of the duplication. 

Ms. DELAURO. But apparently, it is a controversial proposal. I 

understand what you are saying, but it is a—— 

Mr. KINGSTON. Yes. 

Ms. DELAURO. I am just telling what the FCC says it can do and 

not do. 

Mr. KINGSTON. Listen, my choice would be to zap the FCC program and put it under RUS. So—— 

Ms. DELAURO. I’m a strong believer in what RUS does in this 

area versus the Commerce Department. 

Mr. KINGSTON. Yes, and we are both to get on that. I also want to point out the Universal Fund paid as much as $20,000 a year 

to connect one single rural household to telephone service, $20,000 

a year. I am not sure how many jobs we got out of that, but they 

must have been great ones. 

Ms. DELAURO. That is why we have to go with RUS in answer 

to the question. 

Mr. ADELSTEIN. Well, the National Broadband Plan of the FCC 

did indicate they saw an important role for the RUS, and the issue, 

as a former member of staff there, would be if you were to move, 

for example, USF from there to here. It is not an appropriated account. It actually is funds that are collected by Universal Service 

Administrative Corporation through the bills of rate payers and 

then basically redistributed to ensure that everybody has assistance. 

Mr. KINGSTON. I think you are right. It is redistribution. It is a 

tax. That is what it is because it is not a voluntary payment, that 

it is an assessment and it is passed on to each and every one of 

us. 

Mr. ADELSTEIN. It is. But it strengthens the overall system. The 

idea is that every additional connection to the system makes it better for everybody, and it would be an issue with, of course, the domestic discretionary budget to try to move those funds. 

But this is a very different program, and if—— 

BROADBAND PROGRAMS

Ms. DELAURO. That is why I want to know about this program 

and the workings of this program that we are dealing with. That 

is where my questions were focused. 

Mr. ADELSTEIN. Yes. This program, the reason, in fact, it wasn’t 

really zeroed out by the President’s budget. The idea was we had 

carryover because there was no demand for the program during the 

period of the Recovery Act. During the pendency of that, people 

weren’t interested in the loan program. We administer that. 

In the meantime, we also wanted to ensure that we took all of 

the IG considerations into account before we restarted the program 

under this administration and also learned the lessons of the Recovery Act. So the new regulation focuses resources towards rural 

areas. It gives the highest priorities to areas that have no 

broadband service to date, and areas that have less than 25 percent coverage are next in order of priority. So we do try to move 

the funds in that direction. 


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Ms. DELAURO. Do you not have any people requesting those 

funds? I mean, if Wyoming has problems, other places have problems, there are rural parts of various States that have problems 

with broadband attraction, do we sit there and just look at this 

money and just say, well, it is here. Nobody has come knocking at 

our door for it. 

But we know, by virtue of what is happening nationwide, that 

there are underserved areas and are unserved areas. Help me. 

Mr. ADELSTEIN. Yes, in terms of the map—— 

Ms. DELAURO. Help me. 

Mr. ADELSTEIN. Tomorrow I am going to be testifying with the 

Administrator of Financial Telecommunications and Information 

Administration—NTIA—at Commerce, and he produced the map. 

They did the math that 5 to 10 percent of the United States lacks 

access to adequate broadband service. 

Ms. DELAURO. Do you have the rules out for how people can 

apply for this yet? 

Mr. ADELSTEIN. We do. We published them this month. 

Ms. DELAURO. This month? 

Mr. KINGSTON. If the gentlewoman will yield? 

Ms. DELAURO. Okay. Just one second, Mr. Chairman. Okay. So 

that may be the reason. I am just trying to assist you here to say 

if you just got the rule out, that that means people didn’t know 

how to make application for this or what the criteria was. Is that 

correct? 

Mr. ADELSTEIN. That is correct. 

Mr. KINGSTON. But what in the heck is that all about? Two years 

ago, that should have been done. I mean, ‘‘Oh, oh, well, now we figured out.’’ How many billions have been spent between you and the 

FCC in the new program? Because it was a $7 billion push. How 

many jobs were created from this wonderful slug of money from the 

stimulus program? I mean, how effective is this? 

