Testimony on Rural Development

Testimony on Rural Development in the Farm Bill to the Senate Agriculture Committee, August 2006. Written Testimony of Chuck Hassebrook of the Center for Rural Affairs to the US Senate Agriculture Committee on August 16, 2006.

The next farm bill offers America a choice. We can continue the misplaced federal priorities destroying rural communities, or we can invest in creating a future in Rural America.

All Americans have a stake in the outcome. America is strongest when all of its communities are strong and all of its people have access to genuine opportunity. Rural America is a valuable part of America. But rural communities are not sharing in the nation’s prosperity. That hurts all of America.

We can create a better future for rural America and with that enhance the rural contribution to a stronger America. There are proven, practical, local strategies working to revitalize 21st century rural communities. But local initiative must be matched by federal policies that support rural revitalization rather than hinder it. It’s time to invest in creating a future in rural America.

Renewing Agricultural Opportunity by Fixing Policies that Destroy It
The farm bill should foster genuine opportunity in agriculture and make it possible for modest-size family farms to earn decent incomes – incomes that enable them to contribute to build strong communities. Strengthening family farms is one element of a strategy to build strong rural communities – not the only element but a significant one. Strengthening family farms is a legitimate policy objective – a social good.

A substantial body of research demonstrates that social good. University of California researcher Dean McCannell summarized the research for the Congressional Office of Technology Assessment. He wrote that “All the serious studies reach the same conclusion …. Communities that are surrounded by farms that are larger than can be operated by a family unit have a bi-polar income distribution, with a few wealth elites, a majority of poor laborers and virtually no middle class.”

That is not progress. That is social decay. The current farm policy reinforces that decay. Its basic rule – the bigger a farm grows, the more money it gets from the government – ensures three outcomes.

The farm program will do at least as much to help mega farms drive family farms out of business by bidding land away from them; as it does to help family farms stay in business.

  1. The program will do little to support the income of farm operators except on previously owned land. As the long as aggressively expanding mega farms are promised more government money for every acre they add, virtually every nickel of farm payments will be bid into higher cash rents and land purchase prices.
  2. As long as we squander billions on such dubious purposes as helping mega farms drive up land rents and drive out family farms, little money will be left to invest in programs that offer a future to rural America.

That’s why 81 percent of farmers nationwide and even 70 plus percent of southern farmers support more effectively targeting payments to small and mid-size farms, according to an Extension Service poll prior to the last farm bill. It also accounts for growing cynicism toward farm programs among farmers. Many farmers, who in the past supported farm programs, now tell me they would be as well off with no program as with the current program providing unlimited payments to mega farms.

Sensible payment limitations reforms can make farm programs work better and provide the fiscal basis to invest in our future. It’s a win-win solution. We do not have to choose between having effective farm programs and effective rural development programs.

Payment limitation reform that reduced the cost of farm programs by just five percent could fund a quadrupling of funding for entrepreneurial rural development, providing an additional half billion dollars annually at no additional cost to taxpayers. And it would leave an additional $250 million for investment in bio-energy, broadband telecommunications, and rural development related research.

Investing in Creating a Future for Rural America Through Entrepreneurship
It’s the right time for an historic investment in the future of rural America. Toward the end, we urge you to establish through the next farm bill a Rural Community and Entrepreneurship Investment Initiative with mandatory funding of half a billion dollars annually.

Entrepreneurship is the key to rural revitalization. In the most rural farm-dependent counties, we found the majority of new jobs are non-farm proprietorships – people creating their own job by starting a small business. Small entrepreneurship is the one development strategy that consistently works in these communities.

It is also the strategy that has the capacity to bring back young people – including those who gain higher education. Our surveys of rural youth in three northeast Nebraska communities demonstrated that half would like to one day own their own farm or business. That opportunity has the potential to draw them back to rural America. Eight dollar per hour jobs in call centers won’t. We urge you to invest in the following proven entrepreneurial strategies in the next farm bill:

Creation of the Rural Entrepreneurs and Microenterprise Program to make grants for providing training, technical assistance, and loans to rural entrepreneurs. Microenterprise is defined as a business that employs five or fewer individuals and does not have access to the commercial banking sector. Such a program was included in the Senate version of the 2002 Farm Bill but not the final legislation. It should be included in the 2007 bill with $50 million of mandatory funding annually.

