Rural Development Provisions of the 2008 Farm Bill
Released: 2009-01-16T00:00:00

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 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 Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 ). 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 manufacturing and services, new federal political strategies, and the emergence of new political interests in farm bill deliberations. 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 seen as elements of global and regional restructuring, which have significant implications for rural areas, especially those areas where these production sectors remain dominant. Today, nearly 90% of total farm household income comes from off-farm sources. Manufacturing now accounts for about 25% of rural private sector earnings and about 12% of all rural jobs. 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 innovative 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 holding 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, 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

Emerging policy issues surround 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 are important in shaping the provisions of the rural development title of the 2008:

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; Regional-based efforts for economic development. Connecting businesses and rural communities with broadband telecommunications infrastructure

The rural development title of the 2008 farm bill has taken 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. Such issues give rise to several policy relevant questions.

How effective are current federal programs in improving the competitive position of rural areas? Can broad-based federal rural programs be better targeted to the critical needs of particular rural areas? How might regional funding approaches be better integrated into federal policy for rural areas? How can federal policies better assist entrepreneurial efforts in rural communities? How might the biofuels emphasis in the upcoming farm bill be connected to rural development programs?

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. The 1996 farm bill ( P.L. 104-127 ) authorized the first provision in the rural development title funded by mandatory spending, the Fund for Rural America, which expired in 2002. The 2002 farm bill ( P.L. 107-171 ) authorized six new programs supported through mandatory spending. Mandatory funding for most of these programs, however, was largely blocked by appropriators between 2002 and 2007. Several of the programs were funded instead through discretionary appropriations, although in amounts less than the original authorization. The 2008 farm bill has several provisions supported by mandatory spending, although in lesser amounts than were proposed in the House and Senate-passed versions of the farm bill.

Title VI of the Food, Conservation, and Energy Act of 2008 (P.L. 110-246)

New Provisions

Several programs authorized in the 2002 farm bill are reauthorized in the two bills. The Appendix provides a complete side-by-side comparison of current law with the provisions in the House and Senate bills and the enacted bill. Unlike the 2002 farm bill, the rural development provisions of P.L. 110-246 contain only three programs with mandatory funding: Value-Added Product Grants ($15 million); the Microenterprise Assistance Program ($15 million); and a one-time funding of pending water and waste water projects ($120 million). Several programs that were authorized to receive mandatory funding in the 2002 farm bill were reauthorized in P.L. 110-246 with discretionary funding (e.g., the Rural Strategic Investment Program and the Rural Firefighters and Emergency Medical Personnel Program).

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 to the neediest rural communities because of the way rural is defined. Section 6018 directs the Secretary to assess the varying definitions of "rural" used by USDA and to describe the effects these different definitions have on USDA Rural Development programs. The provision directs the Secretary to make recommendations for ways to better target rural development funds. Section 6018 further establishes a new definition of "areas rural in character" that specifies the characteristics of eligible rural areas lying within a Bureau of the Census-defined "urban area." The provision also permits the Under Secretary for Rural Development discretion in determining whether individual rural areas should fall under the new definition.

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

Section 6015 authorizes loans and loan guarantees for locally or regionally produced agricultural food products —those products that travel less than 400 miles between production and marketing. 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 6022 authorizes a Rural Microentrepreneur Assistance Program . The program will provide financial assistance to microenterprises (sole proprietorships or businesses with fewer than 10 full-time employees). The program will target economically disadvantaged microentrepreneurs, i.e., those who could compete in the private sector but have been impaired because of lack of credit opportunities and limited equity capital options. Grants will be provided to microenterprise development organizations to support the development of entrepreneurial activities in rural areas. These qualified organizations are required to match at least 15% of the federal grant. Mandatory funding is authorized at $4 million annually for FY2009-FY2011, $3 million for FY2012, and discretionary spending at $40 million annually (FY2009-FY2012). Sections 6301-6305 establish the Housing Assistance Council Authorization Act. This authorizes $10 million annually (FY2009-FY2011) for the Department of Housing and Urban Development to provide financial assistance to the Housing Assistance Council (HAC) to assist community-based housing development organizations in undertaking community development and affordable housing projects in rural areas. The HAC is an independent, nonprofit organization that has supported local organizations in rural housing development since 1971. Section 6028 authorizes a Rural Collaborative Business Investment Program and provides $135 million in spending. The provision would create Regional Investment Strategy Grants, Rural Innovation Grants, and a Rural Endowment Loan Program. The provision also directs the Secretary to appoint a National Rural Investment Board, create a Rural Philanthropic Institute, and a National Institute on Regional Rural Competitiveness and Entrepreneurship. The program would provide rural regions with a financial vehicle to develop and implement local strategies for innovation.

