[Senate Hearing 108-510]
[From the U.S. Government Publishing Office]



                                                        S. Hrg. 108-510

EXAMINE THE RURAL DEVELOPMENT PROGRAMS OF THE UNITED STATES DEPARTMENT 
                                   OF
                              AGRICULTURE

=======================================================================

                                HEARING

                               before the

    SUBCOMMITTEE ON FORESTRY, CONSERVATION AND RURAL REVITALIZATION

                                 of the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                      ONE HUNDRED EIGHTH CONGRESS

                             SECOND SESSION


                               __________

                             MARCH 16, 2004

                               __________

                       Printed for the use of the
           Committee on Agriculture, Nutrition, and Forestry


  Available via the World Wide Web: http://www.agriculture.senate.gov


                                 ______

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           COMMITTEE ON AGRICULTURE, NUTRITION, AND FORESTRY



                  THAD COCHRAN, Mississippi, Chairman

RICHARD G. LUGAR, Indiana            TOM HARKIN, Iowa
MITCH McCONNELL, Kentucky            PATRICK J. LEAHY, Vermont
PAT ROBERTS, Kansas                  KENT CONRAD, North Dakota
PETER G. FITZGERALD, Illinois        THOMAS A. DASCHLE, South Dakota
SAXBY CHAMBLISS, Georgia             MAX BAUCUS, Montana
NORM COLEMAN, Minnesota              BLANCHE L. LINCOLN, Arkansas
MICHEAL D. CRAPO, Idaho              ZELL MILLER, Georgia
JAMES M. TALENT, Missouri            DEBBIE A. STABENOW, Michigan
ELIZABETH DOLE, North Carolina       E. BENJAMIN NELSON, Nebraska
CHARLES E. GRASSLEY, Iowa            MARK DAYTON, Minnesota

                 Hunt Shipman, Majority Staff Director

                David L. Johnson, Majority Chief Counsel

               Lance Kotschwar, Majority General Counsel

                      Robert E. Sturm, Chief Clerk

                Mark Halverson, Minority Staff Director

                                  (ii)

  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing(s):

Examine the Rural Development Programs of the United States 
  Department of Agriculture......................................    01

                              ----------                              

                        Tuesday, March 16, 2004
                    STATEMENTS PRESENTED BY SENATORS

Crapo, Hon. Mike, A U.S. Senator from Idaho, Chairman, 
  Subcommittee on Forestry, Conservation, and Rural 
  Revitalization, Committee on 
  Agriculture, Nutrition, and Forestry...........................    01
                              ----------                              

                               WITNESSES
                                Panel I

Birdsall, Jim, Birdall and Associates............................    05
Harper, Bob, City Council Member, Riggins, Idaho.................    08
Herring, Carleen, Region IV Development Association..............    06
Miller, Jerry, Rural Development Specialist, Idaho Department of 
  Commerce.......................................................    03

                                Panel II

Cornforth, Fred, Chief Executive Officer, Community Development 
  Corporation, Inc...............................................    19
Pridmore, Mary, Director of Housing Development, Neighborhood 
  Housing Services...............................................    18

                               Panel III

Field, Mike, State Director, USDA Rural Development..............    28
Lane, John, Business Finance Specialist, Clearwater Economic 
  Development Association........................................    26
Thorson, Steve, Business Development Director, Forest Concepts, 
  LLC............................................................    32
Williams, Ron, Vice President, Mountain View Power, Inc..........    30

                                Panel IV

Davis, Phil, Valley County Commissioner..........................    45
Dearstyne, Joyce, Director, Framing Our Community................    41
Smith, Dick, Forest Supervisor, Boise National Forest............    43
Stewart, Mike, Field Director, USDA Rural Development............    39

                                Panel VI

Johnson, Dwight, Acting Administrator, Rural and Community 
  Development Division, Idaho Department of Commerce, on behalf 
  of the Idaho Rural Partnership.................................    58
Tueller, Karl, Deputy Director, Idaho Department of Commerce.....    57
                              ----------                              

