Covering more than 75 percent of the nation’s total landmass, rural America is home to only 50 million people. Formerly defined by the agricultural industry, rural areas are increasingly diverse, requiring a varied approach to development that addresses traditional problems caused by isolation, poverty and lack of infrastructure and community resources—as well as modernization and integration projects such as the government’s recent investments in broadband and general focus on business development.
The USDA’s Rural Development division, referred to by its director as the “venture capitalist” for rural America, consolidates a number of agencies with roots in the Great Depression that were successful over the years in supporting the agriculture industry, electrifying rural America and building community resources.
The program’s mission is to “increase economic opportunity and improve the quality of life for rural residents,” which it approaches through more than 40 rural development programs focusing on housing, community facilities, water and waste management, business and technological development, among other areas. It claims $91 billion in investments in rural homeownership, business development and community and technological infrastructure since 2001, with more than 1.7 million jobs created or saved as a result. Speaking in 2008, RD Under Secretary Thomas C. Dorr noted that the RD loan and loan guarantee portfolio exceeds $100 billion for the first time in history.
Since the Washington Post broke the story in April of 2007, RD has come under increasing criticism for the fact that the vast majority of its budget actually goes to metropolitan areas, including resort and retirement developments—more than three times the amount provided to poor or shrinking rural areas.
The current Under Secretary, Thomas Dorr, was once forced to pay fines for violating the rules of the very agency which he now heads.
In 1935, President Franklin D. Roosevelt established the Resettlement Administration to help relocate families stricken by the Depression, to address soil-erosion and to provide emergency funding for farmers. The Administration’s functions were expanded to include funding for housing, community projects and business development when Congress established the Farmers Home Administration (FmHA) in 1946. The Rural Electrification Administration (REA, established 1935, integrated in USDA in 1939) also contributed to rural development through electrification, telephone and telecommunications—and most recently, Internet services.
The USDA Rural Development division was created as part of a 1994 Department reorganization, in which former FmHA’s “non-farm financial programs for rural housing, community facilities, water and waste disposal and rural businesses,” as well as the former RFA’s utility programs, were consolidated under the authority of Rural Development.
A Brief History of Farmers Home Administration (PDF)
With a $100 billion dollar loan portfolio, RD administers nearly $16 billion in program loans, loan guarantees, and grants. There are forty separate programs, which include low-interest housing operations, USDA-backed loans for businesses and grants for communities and non-profit groups.
Utilities/Water/Telecom Programs
Electric services are historically and currently an integral part of rural development. According to the USDA, rural America “currently enjoys high-quality electric service.”
Most rural electric utilities are cooperatives, serving 11 percent of the population and 75 percent of the country’s total land mass. Average service coverage is 10,000 customers (as compared with typical investor-owned utilities, which service an average of 315,000) - who are mostly residential, more sparsely distributed and tend to have different demands and peak use schedules. This makes rural utilities costly, requiring extra capacity and larger per capita investment to serve peak demand.
Recent policy initiatives to restructure the electric market have caused price increases—and controversy. RD has begun to shift focus toward business development that incorporates alternative energy sources and production.
The provision of Internet access has increased, but rural areas still lag behind urban areas in Internet use (52 percent of residents compared with 60 percent of urban residents)
Water investment is also more costly in rural areas (which are sparsely populated with a limited tax base), requiring higher per-capita investments for development, environmental compliance and maintenance costs for drinking water and wastewater treatment operations.
Budget: For FY 2009, the Presidential Budget includes $6.7 billion for the RD Utilities Program; $20 million for distance learning and telemedicine; and $298 million for broadband programs. Water and waste disposal spending for FY 2009 is a proposed $1.3 billion in direct loans (vs. $1.0 billion in FY 2008), $75 million in guaranteed loans (same as FY
2008), and $220 million in grants (vs. $469 million in FY 2008).
Telecommunications Loans and Grants include broadband loans, community connections grants, distance learning and telemedicine, rural and public television grants, among other loans and grants.
Housing and Community Facilities
Community development programs tend to focus on social complements to economic development, such as fostering community organizations and infrastructure to encourage leadership and cohesion/involvement. Programs are also meant to target high-poverty and isolated areas, and encourage private sector development/investment. Specific programs deal with housing stress and offer rental assistance.
Budget: For FY 2009 the Presidential Budget requests approximately $1.1 billion in budget authority for a $6.7 billion program for Single-Family Housing, Multi-Family Housing and Community Facilities programs, with an additional $997 million (up from $518 million from 2008) to fund the Rental Assistance program, and an allocation of $100 million for a new pilot program in rental vouchers.
And Housing and Community Facilities for information on:
Also, the Empowerment Zones and Enterprise Community program ( EZEC) provides community-based grants.
Business and Cooperative Programs
Business development programs aim at building industry, attracting investment, and helping rural economies integrate in national/global economies. There are a wide range of approaches and assistance programs offered by RD. See the USDA general approaches for supporting business development.