Other Major Provisions

In addition to these newly authorized programs, the rural development title also includes other provisions to create or 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 utilities infrastructure, (3) business and community development, and (4) regional development.

Broadband and Telecommunications

Section 6110 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 makes changes in defining eligible rural communities, makes provisions for prioritizing loans, and reduces equity requirement on broadband providers offering service to unserved areas. Appropriations are authorized at $25 million annually (FY2008-FY2012). The provision also requires annual reporting on the extent of participation in the loan and loan guarantee program. The measure further authorizes the Secretary to designate a National Center for Rural Telecommunications Assessment and authorizes discretionary funding for the center at $1 million annually (Section 6111). Section 6201 reauthorizes the Distance Learning and Telemedicine Loan and Grant Program, which provides funding to educational and medical facilities. The provision will also emphasize library connectivity as an objective of program funding. Section 6112 authorizes a Comprehensive Rural Broadband Strategy. The provision directs the Secretary of Agriculture to develop a comprehensive strategy for enhancing broadband service to rural areas.

Rural Utilities Infrastructure

Section 6001 reauthorizes Water, Waste Disposal and Wastewater Facility Grants through 2012. Discretionary funding is provided under the utilities account of Rural Community Advancement Program (RCAP). This is the largest program in the RCAP portfolio. Section 6011 amends the current interest rate schedule for water and waste water loans by setting rates to a proportion of a municipal bond index. . Section 6006 reauthorizes the Rural Water and Wastewater Circuit Rider Program , which provides technical assistance to rural water systems. Funding is authorized at $25 million annually (FY2008-2012). Section 6008 reauthorizes the Emergency and Imminent Community Water Assistance Grant Program , which provides funding to rural communities facing threats to the provision of potable water. It is also funded under the utilities account of RCAP. Section 6009 reauthorizes Water Systems for Rural and Native Villages in Alaska. This provision targets funding under the utilities account of RCAP for Alaskan native communities. Section 6008 reauthorizes grants to nonprofit organizations for the construction and refurbishing of household well water systems . The program targets well systems for low-income individuals in rural areas. Section 6029 provides $120 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 6003 reauthorize Rural Business Opportunity Grants , which are used for economic planning and technical support and training for rural businesses. Section 6007 reauthorize Tribal College and University Essential Community Facilities through 2012. This program targets funding under the Community Facilities Program, an RCAP account, to tribal facilities. 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. Section 6016 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. authorize $5 million annually. Section 6204 reauthorizes the Rural Firefighters and Emergency Medical Service Assistance Program . Originally authorized by the 2002 farm bill, the measure provides grants to enable entities to provide improved emergency medical assistance in rural areas. It also provides grants to pay the cost of training emergency personnel to respond to hazardous materials and bioagents in rural areas. Unlike the 2002 farm bill, which provided mandatory funding, the provision is authorized for discretionary funding up to $30 million annually (FY2008-FY2012). Section 6202 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. Mandatory funding is authorized at $15 million to be available until expended. An additional $40 million annually (FY2008-FY2012) in discretionary funding is also authorized. 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. Other provisions include $2 million annually (FY2008-FY2012) in grants to nonprofit organizations for Expansion of Employment Opportunities for Individuals with Disabilities in Rural Areas (Section 6023). Section 6027 reauthorizes the Rural Business Investment Program through 2012. This program was authorized in the 2002 farm bill and given mandatory spending. The reauthorization provides a total of $50 million.

Regional Development

Section 6025 reauthorizes the Delta Regional Authority , a federal-state partnership serving a 240-county/parish area in an eight-state region of the Mississippi delta. Section 6024 authorizes $3 million annually (FY2008-FY2012) 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 6026 reauthorizes the Northern Great Plains Regional Authority (NGPRA) , which covers Iowa, North and South Dakota, Minnesota, and Nebraska. The provision authorizes the NGPRA to organize and operate without a federal member if no such individual is nominated within 180 days of enacting the bill. The provision also eliminates prioritization of activities to be funded by the program and the requirement that 75% of the authority's funding go to "distressed counties and isolated areas." 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. While not a provision of Title VI, Section 14217 authorizes the creation of three new regional economic development and infrastructure commissions: (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 (FY2008-FY2012) for each commission.

Appendix. Side-by-Side Comparison of Rural Development Provisions in the House- and Senate-Passed Farm Bills with the 2002 and 2008 Farm Bills