                                APPENDIX

Prepared Statements:
    Birdsall, Jim................................................    66
    Cornforth, Fred..............................................    75
    Davis, Phil..................................................   108
    Dearstyne, Joyce.............................................   103
    Field, Michael...............................................    82
    Herring, Carleen.............................................    70
    Johnson, Dwight..............................................   118
    Lane, John...................................................    77
    Pridmore, Mary...............................................    73
    Stewart, Mike................................................   100
    Tueller, Karl................................................   114
    Williams, Ron................................................    94
Document(s) Submitted for the Record:
    NHS Boise from Mary Pridmore.................................   122
    Partin, Nick.................................................   153

                              ----------                              


 
                  RURAL REVITALIZATION AND DEVELOPMENT

                              ----------                              


                        TUESDAY, MARCH 16, 2004

                                       U.S. Senate,
         Subcommittee of Forestry, Conservation, and Rural 
Revitalization, of the Committee on Agriculture, Nutrition, 
                                              and Forestry,
                                                     Washington, DC
    The subcommittee met, pursuant to notice, at 10:30 a.m., at 
the Ashley Inn, 500 North Main Street, Cascade, Idaho, Hon. 
Mike Crapo, [Chairman of the Subcommittee], presiding.

   STATEMENT OF HON. MIKE CRAPO, A U.S. SENATOR FROM IDAHO, 
              CHAIRMAN, SUBCOMMITTEE ON FORESTRY, 
     CONSERVATION, AND RURAL REVITALIZATION, COMMITTEE ON 
              AGRICULTURE, NUTRITION, AND FORESTRY