Mr. ADELSTEIN. Well, we expect that USDA alone—— 

[The information follows:] 

As of December 31, 2010, Broadband Initiative Program (BIP) awardees had created 1,600 jobs. This figure does not include job creation numbers for NTIA’s BTOP 

program; it is a figure for BIP alone (i.e., the USDA program). The next reporting 

period ended March 31, 2011 and updated data for the first quarter of this calendar 

year is not yet available. This information is tracked and reported publicly on Recovery.gov. More than 25,000 jobs are projected to result ultimately as the buildout 

continues. 

Mr. KINGSTON. Now how many jobs were created? Because we 

are all talking, oh, this creates jobs. So how many were there? 

Mr. ADELSTEIN. Well, the estimate is that there would be—— 

Mr. KINGSTON. Well, how many were there? I don’t mean the estimate. Because 2 years ago, I promise you, we heard this exact, 

same testimony, and I was in the minority. And I have passionately sat where Ms. DeLauro sat. 

Ms. DELAURO. But Mr. Chairman? But Mr. Chairman, if there 

are no regulations—— 

Mr. KINGSTON. And I passionately—— 

Ms. DELAURO. But if there are no rules and no regulations—— 

Mr. KINGSTON. Then why did we start the dog-gone thing? 

Ms. DELAURO [continuing]. That people can apply for, and quite 

frankly, it doesn’t happen overnight. 


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Mr. KINGSTON. Well—— 

Ms. DELAURO. But if you deal with telemedicine, you deal with 

the—— 

Mr. KINGSTON. It would just be so comforting to know that for the $7 billion, we got something besides subsidies to telecom companies that were doing this stuff anyhow slowly. 

Ms. DELAURO. It would be very interesting to see what we get in return for $40 billion in tax subsidies that we provide to the oil 

and gas industry, which is truly on its feet. 

Mr. KINGSTON. If the gentlewoman chooses to pursue that—— 

Ms. DELAURO. Rural America is not on its feet. 

Mr. KINGSTON [continuing]. We will look at that amendment. But 

this is, I can’t tell you how frustrating it is. Even for Ms. DeLauro 

and me to be, you know, discussing the fact that you ought to be 

able to say for $7 billion, we got blank. Instead of, well, $7 billion, 

we now found out what we were doing wrong. We have—oh, revelation—we are going to go to underserved areas right now. 

Heck, it never was intended to go to New York City, and that 

is where they were. And the gentlewoman knows 30 miles outside 

of Houston, Texas, they were getting these loans? 

Mr. ADELSTEIN. That was under the previous program, not under 

the—— 

Ms. DELAURO. It was under the previous program, Mr. Chairman. They have tried to change this program—— 

Mr. KINGSTON. We are feeling—— 

Ms. DELAURO [continuing]. To make it effective, and so it is 

meeting the need nationwide. 

Mr. KINGSTON. I know. Everything is George Bush’s fault. 

But—— 

Ms. DELAURO. No. Well, most of the issues are, frankly. [Laughter.] 

Ms. DELAURO. I mean, let’s put the cards on the table. 

Mr. KINGSTON. And who was the Speaker in 2007? 

Ms. DELAURO. And the deficit is, as well. This is ridiculous. 

Mr. KINGSTON. Can the gentlewoman tell me who the Speaker of 

the House was in 2007? 

Ms. DELAURO. Yes, well, let me just tell you. 

Mr. KINGSTON. I will just say, at some point, you have got to go 

ahead and say, okay, we own the program. And the program has 

not done what it is supposed to do. And, but if you could—the gentlewoman has the stats. If you could say these stats are so crazy. 

Here, let me bring them up again. 

Ms. DELAURO. Well, then everybody in the country is hooked up. 

They ought to go out of business here. That is it. That is everybody—— 

Mr. KINGSTON. To my good friend from Connecticut, West Virginia, 86 percent penetration. I mean, what is so outrageous? Louisiana, 95 percent. Alaska, second to last, 90 percent penetration. 

In a country that owes $14 trillion in debt. 

Ms. DELAURO. My God. 