Creation of a Community Entrepreneurial Development Program based on four pillars of rural economic and community development: small entrepreneurship, charitable giving to support community development, youth engagement, and leadership development. This program would offer grants to collaborating communities to establish regional initiatives for entrepreneurial development, including small business education and technical assistance, leadership development, youth attraction and retention, community-based philanthropy, and intergenerational business transfer planning. We propose mandatory funding of $75 million annually.

Creation of an Entrepreneurship Education Program administered through the four regional rural development centers. This program would make grants to four-year and community colleges, the extension services, non-profit organizations, and primary and secondary schools to provide access for rural Americans to entrepreneurship education. Too often in rural America, we educate our young to move away. This program would help educate rural people to create their future in rural America. We propose mandatory funding of $50 million annually.

Adoption of the Individual Homestead Account provision of the New Homestead Act. Like the Individual Development Accounts typically used in urban areas, these accounts match private savings with public funds. Funds could be withdrawn to start small businesses (including beginning farming), gain education, purchase first homes, and pay medical expenses. The provision would apply to 698 counties in 38 states that have experienced net out-migration of 10 percent or more. For beginning farmers, we propose broadening the New Homestead Act provision to all counties. We propose funding of $250 million.

Investing in Agricultural Entrepreneurship
The future opportunities for small and mid-size farms are in market niches, made up of consumers willing to pay premium prices for products with unique attributes and food produced in ways they support. For example, two-thirds of participants in a Better Homes and Gardens consumer panel said they would pay more for pork produced on small farms that treat animals humanely and are environmentally responsible.

Family farmers need support in developing these market-based opportunities. We also need new entrepreneurial beginning farmers to pursue these opportunities and keep family farming and rural communities alive. We propose the following initiatives:

The Value-Added Producer Grant program should be reauthorized and provided $50 million of mandatory funding. Created by the 2002 farm bill, the program should prioritize projects that strengthen the profitability and viability of small- and medium-sized farms and ranches and set aside 10-15 percent of funds for projects concerning beginning farmers and ranchers.

A Family Farm Innovation Fund should be created to provide seed capital for innovative initiatives to strengthen family farming and ranching opportunities. For example, an agricultural bank in eastern Iowa is sponsoring a series of forums on machinery cooperatives as a means of enabling small and mid-size farms to lower machinery costs to competitive levels. But it takes legal work and research to launch such initiatives. USDA innovation funds could support such initiatives by providing the Secretary of Agriculture authority to use up to $2.5 million annually to support such initiatives from the funds authorized and appropriated for USDA direct lending programs.

Reauthorize the Beginning Farmer and Rancher Development Program to support collaborative local, state, and regionally-based networks and partnerships for training, mentoring, linking, education, and planning activities to assist beginning farmers. This time, the farm bill should commit $15 million of mandatory funding.

Make the Beginning Farmer Land Contract pilot program nationwide and permanent. It allows USDA to provide loan guarantees on land contract sales to beginning farmers. The prohibition on use of USDA guarantees with “first time farmer bonds” should be removed. These bonds make interest on contract land sales to beginning farmers tax exempt. Together, these provisions could provide a powerful incentive to sell land on contract to beginners. Seller could gain tax-free interest and very low risk.

Support Research Focused on Strengthening Small and Medium Sized Farms. Congress should commit $10 million of mandatory funding annually to the existing USDA National Research Initiative competitive grants program initiative “Enhancing the Prosperity of Small Farms & Rural Agricultural Communities.”

Innovative Conservation Initiatives Support Sustainable Community Development
We can and should get much better at designing conservation programs to support communities as they protect the land and water.

Public access to natural space can be a development asset for communities. It can draw young families to start businesses, populate the schools, and revitalize communities. And it can provide the basis for new tourism related self-employment opportunities involving bed and breakfasts, hunting, horseback riding, hiking, biking, wildlife viewing, and other activities.

Conservation programs should work in concert with community initiatives to use public access to natural space as a development asset. Landowners who enroll in the Conservation Reserve Program, Wetland Reserve Program, or the Grassland Reserve Program should receive bonus payments if they restore natural space and provide public access as part of a community plan to use natural space as a development asset.

Conservation programs should help conservation-minded beginning farmers get started. Programs that provide a 10-year stream of payments could, for beginning farmers, provide one up-front, lump-sum payment in return for a binding 10-year conservation commitment. So structured, conservation payments could help finance farm entry and help establish both stewardship and resource stewards on the land.

Chuck Hassebrook, Executive Director
Center for Rural Affairs
email: chuckh@cfra.org



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