in American Agriculture, and USDA's Commitment to Small Farmers
Jill Long Thompson
Thank you for providing me this opportunity to join so many professionals who dedicate themselves to improving the lives or rural Americans and prospects for America's small and mid-size family farms. Few individuals understand the myriad problems facing farm families and the potential benefits from Federal agriculture programs as well as the persons and public officials represented here.
I also appreciate having the chance at this forum to discuss with you the new vision that has taken root at the Department of Agriculture and its very positive impact on small farmers and ranchers and rural America in general. The Clinton Administration is committed to making a maximum effort to improving life in rural America. I see that every day in the three organizations that report directly to the Under Secretary for Rural Development: The Rural Housing Service (RHS), the Rural Business-Cooperative Service (RBS), and the Rural Utilities Service (RUS).
Obviously, the commitment goes way beyond the business, housing, utilities, and development programs administered within the Rural Development mission area.
The results speak for themselves. Total farm cash receipts for 1996 could reach a record $200 billion, $29 billion above 1992 and far beyond the $144 billion average for the 1980s. Much attention has been given to agriculture's $30 billion trade surplus. That is not unfair--it is one of the biggest success stories in the U.S. economy. By the end of the year, U.S. farm exports are projected to reach $60 billion, a 50 percent increase since President Clinton took office. These numbers translate into higher prices, higher incomes, and more jobs. In 1995, U.S. agricultural exports supported nearly 1 million jobs--one-third of them in rural areas.
Secretary Glickman also understands that for many small and mid-sized farm operations a local farmers' market can provide increased outlets and prices for production.
The Agricultural Marketing Service helps states and localities in research and funding for development and expansion of farmers' markets. Twenty years ago, there were fewer than 100 farmers' markets across the country. In 1994, the National Farmers' Directory, published by USDA, catalogued 1,700 farmers' markets. These increased markets mean money for small and mid-size farms.
A Cornell researcher has estimated that direct sales of fruits and vegetables through farmers' markets totaled more than $1 billion in 1993.
Secretary Glickman understands there is room in the system for farmers who choose to market their own products--their own way. Measured across all crops and livestock, farmers are now getting prices 20 percent higher than they got in 1992 and nearly 25 percent above the average for the 1980s. Farmer coopera-tives are another success story. Co-ops reported a record net income of nearly $2.4 billion last year--up 20 percent from 1994.
The value of farm assets--including land--which dropped significantly in the 1980s continues to rise, and to rise much faster than farm debt levels. The overall equity position of U.S. farmers is increasing--up nearly 15 percent since 1992.
To ensure that farmers get a competitive price for their products, USDA created an advisory committee to investigate the effects of concentration in the meat packing industry on producer prices. The Department has already begun to respond to the committee's recommendations.
Secretary Glickman has stated his intention to stop any detrimental effects of buyer concentration on production agriculture.
Droughts and rain have hurt crops. However, a fast, practical, and effective response to disasters has been a priority from day one for USDA and the rest of the Administration. Responding to disasters is one of the most visible--but hardly the only--accomplishments that have occurred since the President called for a "leaner but not meaner" government that works better and costs less. USDA's plans for reorganizing local program delivery through field service centers has already saved taxpayers over $900 million and cut staff by 10,000 positions.
President Clinton's rural Empowerment Zones/Enterprise Communities' (EZ/EC) initiative is proving that some of the best ideas and initiatives that address community problems are those that are initiated at the local level. Communities that went through the EZ/EC application process--even those not selected--succeeded in getting a clearer idea of their own potential and learned that by working together they could realize that potential. The ideas, initiative, and efforts are driven at the local level--not by the Federal government. Instead of telling local governments what the problems were and how these problems needed to be solved, the EZ/EC process has asked local residents to identify and help solve their own problems.
Through our own staff and the work of others, the Administration has offered technical assistance, assisted communi-cations as they build effective partner-ships, and supported efforts to design economic and community development plans. This effort is not all grand schemes. I will use as an example our new Notice of Funding Availability (NOFA) service. Before, officials in thousands of small rural communities would each have to search the Federal Register to find notices that are published by individual federal agencies. Now, our EZ/EC Task Force updates a NOFA database daily and puts the information up on the Internet. Any official in rural America can now sign on to the EZ/EC web site, click on the "What's New" page, and start to find items that could be of assistance to the community.