Mr. KINGSTON. We owe this money to great friends of ours like 

China. For every dollar we spend—— 

Ms. DELAURO. Yes, but you ask China what they are doing about 

broadband—— 


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Mr. KINGSTON. For every dollar we spend—— 

Ms. DELAURO. You ask China what they are doing about 

broadband, I would like to see those 13 countries that are ahead 

of the United States. 

Mr. KINGSTON. I know. I know there are certain people who like 

to—— 

Ms. DELAURO. The 13 countries ahead of the United States, we 

are 14th in broadband in the world. 

Mr. KINGSTON. Well, perhaps the President may want to go to 

the U.N. and get some more instructions on how to handle it. I 

don’t know. That seems how we do our foreign policy. 

Mrs. Lummis, you have been so generous. And Ms. DeLauro and 

I are just having our daily discussion. And you have been very nice 

and patient and quiet. So I feel like we need to yield. 

What do you think, Rosa, maybe 20 minutes to Mrs. Lummis? 

Ms. DELAURO. As much time as the gentlelady needs. [Laughter.] 

Mr. KINGSTON. See? Here we are—always in perfect harmony. 

Mrs. Lummis. 

Mrs. LUMMIS. Thank you, Mr. Chairman. It was great theater. 

REGIONAL INNOVATION

I have a question about a statement in your testimony, Mr. 

Under Secretary. You have mentioned that the USDA is refocusing 

certain programs to encourage regional strategic planning to 

stretch limited resources. And could you tell me what programs you 

are pursuing with this regional approach? 

Mr. TONSAGER. Secretary Vilsack has been intent on trying to 

work with regions of the country that have commonalities. We have 

used the Rural Community Development Initiative—RCDI—funding as well as the Rural Business Opportunity Grant—RBOG—program to provide very modest grants to those regions that have 

come together. 

I think there is approximately 22 regions altogether, and I think 

we have funded something like 7 or 8 of those, in that range 

through those grant programs. 

Mrs. LUMMIS. And they are grants to do what? 

Mr. TONSAGER. It is grants for communities to come together and 

try and identify joint needs. So, as you know, having lived in rural 

America, many communities compete with each other. And so, you 

end up with communities that each want to have a hospital, each 

want to have some kind of public facility. 

And what we are attempting to do is ask the communities to 

identify their commonalities, to work together to try and anticipate 

their needs, to look at their strengths and try and build on those 

strengths. 

Mrs. LUMMIS. Why is that a Federal function? Why is that not 

a State function? 

Mr. TONSAGER. The function is for the Federal Government. We 

have done regional approaches before. We had empowerment zones, 

enterprise communities previously. Those had substantial funds. It 

is our belief that it is a Federal function because there is a demand 

for it, frankly. People inside the—— 


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Mrs. LUMMIS. But couldn’t that be shifted? I mean, if this stuff 

were done like the CDBG program? If it were just like block granted to States? 

Mr. TONSAGER. We are probably talking in the neighborhood of 

$4 million or $5 million, I suppose, overall, $6.6 million that we 

have used. So it is an initiative because the Secretary, the President, and others have sought to do these regional initiatives, and 

we have taken it on as a challenge to do that. 

You could look at grants, but it is a very modest amount of 

money, in relative terms. And we don’t anticipate going to much 

larger amounts. 

FARM BILL ENERGY PROGRAMS

Mrs. LUMMIS. Okay. Now a question about biomass, biofuel programs. Could the entities eligible for the biofuel and biomass farm 

bill programs be eligible to compete under the Rural Energy for 

America Program? I know there has been mention that the Rural 

Energy for America Program is the most successful and competitive 

program. 

So, here again, pursuing the discussion of the gentleman and the 

gentlelady about consolidating programs and trying to wring efficiencies out of this Federal budget, is this one that could be combined with other things? 

Mr. TONSAGER. Each of the programs has a different focus. I 

think we would certainly be open to a discussion about what the 

opportunities might be. For example, the loan guarantee program 

can go up to $250 million with a 60 percent loan guarantee. That 

is focused on very large projects. 

The Rural Energy to America Program—REAP—tends to be on 

smaller projects, individual projects with people. It might be a 

methane digester. It might be an energy efficiency project. So we 

could certainly have a conversation about what we would like to 

meet the opportunities associated with all of those folks. So we 

would probably argue for fairly broad authorities if we were to combine them. 

