Future of Rural Development Funding Uncertain in Farm Bill

As Congress fiddles with major farm legislation, there is a portion of it that gets very little attention. Yet supporters say it is a difference-maker for job creation in small rural communities and provides a boost those towns need. 

In the small town of Staunton, Ill., the new $9 million water plant is a welcome addition. After all, when the 80-year-old facility it replaces seized up last year, the community’s 5,000 residents were without water for five days.

But for Staunton’s part-time mayor Craig Neuhaus, the plant represents more than water security. He expects the water system upgrade to help bring business to this town about 40 miles north of St. Louis. 

“These companies come in, the first thing they are going to ask is: What is your infrastructure? I mean if you don’t have sewer or water they don’t want to come,” Neuhaus said.

It was that very economic development potential that qualified Staunton for a low-interest 40-year federal loan to pay for the plant — money that came from the U.S. Department of Agriculture’s Rural Development Program.

The program — an often overlooked part of massive farm bills — supports non-farm projects that backers say are critical to the economic vitality of rural communities. That amounted to about $30 billion in mostly loan guarantees and grants in 2012, but Congress has cut the program’s funding by a third in the last decade and it’s unclear how funding will fare in the 2013 Farm Bill efforts moving through Congress.

Rural development projects can range from helping put a new roof on a community center to building a new library or providing seed funding for a new business.  But infrastructure projects like Staunton’s new water plant are the bread and butter of rural development, said Doug O’Brien, the USDA’s Acting Undersecretary for Rural Development.

“When you drive across rural America and you see that classic water tower, there is a very good chance that USDA Rural Development was there to provide a grant-loan mix so that we can get to a place that the water system can afford to sustain itself,” O’Brien said.

In 2012, the USDA funded 845 water and sewer projects across the country, with most of the support, like Staunton’s, coming through loans rather than grants.  The agency said those projects affect nearly 2.5 million people across the country. 

Neuhaus said without the federal loan, there would have been no way for Staunton to afford its new plant. The residents are paying a surcharge and increased water rates so the city can pay off the debt. 

Critics, however, contend the USDA’s rural development programs are a relic of the New Deal of the 1930s. And a recent report from the Government Accountability Office said that some of the programs duplicate those found in other government agencies such as the Department of Commerce or Small Business Administration, and that it’s hard to measure the effectiveness of the spending. The Libertarian Cato institute questions whether the money spent actually delivers promised jobs.

The prospect for more funding cuts concerns Chris Merrett, director of the Illinois Institute for Rural Affairs.  

“It would lead to an accelerated deterioration of the rural quality of life,” he said, adding that the farm economy is more than just simply farms — and that a healthy agriculture sector needs a healthy non-farm sector.

But he and others point out that there are fewer farm lawmakers in Congress making sure the money gets funneled to rural economic development.  And with Farm Bill attention directed at the big-money items like crop insurance and food stamp programs, it’s even hard for lawmakers on the Congressional agriculture committees to remember it. 

Current versions of the 2013 Farm Bill include most facets of current development programs, but the question now will be how much money they get, said Frank Dunmire, who is with the Illinois Rural Water Association. He fears if there are more cuts it could lead to a backlog in needed public works program in rural areas.

“It is just going to be a snowball effect” in the projects that would build up, Dunmire said.

Just like Staunton needed water flowing through its pipes, rural interest groups say they need the funding pipeline from Washington to continue, so they reduce or avoid problems like going without water for a week.