Donate ARTICLE NOV 23, 2021 Build Back Rural: New Investments in Rural Capacity, People, and Innovation A net-zero and equitable economy requires the participation and leadership of rural communities, enabled by foundational rural investments in the Build Back Better Act. AUTHORS Mark Haggerty Mike Williams Lily Roberts Mikyla Reta Building an Economy for All, Build Back Better, Economy, Innovation MEDIA CONTACT GOVERNMENT AFFAIRS A farmer drives a tractor down a rural road, January 2019, near Ottawa, Illinois. (Getty/Scott Olson) The Build Back Better Act (H.R. 5376) working its way through Congress will make substantial investments in rural communities. However, for investments in infrastructure, renewable energy, and restoration to lead to a more equitable, resilient, and prosperous rural America, money is not enough. The Build Back Better Act makes foundational investments in the capacity of rural communities and regional intermediaries. It also provides for building block investments in new energy systems, restored landscapes, and broadband. Rural communities are eligible to receive building block investments; foundational investments are rural-exclusive and ensure rural communities have the capacity to apply for, implement, and benefit from building block investments. Foundational investments in the Build Back Better Act don’t add to large dollar amounts. Rather, they mark a transformation in thinking about what rural communities need to be successful in today’s economy: the capacity to lead locally designed transition and development strategies that build wealth and resilience. Rural America today lacks economic security, the result of decades of damaging economic policy and industry restructuring. Traditional economic sectors, such as manufacturing, agriculture, and resource extraction, which historically supported rural places, are increasingly automated or have disappeared altogether. The new economy built around innovation, ideas, technology, and financial markets has overlooked many rural places, concentrating jobs, wealth, and capital in cities. At the same time, popular imagination paints rural areas with a broad brush, ignoring the significant differences and specific needs and strengths of communities. For too long, policy solutions organized around deregulation, tax cuts, and facilitating capital accumulation have eroded the foundations upon which rural economies stand. Underinvestment in infrastructure, inadequate internet access, rural hospital closures, and a declining tax base in many rural places contribute to a vicious downward economic spiral. Current federal rural development funding and policy, however, has proved inadequate to reverse the very real economic, geographic, and policy headwinds affecting rural communities. Federal economic development grants and loan programs are too often siloed and short-term, include competitive and complex applications and reporting requirements, and require matching funds out of reach of rural communities with little capacity. Many programs use the number of people served to assess impact, automatically sidelining rural areas from receiving grants and loans. Rural leaders are understandably skeptical that adding more spending into the same policy environment and structure risks replicating the same unequal and inequitable outcomes. That is why the foundational investments in the Build Back Better Act are so important. They are exclusive to rural communities and represent nascent efforts at transforming the way the federal government goes about supporting rural development. The act also provides rural communities with building block investments in new energy systems, restored landscapes, and broadband. Several programs in the Build Back Better Act provide flexible, longer-term, and predictable funding targeted to rural, disadvantaged communities. Locally designed and led economic development strategies are prioritized. Capacity building, or preparedness, grants help rural communities compete for funding and successfully implement collaborative planning, staffing, implementation, and networking strategies. The act demonstrates a commitment to improving the lives of rural Americans who will build the infrastructure, restore the lands and waters, and manage the resources necessary to meet national climate, conservation, and economic goals. The rural workforce is highly skilled but often has less access to education, training, and wages or benefits commensurate with their experience and skills compared with workers in urban labor markets. Underlying principles A set of underlying principles guides these foundational investments. These principles focus on place-based solutions and investing in working people, as well as on better aligning public and private sectors. This in turn helps accelerate innovation and solve today’s critical problems while creating new businesses and more jobs. Place-based solutions Investing in places is necessary to reverse the hollowing out of rural communities. The Build Back Better Act includes important investments in the physical assets, infrastructure, facilities, and human capital of local governments and partner institutions—including nongovernmental organizations, land-grant universities, tribal colleges, and others—that are necessary for equitable and resilient rural economies. In many cases, these places include often overlooked rural areas, including tribal lands, rural areas in U.S. territories, and communities along the U.S.