Mrs. LUMMIS. Okay. Thank you, Mr. Chairman. 

I also want to thank the gentleman and the gentlelady for the 

discussion about the difficulties and the frustrations that we face 

with regard to the effectiveness of programs, the cost of programs, 

the job-creating ability of programs. It is enlightening. It is more 

than good theater. It is enlightening. 

So thank you very much. I yield back. 

Mr. KINGSTON. We have affectionate disagreement on a regular 

basis. Do you need to go? 

Ms. DELAURO. I do. Can I just ask my last questions, and then 

I will get out of your hair? 

Mr. BISHOP. Go right ahead. 

Ms. DELAURO. I will submit for the record, Mr. Adelstein, the 

questions I asked about broadband. It is an area very, very much 

of interest to me. I really do believe it is a driver of our economic 

future here. 


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SINGLE FAMILY HOUSING GUARANTEE PROGRAM

Ms. DELAURO. So I want to just pursue again the unsubsidized 

guarantee loan program, if I can? It was 2010 we made approximately 10,000 loans to low-income rural families under that program. The budget contends that the guarantee loan program can 

pick up the slack. Is it true? Can the guarantee program pick up 

the slack? 

Ms. TREVINO. It is going to pick up the slack on many of those, 

not all of them, and that is why we have proposed to leave some 

funding in the 502 direct for those very, very low that would not 

have access to private capital or the guarantee program. 

Ms. DELAURO. Are these families living in higher-income, larger 

communities, as the ERS asserts? 

Ms. TREVINO. In the direct—— 

Ms. DELAURO. Forty-eight thousand dollar level, the guarantee? 

Ms. TREVINO. Yes, ma’am. 

Ms. DELAURO. If you can, what other USDA housing assistance 

would be available to these low-income rural families? 

Ms. TREVINO. In order to purchase a home, other than the 502 

direct? 

Ms. DELAURO. Yes. 

Ms. TREVINO. The portion that we have right now allocated in 

the budget and the 502 direct and guaranteed programs. That 

would be all the ones that we offer for single family homeownership. We do have multi-family housing programs, though, that 

many of those qualify for. 

Ms. DELAURO. But in terms of the guarantee loan program that 

we are talking about here, you are not going to be able to hit 

these—these people are not going to be eligible? There is no way 

to cover, available to these low-income rural families? The multifamily is what is available to them? Is that what you are saying 

to me? 

Ms. TREVINO. Yes, ma’am. 

Ms. DELAURO. Okay. I am told here that it would cost us $38 

million more to keep the program level flat. Is that accurate? For 

the Single Family Direct Housing Loan Program, another $38 million? Can you check on that for me? 

Ms. TREVINO. I can check on that, yes. 

Ms. DELAURO. Will you? Because I know everybody is going to 

say it is $38 million, $38 million, but—— 

Ms. TREVINO. Based on the subsidy rate for today? 

Ms. DELAURO. Yes. 

Ms. TREVINO. Or 2012? 

Ms. DELAURO. Yes. 

Ms. TREVINO. For today, okay. 

Ms. DELAURO. By law, 40 percent of the funding for direct loans 

goes to very low income families, incomes at or below 50 percent 

of median. And you know this. Only 3 percent of the guaranteed 

funds go to these low-income families, as I understand it. 

I don’t know what evidence you have that the guarantee program 

can’t devote a greater share to the very low-income families. Will 

those families be in smaller communities? What happens when interest rates go up? 


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Can you provide us with the recent trends in rates for the guarantee loans, the rate at the current time and projections for the 

coming fiscal year? 

Ms. TREVINO. I can get those for you, yes. 

[The information follows:] 

Lenders and borrowers agree to the interest rate for guaranteed loans. Interest 

rates over the past 12 months have ranged between 4.5 and 5.5 percent. We expect 

interest rates to remain at the higher end of the range over the next few months. 