    Senator Crapo. I will officially open this hearing. Ladies 
and gentlemen, this is an official hearing of the U.S. Senate 
Subcommittee on Forestry, Conservation, and Rural 
Revitalization, and I happen to be the Chairman of that 
subcommittee. This subcommittee works under the Senate 
Committee on Agriculture, Nutrition, and Forestry, which is 
Chaired by Senator Thad Cochran of Mississippi. Thad, I would 
just take a moment to note, is an outstanding Chairman of the 
Committee. He is very concerned about the kinds of issues that 
we are going to be handling here today and is the one who 
authorized us officially for this hearing to be held here in 
Idaho.
    The subcommittee has jurisdiction over rural development 
legislation, the Farm Credit System, forestry in general, the 
Farmers Home Administration, and several stream channelization 
and flood control programs. As you probably are aware, the 
primary focus of this hearing is on rural revitalization and on 
rural development and economic opportunities in rural 
communities.
    I am the only member of that subcommittee from the 
Intermountain West, and as a result of that, I felt that it was 
important to hold this hearing out here in the West so that 
people from Idaho in particular and from the Intermountain West 
can have an opportunity to give their input on some of these 
critical issues. We are still faced with a tale of two 
economies between our larger, urbanized centers in the United 
States and our rural communities, and I am very pleased to be 
able to serve on this committee that has a focus on these kinds 
of rural issues.
    As I said, our focus today is on rural revitalization and 
development, particularly the USDA programs for rural 
development. It always interests me to see how the Federal 
Government approaches these kinds of issues.
    According to the memo that I have in front of me here, 
there are over 88 programs administered by 16 different Federal 
agencies that target rural economic development. It is not 
unusual in the Federal Government to have efforts coming at a 
particular issue from many different perspectives. Often that 
is very helpful because we find that there are holes or 
problems in terms of coverage. By the same token, when you have 
that many programs and such a large Federal bureaucracy, we 
also often get into throwing a lot of money at an issue without 
having necessarily the kind of focused successes that we would 
like to have.
    One of the things that I am looking for today, in 
particular with regard to USDA programs, is what is out there, 
what is working, what is not working, what kind of coverage 
overlaps do we have, where do we not have coverage, what can we 
do to make it better? I should note that the USDA administers 
the greatest number of the rural development programs. I said 
there were 16 agencies and 88 programs. If I read my memo 
correctly, the USDA not only administers the greatest number of 
these programs, but has the highest average of program funds 
going directly to rural communities--which is, a tribute to the 
USDA, and our compliments go to them for their efforts in these 
broad areas.
    Today, we have put together five strong panels on rural 
issues ranging from community development to multi-family 
housing to small business financing and the Healthy Forests 
Restoration Act. I know that people in this community are very 
focused on the Healthy Forests Restoration Act, and we are 
going to try to focus on its implementation as well. Through 
this hearing, we hope to address some important questions. 
Which programs can best serve the needs of our rural 
communities and our rural businesses? Can our programs be 
improved or focused better? How can we make better use of 
existing programs in Idaho? Where gaps exist in programs, how 
can we address that concern or problem?
    I am going to have more to say on this and, actually, more 
to ask about this during the question-and-answer period with 
our witnesses, but now I would like to move to our first panel. 
Before I do that, I want to just lay the groundwork. I should 
introduce Emily McClure, who is my assistant today. You 
probably recognize the name McClure, and she is related to 
Senator McClure, a granddaughter, and she works on my staff in 
Washington, DC, right now and is one of the outstanding people 
from Idaho who is representing you in Washington, DC. That is 
the truth. She is going to be the timekeeper today, so I want 
you all to pay very close attention to her.
    [Laughter.]
    Senator Crapo. One of the things I have found, and it is 
true about me, is that--we allocate 5 minutes for your oral 
testimony today. I don't know anybody who can say everything 
they have to say in 5 minutes, and I am sure when your 5 
minutes is up, you will not be done with what you have come 
here to say. I would ask you to pay close attention, though, 
and wrap up your thought or your sentence or whatever when the 
time is up, and I have asked Emily to show you the signs. It is 
also hard for people when they are talking to remember to look 
at Emily, so I have told her when the time is up to ding the 
glass here so that way you get an audible, an audible sign that 
your time is up.
    [Laughter.]
    Senator Crapo. The reason for that is because we like to 
get engaged in a dialog, not only me and you, but among members 
of the panel. It is during that dialog that you will have an 
opportunity to say a lot more of what you might not have been 
able to finish in your opening statement. To all of the 
witnesses today, I encourage you to really follow the 5-minute 
rule because, if not, we don't really get the chance to get 
into that discussion, which is a really valuable part of it 
all.
    If at the end of the day, after your 5 minutes and your 
opportunity during the question and answers, you don't feel 
like you have had a chance to really say it all, we keep the 
record open, and you can supplement the record with further 
statements you can send to us in writing. I hope that that 
works out with all of you very well. Have I forgotten anything 
in terms of instructions?
    We want to thank those from this incredible facility here 
for making it available to us. I do have to tell you, I have a 
week to spend in Idaho now, and I visit with many of you in 
Washington, DC. I apologize to some of you if you have been 
there to see me and business has interfered with us actually 
seeing each other, but I much prefer meeting with folks out 
here in Idaho. I can't imagine a more beautiful setting, both 
this facility that we are in and the incredible surroundings in 
which we find ourselves. This is one of the fun parts of the 
job, to be able to pick where we have these hearings.
    [Laughter.]
    Senator Crapo. With that, we will proceed. Our first panel 
is Jerry Miller, a rural development specialist with the Idaho 
Department of Commerce; Mr. Jim Birdsall, a private consultant 
with Birdsall and Associates; Carleen Herring with Region IV 
Development Association; and Bob Harper, a City Council member 
from Riggins, where I hope to go fishing this year.
    [Laughter.]
    Senator Crapo. With that, we will go in that order. Mr. 
Miller.

