Rural Development Provisions in the 2014 Farm Bill (P.L. 113-79)
Released: 2014-09-04T00:00:00

Policy Background and Overview

While farm commodity issues may occupy center stage in policy discussions of the periodic omnibus farm bills, rural community and economic development are also topics of congressional concern and are a separate title within the farm bill. Since 1973, omnibus farm bills have included a rural development title. The most recent is Title VI of the Agricultural Act of 2014 ( P.L. 113-79 ). Positioning rural areas to better compete in a global economic environment is one of the key issues framing the current debate about the future of rural America. When agricultural production and related businesses dominated rural economies, policies that strengthened and improved agriculture tended to strengthen and improve the well-being of most of America's small communities and rural residents. As the strength of this linkage has declined, the need for new sources of rural economic development has become more apparent to policymakers and rural development practitioners.

Congressional interest in rural policy encompasses a wide range of issues, including agriculture, forestry, and mining; community infrastructure; natural resource conservation and management; medical care; bioenergy; and economic development. Current challenges to and reform of existing federal rural policies are evolving in an environment of increasing concern about economic competitiveness, a shift away from agriculture toward services, and new federal political strategies. A changing rural America is also producing pressures for different policies and raising new questions about what Congress's role should be in shaping rural policy.

Both agriculture and manufacturing issues are increasingly regarded as elements of global and regional restructuring, which have significant implications for rural areas, especially those areas where these production sectors remain dominant. Today, over 90% of total farm household income comes from off-farm sources. The service sector, as with the U.S. domestic economy as a whole, now dominates the rural labor market, although the rural service sector differs from the metropolitan service sector in terms of job categories, skills, and wages.

The rural development title of farm bills generally supports (1) the infrastructure of rural areas, with traditional assistance for housing, electrical generation and transmission, water and wastewater, and community capacity; (2) agricultural development; and (3) rural business creation and expansion. More recently, policymakers have pushed for programs that support innovative and alternative business development, and new mechanisms to finance it. Pressure for such alternative approaches is expected to continue as policymakers recognize the changing structure of agriculture and the great diversity among rural communities, with some rural areas growing and prospering, and others falling further behind as their primary industries (including agriculture) either decline or adapt to a global economy. Such adaptation and dislocation over the past decade has often meant fewer rural employment opportunities and significant population outmigration for many rural communities.

To emphasize the importance of agricultural production in the local economies that still characterize many rural areas, legislative support for technologies to help farmers with planting decisions and local investments in industries that will add value to their products have become important aspects of rural development policy. Research is also increasingly focused on improvements in agricultural waste management and environmental protections. Traditional strategies, notably value-added agriculture (e.g., regional food processing plants, cooperatives, organic farming, biofuels) are being promoted by many in the farm sector. While these strategies hold promise for agriculture and surrounding communities, there remain limits on the extent to which agriculture and other mature industries can become a significant engine for renewed rural economic prosperity.

While commodity policy dominates much of the debate and most of the funding in the farm bill, production agriculture remains a comparatively small and shrinking part of the rural economy, with less than 8% of the rural population employed in agriculture. There is growing recognition that farmers in many rural areas depend more on a healthy rural economy than the rural economy is dependent on farmers for its vitality. The need to strengthen the capacity of rural areas more generally to compete in a global economy is becoming more widely appreciated as the limitations of commodity subsidies, peripheral manufacturing, and physical infrastructure as mainstays of rural development policy become more obvious.

Issues Influencing the Rural Development Title

The policy debate focuses on the question of whether current farm policies, which rely heavily on commodity support payments and subsidies to a few production sectors, help, hinder, or have little impact on the future development of economically viable rural communities. Rural manufacturing, which tends to be lower-skilled and lower-waged, is also undergoing restructuring with the loss of manufacturing to foreign competition. While transformation to a service economy continues in rural America, service employment in many rural areas tends to be in lower-wage personal services rather than business and producer services. Continuing population and economic decline in many farming and rural areas is compelling policymakers and rural areas to create new sources of competitive advantage, innovative ways of providing public services to sparse populations, and new ways of integrating agriculture into changing rural economies.