Ms. DELAURO. Okay. Okay, you understand and the chair knows 

this, as does my colleague Mr. Farr, who is the ranking member, 

I spend a lot of time on this committee putting back funds to rural 

America that have been cut. Because, in fact, it is true, rural 

America suffers severely. And what we need to be about is trying 

to use the resources that we have in order to be able through your 

good offices to be able to provide them with this. 

And if we are going to now take a look at the focus, continued 

focus on urban America, and I am from Connecticut. So that what 

is going to happen then with regard to our rural communities without some of these efforts? 

So I will continue to work here with this committee, et cetera, 

to see what we can do about restoring this. Yes? 

Ms. TREVINO. To answer your question earlier, it would take 

about $40 million to do $1 billion, and that is about what we did 

last year. 

[The information follows:] 

The program would need $53.023 million in budget authority to support $1.121 

billion in program level. This budget authority would maintain the same program 

level as the program level available in the FY 2010 enacted budget. 

Mr. KINGSTON. And I think another issue that kicks in is on restructuring of Fannie and Freddie. That will have a ripple effect 

on the mortgage business because I believe—and Rosa, I don’t 

know exactly what the stat is—but between FHA, Fannie, and 

Freddie, of $14 trillion in mortgages out there, that about 90 percent of it is from those three pots. And if you restructure those—— 

Ms. TREVINO. Yes, sir. About 80 percent of our guarantee go into 

either a Ginnie or a Fannie/Freddie into the secondary market. 

Mr. KINGSTON. Yes. 

Ms. DELAURO. I think we just have to address on this committee, 

Mr. Chairman, how we can address this issue. 

Mr. KINGSTON. Yes. 

Ms. DELAURO. Because it is at the core of the economic mission 

here. 

Thank you very much, Mr. Chairman. 

I thank you, too, Mr. Bishop. 

Mr. KINGSTON. Thank you. 

And I have one more question, but Mr. Bishop, do you want 

to—— 

Mr. BISHOP. Thank you very much. 

Let me apologize for not being here for much of the hearing. I 

have been trying to monitor via email. I had a responsibility as 

ranking member of another subcommittee that was meeting, and I 

had to be there. 


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RURAL AMERICA

But I am very much interested in the discussions that have 

taken place and continuing those regarding rural housing, rural 

health, broadband, and of course, rural utilities related to water 

and sewer projects. But I agree with Ms. DeLauro that we have a 

very, very, very strong mission and concern with regard to rural 

America. 

We have had economic challenges over the past few years, but 

when America has a cold, rural America has pneumonia. And it is 

really Rural Development at USDA that has the responsibility of 

kind of getting us healthy. 

And it has been a long time since rural America has enjoyed 

good health. So I am very, very interested in your mission and how 

we can help you. And given the budget difficulties that we are facing, I want to make sure that within our capacity that we do everything possible to help you to carry out your mission. 

RURAL MICROENTREPRENEUR ASSISTANCE PROGRAM

My specific question has to do with the Rural Microentrepreneur 

Assistance Program. It was a major new initiative that was created 

in the 2008 farm bill, providing funding to community-based organizations to make small loans and technical assistance to microentrepreneurs. 

Can you explain the actual application procedure for the program? In particular, what the credit requirements are for the assistance, and what percentage of approved projects have been submitted by minority applicants—Hispanic, Indian—and whether or 

not you maintain statistics on applicants who don’t get the assistance? 

This is extremely important because I am aware that the programs cost much less than the traditional loan programs, but many 

of them have been very, very, very effective in creating jobs and 

stimulating economies. In urban areas, for example, I have a couple of areas in Albany, Georgia, for example, where they have 

worked quite well. 

So if you could address that, I would appreciate it. And any comments that you might have on how we could expand and improve 

access to the program so that more rural residents in particular, 

and particularly more minority residents can have access to it? 

Small and disadvantaged farmers is a target of the department, 

and we are pleased with that. But small and disadvantaged entrepreneurs in rural areas ought to also be a target, and I would like 

to hear your comments on that and tell us how we could help you 

to enhance that mission that was set forth in the 2008 farm bill 

and perhaps enhance it as we go forward to 2012? 

Mr. TONSAGER. Thank you, Congressman. 