The FY 2009 budget request includes $49 million in authority to support $738 million in direct and guaranteed loans and grants for Rural Business and Cooperative Programs.
Field Offices
Rural Development Executive Summary
(USDA 2007 Farm Bill Theme Papers) (PDF)
Stakeholders include residents of rural areas (including those being developed for retirement and recreation) and metro and suburban areas that qualify for RD assistance; business investors; utility companies and Internet/technology providers; water and waste treatment industries (also environmental regulators); agricultural and manufacturing industries concentrated in rural areas; alternative fuel industry; politicians pandering to rural base; etc.
With more than 40 programs under its aegis and growing, the Rural Development division of the USDA is a quiet but controversial presence, distributing billions of dollars in development aid and loans/loan guarantees. Many observers note what can seem like arbitrary administration of these funds to areas designated by a vague policy definition of “rurality.” The majority of recipient communities are, in fact, not at all rural—but suburban, retirement- or resort-economy-based, and positively metropolitan.
USDA officials maintain that they follow regulations as directed by the department and Congress, but those regulations are increasingly confusing or opaque. Rural America covers 75 percent of the nation’s landmass, and can no longer be predominantly defined (culturally, demographically, or economically) by the agriculture industry. But inconsistent definitions of “rural” lend well to subjective—and ultimately, strategic interpretations.
According to an article published in the Washington Post in April of 2007, the USDA has doled out in excess of $70 billion in grants, loans and loan guarantees through its Rural Development program since 2001. A Post investigation found that over half of that money has gone to “metropolitan regions or communities within easy commuting distance of a midsize city, including beach resorts and suburban developments.” Metropolitan areas with populations of 50,000 or more received $30.3 billion—more than triple the amount given to poor or shrinking rural counties (which are the ostensible beneficiaries of Rural Development), which received a total of $8.6 billion for the same period. (Even retirement or recreational communities got $8.8 billion).
Among the beneficiaries: Providence, Nantucket, Martha’s Vineyard and Cape Cod, home to some of the wealthiest beach towns in the country. Such popular destinations, which are located conveniently close to big cities and swell with summering populations (and the resultant tourist economies) and boast exorbitant real estate prices, are somehow eligible for billions of dollars in USDA rural development aid. In addition to the “beach towns from Cape Cod to New Jersey to Florida” that the Post reports “collected federal money for water and sewer systems, town halls and boardwalks,” are the electric and Internet companies awarded low-interest loans to provide for affluent southern suburbs.
A long way from the early narrow focus of the Rural Development initiative, whose roots go back to emergency relief for farmers and destitute rural communities in the Great Depression—the breadth and scope of “rural” communities in need has expanded dramatically. Requirements for determining eligibility for RD assistance tend to be quite variable and even subjective, depending on the program itself and leaving room for lawmakers to weigh in. For some programs, assistance is limited to towns with populations below 2,500, but for others numbers can reach up to 50,000, and some census-based decisions can divide eligible communities by street or block.
The Post article further argues that, over time, the RD program has “become more complicated, bureaucratic and secretive,” with reporters deferred to central authority in Washington and “heavily redacted” documents obtained under the Freedom of Information Act, which hid loan amounts and recipient locations.
Only a day before the Post article was printed, Agriculture Secretary Mike Johanns had proposed changes in the 2007 Farm Bill that would include streamlining RD, with more funds going to rural health care and community facilities, as well as a consolidation of energy grant, business loan, loan guarantee and Community Programs platforms. At the same time, Dorr announced a $62.9 million provision for distance learning and telemedicine loans, $75 million in loan and grant combinations and $15 million in grants.
Measuring Rurality
According to a 2004 CRS Report, there is no “overarching framework [that] guides rural policy at the federal level,” but focus remains on standard issues like “adequate housing, employment creation and business retention, human capital concerns, poverty issues, medical care, and infrastructure development.”
And although farming has declined to less than 8% of rural employment in recent decades, farming and agriculture remain “the major backdrop to much of congressional debate on rural policy.” Rural development is seen increasingly in terms of its relevance in a global economy. According to CRS, “positioning rural areas to better compete in a global environment is one of the key issues framing much of the debate about rural America.” Part of rural funding is tied up in the farm bill, and development needs are seen as part of larger restructuring issues in the agriculture debate. In this sense, it can almost be seen as a proxy for political struggles—over the agricultural industry and politically charged projects like biofuel—with socioeconomic development hanging in the balance. Recent budget cuts—in both the Farm Bill and USDA FY 2009 budget—raise questions over the future of rural development practices, both for the economy and for the residents of rural America.