-Mexico border. Place-based investments build capacity that captures and reinvests back into the community more of the wealth rural economies produce. Investing in working people The rural workforce is highly skilled but often has less access to education, training, and wages or benefits commensurate with their experience and skills compared with workers in urban labor markets. As a consequence, the rural workforce is less able to adapt to the new economy and more likely to be displaced during transitions in energy, manufacturing, and other economic sectors. Securing support for training and direct assistance, as well as bringing high-quality jobs to rural communities, are necessary to support rural families and their communities. Accelerating innovation The Build Back Better Act represents a “mission” approach to solving problems that matter to rural communities and workers. Economists argue for more strategic and intentional coordination between government and the private sector to drive innovation and accelerate commercialization of new ideas and technology that lead to new business startups and jobs. The Build Back Better Act makes important new investments in research, partnerships, facilities, and incentives focused on solving the climate crisis and ensuring equitable growth. Foundational investments in rural capacity Foundational investments prepare rural communities and workers to compete for building block funding and ensure rural economies capture and retain more of the benefits when building block investments are made. Foundational investments enable rural places to leverage the value they produce into more resilient and equitable communities. Rural Partnership Program The Rural Partnership Program (RPP) (Sec. 12008) is an important foundational investment that will catalyze new approaches to rural development that prioritizes locally led solutions. The RPP would deliver long-term, flexible funding for communities to design and implement development solutions that build on existing assets and goals. It includes $887 million for development grants targeted directly to partnerships of local governments and qualified for-profit and nonprofit entities in low-income rural regions and $97 million for innovation grants for regional institutions that can help build capacity in targeted counties. Investing in research, education, and facilities at land-grant universities, tribal colleges, and rural institutions In addition to building block funds—for example, to implement forest and rangeland restoration projects on public and private lands—the Build Back Better Act makes foundational investments in agricultural and forest research, education, cooperative extension, and facilities (Sec. 13001). These investments include $1 billion for the U.S. Department of Agriculture’s (USDA) National Institute of Food and Agriculture and $1 billion for the Research Facilities Act to build the physical assets, research, and extension capacity necessary to help transform rural agriculture and forestry economies. These foundational investments leverage the public’s role in driving innovation and forming new markets through basic research and public-private partnerships. Investing in rural health care education and workforce development The Build Back Better Act includes several improvements and increases in funding to “Rural and Undeserved Pathway to Practice Training Programs for Post-Baccalaureate Students, Medical Students, and Medical Residents.” (Part 6, Sec. 137601) These scholarships and investments in additional medical residencies are intended to incentivize students from rural and underserved areas to become doctors and practice within their home communities, increasing the availability of health care in rural areas and retaining high-wage earners. Improving rural America’s energy future Delivering roughly $14 billion across multiple programs (Sec. 12004-12007), the Build Back Better Act will support expansive renewable energy development and energy efficiency investments in rural communities. It will do so through direct grants and low-interest loans for renewable energy for agricultural producers and small businesses, through a major investment in the resilience of rural electric cooperatives, and through direct support for people to invest in renewable energy on their properties. Building block investments The foundational investments described above are targeted to rural areas and build the capacity of rural communities to be awarded building block investments for which they are eligible but must compete with suburban and urban communities to win. Building block investments are essential to building the infrastructure and energy capacity necessary to achieve a net-zero economy; to restore and conserve the ecological functions of forests, grasslands, and wetlands; and to guarantee a more equitable and resilient U.S. economy. Many of these investments will occur in rural areas. Prioritizing safe and affordable housing in rural places The Build Back Better Act includes significant support for rural homeowners and renters. The USDA’s Section 504 program would allocate $100 million in grants to help low-income homeowners upgrade or repair their homes, including manufactured homes. In addition, $2 billion would go toward construction, improved energy and water efficiency, climate resilience, and the removal of health and safety hazards in rural rental housing. In addition, the Build Back Better Act includes $3.05 billion via Community Development Block Grants for affordable housing and neighborhood infrastructure. This includes $700 million and $500 million to address the housing and community infrastructure needs of colonias and resident-owned manufactured housing communities, respectively. Colonias–under-resourced communities along the U.S.