[The information follows:] 

The Rural Microenterprise Assistance Program (RMAP) was implemented in FY 

2010. The first round of loan and grant awards were made in September 2010. The 

loan documents between the Agency and the Microdevelopment Organizations 

(MDO) were executed during the period of October–December 2010. MDOs are just 

starting to use their loan funds to make micro loans. MDOs are required to submit 

program activity reports quarterly which will include racial and ethnicity information of their microborrowers. MDOs’ quarterly reports are not required to report inVerDate Mar 15 2010 03:51 Jun 25, 2011 Jkt 066679 PO 00000 Frm 00063 Fmt 6633 Sfmt 6602 E:\HR\OC\66679P2.XXX 66679P2

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formation on applicants not approved for loans. The Agency will conduct a Civil 

Rights Compliance Review of each MDO every three years which will include the 

statistic of applications received but denied a loan. One of the priorities of the 

RMAP program will be to focus in underserved areas and the Agency will have better data through this fiscal year. 

Regarding the underwriting requirements, microborrowers will be suject to a 

‘‘credit elsewhere’’ test so that the MDO will make loans only to those microborrowers that cannot obtain business funding of a maximum of $50,000 or less at affordable rates and on acceptable terms from other sources. Eligible microloan purposes are spelled out in the regulations. The MDO will establish their credit standards and their loan policies which are provided to the Agency. The MDO must provide evidence to show they have demonstrated experience and the capacity to manage the microloan revolving loan fund. 

I just want to offer a thought, and I am going to ask Administrator Canales to speak to it. 

The exciting thing about working in rural America is the thousands and thousands of communities, peoples, groups, organization, 

local coops, rural electric systems that really, really work at this 

and really, really care about it. And what we do with our mission 

is try and align ourselves as closely with that group of people as 

we possibly can and give them all the tools we can possibly give 

them to aggressively go out there and help rural America. 

And there is just an enormous number of people with a lot of 

skill sets. This particular program is tremendously advantageous to 

those kinds of folks who really want to go out, do a small business, 

create some jobs, and be part of the solution that we really need 

to get to. 

With that, I will ask Judith if she will address the questions that 

you have raised. 

Ms. CANALES. Good morning, Congressman. Thank you so much 

for this opportunity to address the panel and also for your interest 

in the Rural Microentrepreneur Assistance Program, which, as you 

know, was authorized in the 2008 Farm Bill. 

Indeed, at this point in time, having completed one round, two rounds, we have already been able to provide for $37 million worth 

of revolving loan funds, meaning 63 loans that have been conducted throughout the United States, as well as, in addition to 

that, 73 grants, totaling $9.7 million. And that is rounds one and 

two. 

We are currently in the phase of reviewing the round three 

group. This application is a competitive application. Because it is 

a new program, we are very much learning about the program also. 

Not to say we don’t have experience operating revolving loan funds, 

but because it offers a new emphasis and this new emphasis meaning it is for being able to do micro lending. 

So micro lending in the sense of a business that is 10 employees 

and below, and also the fact that we are also able to provide grants 

to the organizations that are actually conducting these loan programs, this is something that is new for us. What occurs very often 

and usually, is that organizations basically apply for revolving loan 

funds and don’t have this kind of access. And so, these are very 

critical pieces. 

The other aspect to this is that what we are doing very strongly 

is to promote what I call geographic diversity, meaning being able 

to have these loan programs conducted throughout the United 

States. And then throughout the United States, as you also well 


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know, is the opportunity to be able to work with the various communities that you have just described. 

In the long run, it is all about working with an intermediary at 

the local level to bring access to capital to prospective rural businesses. 

Mr. BISHOP. Just for the record, and I know my time has expired, 

I see. But could I get you to provide me with a list of the—— 

Ms. CANALES. Awardees? 

Mr. BISHOP [continuing]. Awardees for the country, and particularly for Georgia? 

Ms. CANALES. Yes, sir. 

And as a matter of fact, I have met with some organizations from 

Georgia, who are highly engaged and are looking at just different 

parts of the State because they want to be able to, which I think 

this is a very good thing, make sure that no part of Georgia is uncovered. 