More recently, economic development efforts in some areas have targeted various entrepreneurial strategies and microenterprise development. These approaches attempt to capitalize on a particular area's distinctive social, economic, and environmental assets and advantages to build endogenously on existing local and regional strengths. Developing a local and regional entrepreneurial culture seems to be an important approach in these efforts' successes. Linking public and private sources to build "business incubators" is a common strategy, as is developing new commercial ties with area colleges and universities. Communities are also applying such entrepreneurial energy to making their local governments, schools, and hospitals more efficient through, for example, telecommunication innovations.

The trends noted above suggest a range of issues that were important in shaping the provisions of the rural development title of the 2014 farm bill:

conservation and environmental restoration as rural employment opportunities; stemming rural population out-migration; vertical integration and coordination of agriculture into supply networks and their implication for rural areas; developing rural entrepreneurial capacity; rebuilding an aging rural physical infrastructure; public service delivery innovations in sparsely populated areas; increasing suburbanization and the conflicts between agriculture and suburban development; human capital deficiencies in rural areas; regionally based efforts for economic development; and connecting businesses and rural communities with broadband telecommunications infrastructure.

The rural development title of the 2014 farm bill took shape against this backdrop of shifts in the rural economy, widespread and long-term poverty in some rural areas, outmigration in other rural areas, dwindling economic opportunity in rural areas, gaps in critical infrastructure, and a growing appreciation in many quarters of the limits of existing rural development programs to respond to the great diversity of rural places and socioeconomic circumstances.

Federal Rural Development Programs

More than 88 programs administered by 16 different federal agencies target rural economic development. The Rural Development Policy Act of 1980 ( P.L. 96-355 ), however, named USDA as the lead federal agency for rural development. USDA administers most of the existing rural development programs and has the highest average of program funds going directly to rural counties (approximately 50%). Three agencies are responsible for USDA's rural development mission area: the Rural Housing Service (RHS), the Rural Business-Cooperative Service (RBS), and the Rural Utilities Service (RUS). An Office of Community Development provides community development support through Rural Development's field offices.

It is important to note that most loan and grant programs administered by USDA Rural Development are funded through annual (discretionary) appropriations. The rural development title of omnibus farm bills does not address every program administered by the three USDA mission agencies. Many of these programs are "permanently" authorized, often through amendments to the Consolidated Farm and Rural Development Act of 1972 (the ConAct, P.L. 87-128) or the Rural Electrification Act of 1936, and are funded through annual appropriations. Farm bills generally give the authority to appropriate discretionary funds for these "permanently" authorized programs for specific time, usually for the authorized period of the farm bill.

Title VI of the Agricultural Act of 2014 (P.L. 113-79)

While there have been long-standing arguments for the need to address the unique issues facing rural America through a comprehensive rural policy, the unique needs and resources of very different rural areas and the absence of any nationally organized rural constituency make that an unlikely outcome in the near term. Congress has chosen instead to address national rural policy issues in this and most previous farm bills, through support for a portfolio of loans, loan guarantees, and competitive grant programs that generally address three major deficits that most all rural areas experience: (1) rural infrastructure, (2) rural business development and retention strategies, and (3) rural investment capital. The three mission agencies of USDA Rural Development support such a policy, with their respective emphasis on housing and community facilities, water, broadband, and electrical generation, and business/cooperative development. While local rural economic development is shaped by the distinctive resources that different rural areas can draw on, infrastructure, business planning and development, and the general absence of capital are three clear needs that virtually all rural areas can identify. The nearly 60 different loan and grant programs currently administered by USDA Rural Development generally follow this agenda. Newly authorized programs in the 2014 farm bill, as with previous farm bills, have reinforced this emphasis.

In the 2014 and the 2008 farm bills, newly authorized programs that address rural development issues from a regional perspective, as opposed to a local emphasis alone, have become more prominent. In addition to the authorization of three new regional development commissions in the 2008 farm bill, the 2014 farm bill also prioritized multijurisdictional planning for strategic rural development. These regional efforts suggest some movement away from the very local, ad hoc needs of rural communities, and toward a more comprehensive planning approach that, in time, could begin to shape the contours of a more comprehensive national and integrated rural policy.

Below, the various provisions of the 2014 rural development title are briefly outlined. An Appendix provides a complete side-by-side comparison of current law with the provisions of the House and Senate bills and the final enacted bill.