In Rural Development, we are also taking big steps to change the way we do business. In one of the most ambitious efforts in the entire Federal government to re-engineer, Rural Development is modernizing its single-family housing loan program, which has provided housing loans worth $46.8 billion to more than 2 million rural Americans.
The Dedicated Loan Origination/Servicing System (DLOS) is a modern, automated loan processing and servicing system which will be administered in a national service center similar to the type used by the private sector to improve customer service and reduce costs. DLOS will reduce the time-consuming and often duplicative work now being handled, often manually, in thousands of field offices across the Nation.
As part of our DLOS initiative, we have already combined the guidance provided in 16 different regulations totaling 290 pages into one consolidated rule which was published in the Federal Register on April 8. We estimate the final rule, after DLOS is fully implemented, will cover approximately 30 pages in the Code of Federal Regulations, which represents a 90 percent reduction in regulations from the 290 pages.
The new loan system is now being implemented and is scheduled to become fully operational in October 1997. On October 1, two pilot states, Virginia and Missouri, will begin processing new loans using DLOS and will convert all their existing loan portfolios to DLOS next year.
The high level of automation offered by DLOS will have a major impact on staffing levels needed to handle the Rural Development single family housing loan program. At present, 3,300 staff years are needed to operate the program. The DLOS-driven system will require only 1,800 staff years, with about 1,200 staff years remaining in local offices handling loan origination and servicing, and 600 positions moving to the DLOS service center in St. Louis. It will save taxpayers $250 million over the next 5 years.
At this juncture, few subjects are as important to small and mid-sized family farms as the restructuring and refocusing of Federal Rural Development programs. The numbers make that case best.
Rural America contains 83 percent of the nation's land and is home to 21 percent of the population. The Wall Street Journal reported in June that the population is growing in most rural areas at the fastest rate in more than two decades.
The same article discussed a USDA report which showed employment expanding faster in nonmetro communities than in urban areas, which have been hit more directly by corporate layoffs.
Rural America supplies 18 percent of the Nation's jobs and generates 14 percent of the Nation's economic output. Agriculture remains a primary component in the rural economy, but it is not as large a component as many urban residents might think. Over the past 20 years, the percentage of the rural work force employed in farming has decreased from 14 percent to 8 percent; at least 80 percent of rural residents are supported by nonfarm income. The largest and a growing share of rural employment comes from the service sector, which employs about one-half of all rural workers.
Real earnings per job remain lower in rural areas than in urban areas, however, declining by more than 6 percent from 1979 to 1989. This affects farm families because, like most families, farm households receive income from a variety of sources. In 1993, only about 12 percent of a farm household's income came from the farm. For the majority of farm operator households, those with less than $50,000 in gross sales, off-farm income is critical. Off-farm incomes such as wages and salaries; income from an off-farm business; unearned income (e.g., interest and dividends); and royalties, annuities, and Social Security make the difference between a good year and a bad year.
Small and mid-sized farmers depend on a strong rural America, and a strong rural America requires an investment in people and communities for the future. It requires efforts toward self-sustainability and competitiveness in the global economy. It means investing to improve the physical infrastructure, quality of life, and job opportunities in rural America. It requires strategic planning for a coordinated effort to move toward self-sustainability and competitiveness in the global economy. It requires improved access to capital and technical assistance for small business, which is a vital ingredient for job creation in rural America.
Despite decades of investments in infrastructure and business development, rural America continues to face many significant challenges. Some of the challenges, like the persistence of poverty in major parts of the South and in Appalachia, have been with us for a long time. Others, such as the loss of jobs and businesses from rural economies, are due to changes in the structure of rural economic bases and the globalization of competition.
Increasingly, new problems--problems that center on the role rural communities will play in a future that relies less and less on raw materials as economic assets--dominate the rural policy agenda. Today, we are concerned about creating jobs in remote places and in developing new industrial uses for traditional commodities. We are concerned about building economic linkages between rural businesses and the urban and global marketplaces to which they must sell.
We are concerned about building economic bases on regional scales to achieve economics in production that will make rural competitiveness feasible.
We are also concerned about finding solutions that pool the assets of public and private organizations to achieve holistic and forward-looking approaches to economic development.
President Clinton clearly understands this, coming from a small, rural community. In his Fiscal Year 1997 Budget, he proposed a $2 billion increase for rural development programs. The total of $9.6 billion for loans and grants for rural housing, utilities, and business programs would make a dramatic impact in rural America.