[The information follows:] 


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So that benefits all of you from Georgia, but that is something 

that I have been encouraging all of our State offices because, as 

you well know, we operate through a field system for Rural Development and having State offices. And I have asked our program directors to look at every—at your State and find out who is covered. 

And if we don’t have an area that is covered that is rural, then we 

need to make sure that there is an opportunity for those communities to get served. 

Mr. BISHOP. Because there are lots of communities that need the 

assistance but don’t have microentrepreneur programs. 

Ms. CANALES. An intermediary, yes. 

Mr. BISHOP. And there are some that have the programs, but 

probably could benefit from your resources. 

Ms. CANALES. Absolutely, sir. And I would be happy to get you 

the information, and we are conducting training for our staff on 

this program because, again, it is a new program as far as our 

menu of programs. We have been operating, like I said, revolving 

loan funds for several years in other cases, but the other part to 

this, too, is that we, of course, will be conducting a stakeholder 

meeting of all the awardees to this point in time so that we can 

get more feedback as to the intricacies of the program and how we 

can improve it. 

Mr. BISHOP. The City of Albany, Georgia, has a microentrepreneur program. I don’t know if they are participating with USDA 

at this point or not. But they have got several very, very good success stories, which have created spinoff businesses from the original microentrepreneur who was first funded. 

And apparently, they do a good job with the technical assistance, 

and I want to make sure that I connect them with you if they are 

not already connected. 

Thank you very much, Mr. Chairman. I yield back. 

COMMUNITY FACILITIES PROGRAM

Mr. KINGSTON. Thank you, Mr. Bishop. 

Ms. Trevino, I wanted to ask a couple of questions to you for the 

record. If you could just get back to us on the community facility 

guarantee program versus the direct community facility loan program. And specifically, on the community facility guarantee program, how many defaults have there been? When did they occur? 

Why did they occur? 

And have the rules and standards changed appropriately, and 

what steps are you taking to address the operation? I don’t know 

if you would have those stats. 

Ms. TREVINO. I cannot give you the numbers of the amounts that 

have defaulted, but just to tell you that the default rate in the 

guarantee program tends to be more effective than the direct program because we make fewer loans there. However, the loans are 

larger. That is where we fund a lot of the big hospitals, the $10 

million and more projects. So a loss of just one has a huge impact 

on the portfolio and, therefore, affects the—— 

Mr. KINGSTON. But you want to eliminate it? 

Ms. TREVINO. That is the one that we have asked because the direct program right now is a negative subsidy. 

Mr. KINGSTON. Yes. 


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Ms. TREVINO. And so, we can increase that and try to cover any 

of the ones that aren’t going to be met under the guarantee program. 

Mr. KINGSTON. Okay. If you could get back to me on that? 

[The information follows:] 

The total losses for the Communities Facilities guaranteed loan program beginning in March, 1997 through February, 2011 are $70,221,093.24. 

The four largest losses in the history of the program occurred between August, 

2006 and September, 2009. These totatled $43,218,176, or 61 percent of the total 

losses in this period. Three of these loans were obligated in 2000 and one was obligated in 2005. Two of the loans, totaling just over $23 million, were made by nontraditional lenders without the required regulatory oversight. The other two loans, 

totaling just over $19 million, were made to commercial lenders. Two of the loans 

were for golf courses, and two were for hospitals. One of the lenders continues to 

service its debt, and we expect to collect an additional $3.5 million. 

These losses were primarily due to golf courses and nontraditional lenders/investment bankers. As a result, we have strengthened our oversight and standards for 

recreational facilities and nontraditional lenders wishing to participate in the program. 

Historically, the 55 loans in which the program has experienced a loss are comprised of 25 health care facilities, primarily assisted living and nursing homes; 6 

recreational facilities, the two largest losses being golf courses; 6 schools; 5 museums; 5 child care facilities; 4 community centers; and 4 other assorted facilities. 

BLENDED PUMPS AUTHORITY

Mr. KINGSTON. And Under Secretary, as you know, we had a vote 

on the floor about the ethanol blender program, and it was 261 to 

158. So it failed on a bipartisan basis. I am not sure what the Senate is going to do with it, obviously. But there doesn’t seem to be 

legislative support based on that vote. 