New Provisions in the 2014 Farm Bill

Concerns about how effectively USDA targets its rural development loan and grant assistance have been a recurring consideration by policymakers and rural development practitioners. The general concern is that rural development funding may not be targeted as well or as effectively as it could be. Section 6209 directs USDA to begin collecting data regarding economic activities created through USDA Rural Development grants and loans, and to measure the short- and long-term viability of award recipients. The provision also directs USDA to submit a report every two years with information on rural employment generation, new business start-ups, and any increased local revenue.

The rural development title authorizes a new Strategic Economic and Community Development initiative (Section 6025) that will prioritize projects that support economic development plans on a multijurisdictional basis. Other criteria for project selection include planning developed through the collaboration of multiple stakeholders in the service area of the plan, including the participation of combinations of stakeholders such as state, local, and tribal governments, nonprofit institutions, institutions of higher education, and private entities. Priority is also given to projects with investment from other federal agencies, and philanthropic organizations. The program reserves 10% of the appropriation for community facilities, rural utilities, rural business and cooperative development accounts for projects that meet the criteria of strategic development.

Other new provisions in the rural development title include the following programs:

Section 6015 creates a new Rural Business Development Grants program. The program essentially terminates the Rural Business Enterprise grant program and the Rural Business Opportunity grant program and combines their general functions into the new grants program. It has an authorized appropriation of $65 million annually FY2014-FY2018, subject to annual appropriations. This authorized annual funding level is substantially more than the two grant programs it replaces. Section 6014 reauthorizes loans and loan guarantees for locally or regionally produced agricultural food products —those products that travel less than 400 miles between production and marketing. The program targets low-income areas without access to fresh fruits and vegetables. An increase of up to 7% of the appropriation for the Business and Industry Loan Guarantee program is authorized. Funding priority is given to projects benefitting underserved communities (i.e., those with limited access to affordable, healthy foods and with high rates of poverty or food insecurity). Section 6002 eliminates the reserve funding under the Community Facilities grant program for child care facilities. Section 6205 authorizes a new Rural Energy Savings Progra m. The program provides loans to utility districts and Rural Utility Service borrowers to assist rural households and small businesses in implementing durable, cost-effective energy efficiency measures. The program has an annual appropriation authorization of $75 million annually for FY2014 through FY2018, subject to annual appropriations. Section 6105 authorizes a new Rural Gigabit Network Pilot Program (operating at a 1 gigabit per second downstream transmission capacity) that could bring ultra high-speed broadband to more rural areas. The program has an annual appropriation authorization of $10 million each year for FY2014 through FY2018. Section 6006 authorizes an Essential Community Facilities Technical Assistance and Training Program . This grant program provides public entities and nonprofit corporation the technical assistance and training necessary to prepare reports and surveys necessary to request financial assistance under the Community Facilities loan and grant program. The program will also provide training to assist in the management of community facilities. Funding for the program comes from a 3%-5% carve-out of the funds appropriated for the Community Facilities loan and grant program. Section 6208 modifies the definition of "rural area" for the Housing Act of 1949 . The provision increases the maximum eligible population threshold to 35,000 from 25,000 and permits any rural area that was eligible in the 1990, 2000, and 2010 census to remain eligible for Rural Housing Service programs until the 2020 decennial census.

Other Major Provisions

In addition to these newly authorized programs, the rural development title also includes other provisions to reauthorize and/or amend a wide variety of loan and grant programs that provide further assistance in four key areas: (1) broadband and telecommunications, (2) rural water and wastewater infrastructure, (3) business and community development, and (4) regional development. Each of these programs has authorized discretionary spending subject to annual appropriations, with the exception of one mandatory spending authorization of $150 million for reducing the backlog of pending water and waste water applications.

Broadband and Telecommunications

Section 6104 reauthorizes the Access to Broadband Telecommunications Services in Rural Areas . The program was originally authorized in the 2002 farm bill (Section 6103) and funded by mandatory authorization. Its effectiveness, however, was limited by difficulties in implementation. The provision establishes new criteria for applications, reporting requirements, and prioritizing loans, which includes applications that provide broadband not primarily for business service if at least 25% of the customers in the proposed service territory are commercial interests. The provision also establishes minimum levels of downstream transmission capacity. Section 6201 reauthorizes the Distance Learning and Telemedicine Loan and Grant Program, which provides funding for end-user telecommunications equipment. The provision also emphasizes library connectivity as an objective of program funding. Funding is authorized at $75 million each year for FY2014 through FY2018, subject to annual appropriations.

