Rural Development
Tadlock Cowan

Policy Issues

Since the 1972 Rural Development Act (P.L. 92-419), rural policy has been an identified concern of the Congress. 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 is also undergoing restructuring with the loss of low-wage/low-skill employment to foreign competition; and 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 producer services. Continuing population and economic decline in many farming and rural areas, especially the Great Plains region, 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.

Important policy issues affecting rural development include:

• Creating new sources of economic growth and development for rural areas;

• Stemming rural population out-migration;

• Increasing vertical integration and coordination of agriculture into agro-food value chains and their implication for rural areas;

• The role of new value-added agriculture production in rural development;

• Developing rural entrepreneurial capacity;

• Rebuilding an aging rural physical infrastructure;

• Public service delivery innovations in sparsely populated areas;

• The fate of remote, low-wage, declining rural areas, many of which are in agriculture-dependent counties, especially the Great Plains;

• Increasing suburbanization and the conflicts between agriculture and suburban development;

• Human capital deficiencies in rural areas;

• Connecting businesses and rural communities with broad-band telecommunications infrastructure.

Recent Congressional Activity

Legislation has been introduced in the 108th Congress directed at strengthening the rural workforce, providing new telecommunications infrastructure, creating new regional authorities, and stemming rural population loss:

• Rural Renaissance Act (S. 1796) would create the Rural Renaissance Corporation to issue rural renaissance bonds for financing rural projects;

• The New Homestead Act of 2003 (H.R. 2194/S. 602) would renew rural areas suffering significant population out-migration by attracting new businesses and residents. The bill provides (1) student loan forgiveness to recent college graduates who stay and work in qualifying counties; (2) tax credits for homebuyers; (3) Homestead Accounts to help build savings and increase access to credit; (4) an investment tax credit for rural businesses; and (5) a Venture Capital Fund;

• The Rural America Job Assistance and Creation Act (H.R. 137) would provide grants for small business to improve job skills in their respective industries;

• Southern Empowerment and Economic Development Act to authorize the Delta Black Belt Regional Authority (H.R. 678). This bill would provide for comprehensive community and economic development in the distressed Southern Black Belt and Mississippi Delta region;

• The Southwest Regional Border Authority Act (S. 458/H.R. 1071) and the Southeast Crescent Authority Act of 2003 (H.R. 141);

• The Rural America Digital Accessibility Act (H.R. 138) would provide grants to underserved rural areas for broad-band telecommunications development.

FY2005 Appropriations

For FY2005, the Administration is requesting $2.206 billion in budget authority to support $7.667 billion in program level loans, grants, technical assistance, salaries and expenses. This is approximately $241.5 million less in budget authority than enacted in FY2004 and $3.430 billion less in program level funding. The lower program level request reflects Administration estimates of interest rates, loan subsidy rates, and loan default and recovery rates. (Reported figures for budget authority in FY2004 reflect a 0.59% rescission.) As was the case in FY2004, the Administration again requests cancelling mandatory funding for various rural development programs authorized in the 2002 farm bill and is requesting that some mandatory funding be shifted to discretionary authorization.

The House-passed appropriations bill (H.R. 4766) recommends $2.4 billion which, in part, supports a $10.28 billion loan authorization level. This recommended budget authority is $188.7 million more than the Administration's request, and the loan authorization level is $2.7 billion more than requested. Direct loans for water and waste water would increase to $90 million in FY2005, up from $34.4 million in FY2004. Water and waste water grants would fall below amounts available in FY2004, but would still be approximately $100 million more than requested. The House bill also recommends prohibiting the expenditure of mandatory funding for various rural development programs as requested by the Administration.

Rural Development Funding Opportunities

• The Economic Development Administration (EDA) is soliciting proposals for funding to support comprehensive, entrepreneurial and innovation-based economic development efforts. The goal is to enhance the competitiveness of regional business environments that result in increased private investment and higher-skill, higher-wage jobs. Approximately $285.1 million has been appropriated for EDA programs in FY2004. Grant awards will not exceed 50%of a project's cost. Eligible applicants for and eligible recipients of EDA financial assistance are defined at 13 CFR 300.2. Proposals are accepted on a continuing basis.

• Funding is available under the Rural Utilities Service's Rural Broadband Access Loan and Loan Guarantee Program. This program supports the construction, improvement and acquisition of facilities and equipment for broadband service in eligible rural communities. Of the total FY2004 loan funds available, $2.051 billion will be available for direct cost-of-money loans, $80 million for 4% direct loans, and $80 million for loan guarantees. Awards of at least $100,000 will be made for loans and loan guarantees. Maximum awards of $7.5 million may be made for direct 4% loans. Eligible rural communities include any area of the U.S. that is not contained in an incorporated city or town with a population in excess of 20,000 inhabitants. For further information, see Federal Register: March 29, 2004 (Volume 69, Number 60): Page 16231-169232.

CRS Products

CRS Report RL31801. Appropriations for FY2004: U.S. Department of Agriculture and Related Agencies.
CRS Report RL32301. Appropriations for FY2005: U.S. Department of Agriculture and Related Agencies.
CRS Report RL31704. A New Farm Bill: Comparing the 2002 Law with Previous Law and House and Senate Bills.
CRS Report RL31837(pdf). An Overview of USDA Rural Development Programs.
CRS Report RL32372. Economic Development Options and Constraints in Remote Rural Counties: A Case Study of the Great Plains Region.
CRS Report RL31172(pdf). The Changing Structure of Agriculture and Rural America: Emerging Opportunities and Challenges.
CRS Report RL31598(pdf). Value-Added Agricultural Enterprises in Rural Development Strategies.

Websites

USDA Rural Development: http://www.rurdev.usda.gov/
USDA Rural Business-Cooperative Service: http://www.rurdev.usda.gov/rbs/
USDA Rural Utilities Service: http://www.rurdev.usda.gov/rus/
USDA Rural Housing Service: http://www.rurdev.usda.gov/rhs/
USDA Economic Research Service: http://www.ers.usda.gov/
Center for Agricultural and Rural Development: http://www.card.iastate.edu/
Center for the Study of Rural America: http://www.kc.frb.org/
National Rural Development Partnership http://www.rurdev.usda.gov/nrdp/
Rural Policy Research Institute: http://www.rupri.org/

CRS Contact: Tadlock Cowan (7-7600)

Page last updated August 26, 2004.

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