But the other concern is that there is not legislative authority on 

it. It appears that the USDA is starting a new program without a 

farm bill authorization or without amendments or without legislation, and I wanted you to react to that. 

Mr. TONSAGER. We are evaluating an opportunity to provide 

some assistance for blender pumps in our programs. I can’t speak 

directly to it because it is in the development phase of the regulation. So I can’t get to the details of that. 

We would not pursue it if we did not believe we had authority 

to do it. We do believe that. We have gone through our general 

counsel’s office, evaluated that. 

Mr. KINGSTON. Do you know where they cited that authority? 

Mr. TONSAGER. I don’t. Offhand, I don’t have it. 

[The information follows:] 

Section 9007(a)(2) authorizes the Agency to fund parts of ‘renewable energy systems’ as well as renewable energy systems in whole. The Agency’s definition of ‘renewable energy system’ in its current regulation at CFR 4280.103, specifically includes ‘delivery’ as one aspect of such a system. The Agency has determined that 

a flexible fuel pump is a uniquely critical aspect of a biofuel ‘renewable energy system’ which the Agency believes covers the conversion of the biomass through the 

dispensing of the biofuel to a vehicle. The Agency believes this interpretation is consistent with the authorizing statute and its corresponding regulation. 

The policy rationale for the Agency to include flexible fuel pumps in Rural Energy 

for America Program is to address a barrier that the Agency has determined impedes the broader use of biofuels as a liquid transportation fuel in the United 

States. For example, one major aspect of this barrier derives from two scenarios. 

The first is one of an insufficient availability of higher ethanol-blend fuels in the 

market place that discourages Americans from purchasing flexible fuel vehicles that 

can burn such higher ethanol-blend fuels and does not provide a sufficient level of 


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higher ethanol-blend fuel to supply the existing flexible fuel vehicle fleet to fully 

take advantage of the fleet’s ability to consume additional biofuel. The second is one 

of an insufficient number of flexible fuel vehicles on the road to encourage fuel station owners to expend the capital necessary to install flexible fuel pumps in response to market forces. By allowing Rural Energy for America Programs to provide 

financing through grants and loan guarantees to encourage the installation if flexible fuel pumps in rural areas, the Agency believes it can help overcome this barrier. 

The Agency acknowledges that there are other similar biofuel examples, including 

barriers to biodiesel. 

The Agency recognizes that Rural Energy for America Program is designed to address a variety of renewable energy and energy efficiency goals. With the inclusion 

of flexible fuel pumps for Rural Energy for America Program funding, the Agency 

will ensure that it will not ignore the other important goals and purposes of the program. 

Mr. KINGSTON. I think that would be of interest to us, and one 

of the goals that this Congress has set is not to create new programs unless you eliminate another program and you can justify 

the creation of it. It is not—I think conceptually there is certainly 

good argument for it, but with budget constraints and that vote on 

the floor of the House being bipartisan and pretty overwhelming 

against it, it is probably best to delay that unless we can show 

hard-core evidence of results immediately. 

Do you think we will be able to or what do you—this committee 

would be very interested in that. And do you know how much that 

is going to cost per fuel station? 

Mr. TONSAGER. Again, I am reluctant to speak regarding it because of the regulatory writing process that we are in right now. 

Mr. KINGSTON. And how would you handle the charge, say, of a 

large chain, you know, somebody who has 200 gas stations versus 

a mom-and-pop? How would you choose between the two of them? 

Mr. TONSAGER. Again, I am sorry to continue to cite the program 

being in the review process. But generally, general counsel says I 

should not have a discussion in public when it is in that particular 

process. 

Mr. KINGSTON. When does the review process end? 

Mr. TONSAGER. Quite soon. 

Mr. KINGSTON. All right. Well, Mr. Bishop, if you do not have 

any other questions, and we will have maybe some, a few more for 

the record. But we certainly appreciate your testimony today. As 

usual, Mr. Young goes unscathed. I think there has got to be a 

way—— 

[Laughter.] 

Mr. KINGSTON. I think, Mr. Adelstein, you should give him a little broadband so he can catch some of this. But we certainly appreciate your testimonies today and all your answers. 

Thanks. 

The committee stands adjourned. 


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