Rural Utilities Infrastructure

Section 6003 reauthorizes the Rural Water and Wastewater Circuit Rider Program , which provides technical assistance to rural water systems. Funding is authorized at $20 million annually (FY2014-FY2018), subject to annual appropriations. Section 6007 reauthorizes the Emergency and Imminent Community Water Assistance Grant Program , which provides funding to rural communities facing threats to the provision of potable water. Funding is authorized at $30 million annually through 2018, subject to annual appropriations. Section 6008 reauthorizes Water Systems for Rural and Native Villages in Alaska . Funding is authorized at $30 million annually through 2018, subject to annual appropriations. Section 6009 reauthorizes grants to nonprofit organizations for the construction and refurbishing of Household Well Water S ystems . The program targets well systems for low-income individuals in rural areas. Authorized funding was reduced from $10 million to $5 million each year for FY2014 through FY2018, subject to annual appropriations. Section 6210 provides $150 million in mandatory funding for Pending Water and Wastewater Loan and Grant Applications. This would be a one-time expenditure designed to remove some of the current backlog of applications.

Business and Community Development

Section 6005 reauthorizes Tribal College and University Essential Community Facilities through 2018. This program targets funding under the Community Facilities Program. Essential facilities include those that support public safety infrastructure and provide community health care. Section 6013 reauthorizes Rural Cooperative Development Grants . This provision permits multi-year grants (up to three years) for awards to rural cooperative centers. It provides a 20% set-aside for rural centers working with socially disadvantaged communities when the appropriation level exceeds $7.5 million. It provides an appropriation of $40 million each year for FY2014 through FY2018. Section 6023 reauthorizes the Rural Microentrepreneur Assistance Program . Funding is authorized at $3 million annually through FY2018. The program provides loans and grants to third-party organizations to assist small businesses that cannot otherwise get credit at reasonable terms. The third-party entities provide expertise to the small businesses in developing and implementing innovative projects. Section 6015 reauthorizes the Appropriate Technology Transfer for Rural Areas Program (ATTRA) . The program supports a cooperative agreement between the Rural Business-Cooperative Service and the University of Arkansas to provide information and technical support for sustainable and organic agricultural production. Authorizes $5 million annually through FY2018, subject to annual appropriations. Section 6203 reauthorizes the Value-Added Agricultural Market Development Program . This provision targets funding for "mid-tier value chains" which are local and regional supply networks linking independent producers with businesses and cooperatives. It also reserves 10% of the Value-Added Products Grants for projects benefitting beginning or socially disadvantaged farmers and ranchers. Funding is authorized at $63 million annually (FY2014-FY2018), subject to annual appropriations. The measure also prioritizes loans that contribute to opportunities for beginning farmers and ranchers, socially disadvantaged farmers or ranchers, and small and medium-size family farms. Section 6028 reauthorizes the Rural Business Investment Program through FY2018. This program was authorized in the 2002 farm bill and provides capital for Rural Business Investment companies, which, in turn, make loans to start-up businesses. The purpose of the program is to create a funding source for venture capital in rural areas. The reauthorization provides a total of $20 million each year for FY2014 through FY2018, subject to annual appropriations.

Regional Development

Section 6026 reauthorizes the Delta Regional Authority , a federal-state partnership serving a 240-county/parish area in an eight-state region of the Mississippi Delta region. Section 6024 authorizes $3 million annually through FY2018 for grants to support health care services, health education programs, health care job training programs, and development and expansion of public health-related facilities in the Delta region. Section 6027 reauthorizes the Northern Great Plains Regional Authority (NGPRA) , a regional economic planning and development commission that supports regional infrastructure and business development in Iowa, North and South Dakota, Minnesota, and Nebraska. Section 6206 directs the Secretary of Agriculture, in coordination with the Secretary of Transportation, to conduct a Study of Rural Transportation Issues regarding the movement of agricultural products, renewable fuels, and economic development in rural America. Section 6207 reauthorizes funding for three new regional economic development and infrastructure commissions created by the 2008 farm bill: (1) the Northern Border Regional Commission; (2) the Southeast Crescent Regional Commission; and (3) the Southwest Border Regional Commission. Funding is authorized at $30 million annually through FY2018 for each commission, subject to annual appropriations.

Appendix. Side-by-Side Comparison of Rural Development Provisions in the 2014 Farm Bill with the House- and Senate-Passed Farm Bills