Congress reduced the President's budget request to about $8.7 billion. We will do the best we can with the resources provided us.
In addition, the Administration believes we must push beyond traditional thinking and currently constructed Federal programs if we intend to make a better life for rural America. We need new ideas, and a new emphasis on what the Federal government can do well and what it cannot do. In his State of the Union Address, President Clinton said,
We know big government does not have all the answers. We know there's not a program for every problem. We know and we have worked to give the American people a smaller, less bureaucratic government in Washington. And we have to give the American people one that lives within its means. The era of big government is over. But, we cannot go back to the time when our citizens were left to fend for themselves. Instead, we must go forward as one America, one nation, working together to meet the challenges we face together.
The key to our future efforts on behalf of rural America and the people that live there will be partnerships. A Federal partnership does not mean an exclusively Federal way of doing business.
The days when Federal resources could be thrust on local governments--with all the regulations and requirements and strings that come attached to Federal aid are gone. Uncle Sam does not have the financial resources or the staff. The Clinton Administration also understands that a grassroots/bottom-up approach to problem-solving works best. We are already working in partnership with state and local governments, foundations, nonprofits, and businesses and regional interests to build water and wastewater systems; finance decent, affordable housing; support electric power and rural businesses, including cooperatives; and support community development.
In the single family and multi-family housing loan programs, we have encouraged leveraging, which utilizes our direct loan funds in partnership with another lender's funds. We take the second lien on the property, with the private-sector lender or housing finance agency in first position. For example, the Federation of Appalachian Housing Enterprises (FAHE), a home-grown financing intermediary in Kentucky, is working with us and seven community-based nonprofits to provide leveraged loans so low- and very low-income rural residents can achieve the dream of home ownership. These leveraged loans will be funded through a creative blending of funds from the HOME program, Appalachian Regional Commission funding, the FAHE Home Loan Fund, individual groups' home loan funds, local bank support, and, of course, Rural Development financing.
We expect that the partnership funds will provide approximately 30 percent of the needed financing, and Rural Develop-ment will provide the remainder, stretching our resources greatly in this high-need area.
In another partnership example in the Pacific Northwest, the Rural Development mission area has been a key player in addressing the economic ills of a regional economy impacted by changes in the timber industry. State governments in Oregon, Washington, and California, a dozen federal agencies, and numerous local governments were brought together through Community Economic Revitalization Teams to address the consequences of a regional economic dislocation. This partnership has helped build medical clinics and multi-family housing projects, provide clean drinking water for rural families, and create seed money to establish small businesses in timber-dependent areas.
Consider, for example, an employee-owned business located in Omak, Washington, part of the Pacific Northwest, that received a $4.9 million business and industry (B&E) guaranteed loan last year. This sawmill and plywood manufacturing company has an annual payroll of $30 million--almost 500 families depend on its operation directly. With the economic downturn in the timber industry, the business was headed for closure unless it restructured its debt.
The Bank of Washington participated by providing a $10 million line of credit for inventory and working capital. The employees sacrificed $28 million in stock to ensure the future success of the business. This means $38 million of other credit or debt of the company was leveraged against the $4.9 million B&I guaranteed loan. This B&I guarantee saved 476 jobs--approximately 20 percent of the community's work force.
Other jobs such as those of truck drivers, loggers, and raw material suppliers were also saved since there are no other
sawmills for over 100 miles in that part of the state.
We like what we have seen working with partners. We are going to increase our use of partnerships, letting us leverage our limited resources, building private, nonprofit, and other public sector participation in local rural efforts, and increasing our likelihood of success. In many cases, we are going to structure our programs around partnerships.
That is more possible because the rural development provisions of the 1996 Farm Bill signed into law by President Clinton are going to fundamentally change the way Federal Rural Development programs are delivered by the Rural Economic and Community Development (RECD) mission area. In enacting the Rural Community Advancement Program (RCAP) in the Rural Development title of the Farm Bill, Congress accepted most of the elements of the concept first proposed by President Clinton in his Fiscal Year 1996 budget. They will promote genuine partnerships at the grassroots level by establishing a mechanism to identify the needs of rural communities at the local level and foster flexible and innovative approaches to rural development.