2008 U.S. Farm Bill
In his commentary on provisions for rural development in the 2008 U.S. Farm Bill (see below), Mathew D. Chase, the executive director of the National Association of Development Organizations (NADO) argues that the latest budget framework release in late March for the 2008 Bill provides “zero new mandatory resources for community and economic development in rural America.” Chase further posits that the failure to provide adequate funds for rural development will have wide reaching detrimental effects—on the U.S. position in an increasingly economic global economy, on the country’s development of alternative fuel sources and leading competitive standards of food production. Rural Development and the 2007 Farm Bill
(CRS Report to Congress) (PDF)
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Founded: 1994
Annual Budget: $2.1 billion in budget authority to support a program level of $14.9 billion (FY 2009 proposed budget), exclusive of U.S. Farm Bill provisions
Employees: 6,300
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Rural Development
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Tonsager, Dallas
Under Secretary
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President Barack Obama’s choice to be Under Secretary of Agriculture for Rural Development, Dallas P. Tonsager, ws confirmed by the Senate on May 12, 2009. A South Dakota farmer who was part of the Obama campaign, Tonsager has been a generous supporter of the Democratic Party. However, he also received an appointment from George W. Bush.
Tonsager, 54, grew up on a dairy farm near Oldham, SD. He graduated from South Dakota State University with a Bachelor of Science degree in agriculture in 1976.
From 1988 to 1993, Tonsager was a board member of Green Thumb, Inc., a nationwide job training program for senior citizens. During that same period, he served two terms as president of the South Dakota Farmers Union. He also served on the board of National Farmers Union Insurance from 1989 to 1993, and he was a member of the advisory board of the Commodity Futures Trading Commission from 1990 to 1993.
In 1993, President Bill Clinton selected Tonsager to serve as South Dakota’s state director for rural development for the US Department of Agriculture. Tonsager oversaw a diversified portfolio of housing, business, and infrastructure loans in South Dakota totaling more than $100 million. His term concluded in February 2001.
Tonsager was appointed to the Farm Credit System Insurance Corporation (FCSIC) board by President George W. Bush on December 1, 2004, for a term that expires May 21, 2010. The FCSIC, an independent US government corporation, is responsible for ensuring the payment of principal and interest on insured notes, bonds, debentures, and other obligations issued on behalf of Farm Credit System banks. The system is a nationwide financial cooperative that lends to agriculture and rural America. Tonsager was also appointed in 2004 to the board of directors of the Farm Credit Administration (FCA), which is responsible for the regulation and examination of the Farm Credit System.
During Barack Obama’s presidential campaign, Tonsager served as n ational co-chairman of the rural advisory committee. According to OpenSecrets.org, he has contributed $22,250 to Democratic candidates and party organizations since 1993, including $1,000 to Obama.
In partnership with his brother, Tonsager owns Plainview Farm in Oldham, a family farming operation that includes corn, soybeans, wheat, and hay. He previously served as owner of Golden Plains Ventures and Tonsager Consulting. He currently serves on the board of Lutheran Social Services of South Dakota.
Tonsager and his wife, Sharon, have two sons.
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Dorr, Thomas
Previous Under Secretary
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A native of Marcus, Iowa, Thomas C. Dorr earned his B.S. degree in business administration from Morningside College in Sioux City, Iowa. For more than 30 years, he was president of a family farming and agribusiness company that consisted of a corn and soybean farm, a state-licensed commercial grain elevator and warehouse and two limited liability companies.
In 1995, the USDA forced Dorr’s Pine Grove Farm to return $17,000 in federal agricultural subsidies that it had improperly obtained. (And according to the Environmental Working Group, Dorr Farm operations received $466,673 in farm subsidies from 1995 to 2002). Despite the dubious record, Bush appointed him Under Secretary in 2001—to the same Department he was found guilty of cheating. Following Dorr’s nomination, another USDA probe found further violations, which Dorr’s farm quieted with another $17,000 in fines. According to a Texans for Justice Report, few Republicans supported Dorr’s nomination, and shortly after his nomination, in 2002, the Senate Agricultural Committee Chair from his home state said, “Mr. Dorr lacks the judgment, outlook and temperament for this very important position.” Senator Tom Harkin was more direct, saying, “As the CEO of a corporation, Mr. Dorr, in filing false information with USDA, does not meet the standard set by President Bush when he signed a new law on corporate responsibility just last week.”
President Bush had appointed Dorr in 2000 to his Agriculture Department transition team, and invoked temporary recess appointment powers (after Congress went into recess during the summer of 2002) to install Dorr as a USDA undersecretary and as a board member of the Commodity Credit Corp. After his nomination, comments he had made in 1999 on the Iowa State Board of Regents—suggesting that Christian and European backgrounds of certain Iowa farmers “enabled them to succeed”—surfaced amid controversy. The timing was especially poignant because in the same year, the USDA has settled a class-action suit by black farmers who accused the Department of discriminatory lending practices. Other criticisms of the Under Secretary stem from his reported praise of—and policy support for, big agribusiness over family farms. (See Texans for Public Justice article, below).
Dorr also served as Chairman of the USDA Energy Council, responsible for the President’s Energy Initiative (promotion of domestically grown fuel), and Federal Co-Chair of the Biomass Research and Development Board.
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