-Mexico border—are among the least-resourced neighborhoods in the country, often disconnected from safe water, sewage systems, and electrical grids. Ensuring that low-income people in rural areas receive the tax credits they’re due The American Rescue Plan of spring 2021 (H.R. 1319) made crucial improvements to the earned income tax credit (EITC) and the child tax credit (CTC), and the Build Back Better Act proposes extending those changes. For the first time, the EITC includes workers ages 19 to 24 and above age 65—age groups that had previously been excluded. For workers without children, the maximum EITC increased to roughly $1,500, and the maximum income to qualify rose from $16,000 to $21,000. The proportion of workers who benefit from this change is higher in rural areas than in metropolitan ones: 21 percent of rural workers without children in the home will benefit, compared with 17 percent of metro area workers. Under the previous structure of the CTC, nearly half of children who live in rural areas were excluded from the full CTC because their parents earned too little to qualify in the first place. With the American Rescue Plan and Build Back Better Act’s change to a tax credit that’s fully refundable—available to parents with low or no earnings—94 percent of children in rural areas will benefit, compared with 89 percent of children in metro areas. Supporting small-business growth and high-wage jobs The Minority Business Development Agency (created by executive order in 1969 but newly codified by the Infrastructure Investment and Jobs Act), will use $400 million to establish regional offices and $200 million to establish business support centers in rural areas. Centers provide would-be entrepreneurs and those who have started businesses and organizations with one-on-one support in developing business plans, marketing materials, financial systems, and more. In addition, the Small Business Administration will use funds to create a new Native American outreach program and a new set of rural small-business conferences (Sec. 100202-100203). Targeting financial support to communities historically excluded by the USDA The U.S. Department of Agriculture is a major driver of investments in rural areas, but over the course of the 20th century, Black farmers and communities faced enormous discrimination and exclusion from USDA support. The Build Back Better Act’s funding for USDA programs includes steps to rectify past wrongs, including $750 million for farmers who experienced discrimination in USDA lending programs and significant additional support for higher education institutions’ agricultural research programs that primarily serve communities of color (Sec. 20023). Many of the families and communities affected by historic discrimination are in rural and isolated areas where these investments can rebuild resilient and equitable communities and economies. Growing regional economic clusters The Economic Development Administration will receive $3 billion under the Build Back Better Act to support regional economic clusters using a “mission” approach (implementing the “Accelerating innovation” principle described earlier in this column) that aligns infrastructure, workforce, entrepreneurship, planning, and readiness funding to support collaborative and regional economic development strategies (Sec 110018). Technical assistance grants will help regions build collaborations among university, government, nongovernmental, and tribal entities and prepare cluster initiatives. Regional collaborations receiving technical assistance grants are then eligible for implementation grants to act on locally developed strategies. A share of the proposed funding will be allocated to communities losing coal-fired power plants and to coal mines seeking to transition to a more diversified economy. Aligned with foundational funding—for example, through the Rural Partnership Program—regional economic clusters will be able to create and grow markets for rural economies and ensure more of the benefits are reinvested within the region. The Build Back Better Act demonstrates a commitment to improving the lives of rural Americans who will build the infrastructure, restore the lands and waters, and manage the resources necessary to meet national climate, conservation, and economic goals. Conclusion Rural communities and workers will be central to meeting the nation’s climate goals and to building a more equitable and resilient economy and communities. The Build Back Better Act will make the building block investments in infrastructure, energy generation, land and water restoration, and workers that are necessary to meet these goals. The act also will make foundational investments in rural assets, capacity, workers, and families to ensure that rural communities benefit when building block investments are made. Without foundational investments, rural places will continue to struggle as too much of the value they generate for the nation is exported, rather than returned and reinvested. The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible. AUTHORS Mark Haggerty Senior Fellow, Energy and Environment Mike Williams Senior Fellow Lily Roberts Managing Director Mikyla Reta Policy Analyst PREVIOUS Rural Broadband Investments Promote an Inclusive Economy ARTICLE Rural Broadband Investments Promote an Inclusive Economy Jul 12, 2021 Caius Z. 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