The legislation also changed the funding mechanisms for USDA Rural Develop-ment programs to ensure that Rural Development state offices have flexibility to work with states and local communi-ties. This new framework will require that projects be evaluated in a competitive system which considers community needs, priorities, and capacity--as well as project quality--rather than relying on a "first come, first served" approach to funding eligible projects.
State Rural Development offices will develop strategic plans that formulate community development objectives and establish links between local, state, and private-sector organizations and our staff to integrate assistance provided under this proposal with ongoing activities and priorities. It provides that states; local, private and public-sector organizations; state Rural Development Councils; and federally recognized Indian Tribes in the state are to be involved in the preparation of the state plan.
Plans will identify goals, methods, and benchmarks for measuring the success of carrying out the plan. Priority will go to communities with the smallest populations and lowest per capita income. Under the new law, USDA Rural Development will combine funding which had been provided separately for eligible purposes into three funding streams. Funding will be allocated to states by formula.
The mission area has begun our internal processes for implementing the Farm Bill. It is our intention to deliver our programs under RCAP in the coming fiscal year--consistent, of course, with any direction or limitation provided us under the Fiscal Year 1997 agriculture appropriations law. The appropriators have made several fundamental changes in the RCAP structure--we cannot transfer funds between the three streams or make grants to state governments. But we still have more flexibility in administering our programs than we have ever had. We start the state strategic planning process predisposed to leave to State Directors much of the decisionmaking regarding the plans.
We will be asking a wide range of interested parties to participate in the process at the national level as well as the state level.
The 1996 Farm Bill also includes language authorizing $300 million over 3 years for Secretary Glickman's "Fund for Rural America," which will augment existing resources for agricultural research and rural development. One-third of the funding is to be dedicated to rural development, one-third is dedicated to research, and one-third can be allocated at the discretion of the Secretary. In the near future, Secretary Glickman will announce how he intends to direct that funding.
USDA Rural Development is now poised to make this holistic approach the foundation of our Rural Development program delivery structure and to work
even more closely with rural electric co-ops; states; businesses; community organizations, including community action agencies; foundations; and the private sector in tackling the important issues of job creation, trade, and the preservation of the rural way of life.
Together, we will be working toward a vision of a vibrant and prosperous rural America with opportunities for all as our Nation enters the next century.
This is not a new task for the agencies of the Rural Development mission area. The Rural Business-Cooperative Service, the Rural Housing Service, and the Rural Utilities Service and their predecessor agencies have a very proud history of improving the lives of rural people.
The agencies take pride in our long history of providing credit to businesses, families, and communities that do not have effective access to credit because of the isolated nature or small scale of the rural market, and of providing subsidies to low-income families and communities that could not otherwise afford rent or debt service payments. In the last 3 years, USDA Rural Development has provided new home ownership opportunities to over 230,000 people and rental housing for another 30,000 families.
We have helped 500,000 students in 230 schools, and 112 medical facilities serving over 134,000 patients have improved access to educational and health care resources through the Distance Learning/Medical Link program. We have created or saved nearly 110,000 jobs through loans and grants to rural businesses. Just this summer, USDA gave $70 million in grants and loans to 54 communities in 35 states to build, improve, or expand public drinking water systems as part of the Water 2000 Initiative.
We stand ready and willing to do what we can to improve conditions in rural America. While significant progress has been made, more can always be done. Progress is not something that can be dictated by Washington or provided by grant or loan, or that follows automatically from the construction of any project. Progress happens only when hard work, personal dedication, and sacrifice meet opportunity.
For both individuals and communities, President Clinton feels everyone has an obligation to help themselves--not depend on government or look to others. Federal and state resources are to be expended to meet a need that cannot be satisfied by local governments, nonprofit organi-zations, or the private sector. In that context, the role of USDA will be as a partner to ensure that whether you choose to live in rural America or urban America, you have access to good quality health care and good quality education, and that there are economic opportunities so that families and communities can prosper.
The mission area, like many other agencies in the federal government, is changing the way we do business. We will not always have resources to match the need. We will be operating out of fewer offices, and we will have fewer people. But we will not use any of these as excuses. Our commitment is to have better customer service and better, more efficient ways of doing business. A child who grows up in rural America ought to be able to compete with children growing up all around the world.
Thank you again for giving me this chance to be with you for this important conference and to represent the thousands of USDA employees who serve farmers, ranchers, and the rest of rural America every day with dedication, great skill, and enthusiasm.
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