 STATEMENT OF JERRY MILLER, COMMUNITY DEVELOPMENT SPECIALIST, 
                  IDAHO DEPARTMENT OF COMMERCE

    Mr. Miller. Good morning, and thank you very much for this 
opportunity to present before the U.S. Senate, and thank you 
for providing this voice for rural Idaho and rural America. On 
behalf of the Idaho Department of Commerce, I would like to 
take this opportunity to once again thank the U.S. Senate and 
the office of Senator Mike Crapo for conducting today's hearing 
and providing a voice for rural America. My name is Jerry 
Miller, and I am a rural development specialist with the Idaho 
Department of Commerce. My primary responsibility at the 
department is to assist the communities plan, fund, and 
implement their community and economic development projects.
    The approach that we take in Idaho toward economic and 
community development can be summed up with the word 
partnership. It is only through the collaboration of State and 
Federal partners, city and county governments, and non-profit 
organizations do we achieve the results that we have been able 
to achieve in the State with the limited resources that are 
available. I want to highlight two examples of partnerships 
that have formed out there, and these are partnerships that 
have been incubated, nurtured, and created around two small but 
very effective Federal programs.
    The first program I would like to talk about this morning 
is the Rural Community Assistance Program funded through the 
U.S. Forest Service. Each year the Forest Service provides 
approximately $140,000 for small-scale community and economic 
development projects in Idaho. The Rural Community Assistance 
Program is unique in that it addresses projects that don't fit 
the size, scale, and cookie-cutter mentality of some of the 
larger State and Federal funding programs that are out there. 
This is an especially important offset given that the current 
trend at both State government and the Federal level seems to 
be toward agencies funding larger projects and fewer of them.
    I won't go into all the details and mechanics of how the 
programs work in Idaho. I would rather tell you the story of a 
success that we have had with the Rural Community Assistance 
Program and that is the Almo-Connor Creek-Elba fire base 
station or otherwise known as the ACE Fire Association, located 
in lower Cassia County.
    Organized as a volunteer department, the ACE Fire 
Association protects the residences, lands, and public 
attraction of southern Cassia County in Idaho. Included in 
their jurisdiction is the city of Rocks National Reserve and 
Castle Rocks State Park. Before receiving a Rural Community 
Assistance Grant, ACE Fire Association lacked the facilities to 
provide even the most minimal, basic level of fire protection. 
Equipment sat outside exposed to the elements, which meant 
during the winter months, it effectively could not be used. You 
can't prefill a fire truck and let it sit outside and freeze in 
the winter months. Probably even scarier than that is the fact 
that the ambulance service had to forego use of medications, 
supplies, and certain weather-sensitive equipment simply 
because there was no way to protect it from the elements.
    Recognizing the need to have an adequate fire station and 
ambulance base, the community rallied to the cause. Volunteers 
were recruited and partnerships were formed. Through these 
efforts, the ACE Fire Association accumulated over 1,000 hours 
of volunteer assistance and another $60,000 in donations and 
matching funds. Rural Community Assistance Program funding 
helped the ACE Fire Association finish the project. Were it not 
for the $30,000 investment that this program made for this 
project, it would not have been able to be accomplished and 
folks in southern Cassia County would go without fire 
protection.
    In closing, I want to quickly address one other partnership 
that has been very successful, and that is the National Fire 
Plan Economic Action Program. Operating in a form similar to 
the Rural Community Assistance Program, the program provides 
small grants to small businesses in community economic 
development efforts to find alternative uses for small-diameter 
timber and other fire fuel materials.
    In this area, where the cost of fire suppression and damage 
due to wild fire is reaching in the billions, the Economic 
Action Program, EAP, is a cost-effective way not only to build 
rural economies, but also make the prevention of wildfire an 
affordable tool and strategy in addressing fire issues.
    With that I would conclude my testimony.
    Senator Crapo. Thank you very much, Mr. Miller.
    Mr. Birdsall.

       STATEMENT OF JIM BIRDSALL, BIRDSALL AND ASSOCIATES

    Mr. Birdsall. Thank you, Senator Crapo.
    Mr. Chairman, thank you for this opportunity to offer 
public testimony concerning an extremely important subject, as 
you have indicated, that discussion being the health and 
vitality of our rural communities.
    Just for context I wanted to let you know that I have been 
working in the community development arena for the past 28 
years. I should divulge, however, that I do not have an 
academic background in this field. My experience has all been 
on-the-job training working in the rural setting. I admit the 
fact that I have done this for such a long time may not speak 
well for my intelligence, but it does provide me with some 
pretty good perspective on the subject. It also gives a person 
plenty of time to question whether or not they are doing any 
good, and having had a chance to roll that question around a 
little, I have concluded that people like myself and others 
are, in fact, making a difference.
    This holds true as well for the rural helping programs that 
many communities utilize. I would like to spend the next few 
minutes offering my insights about some of these programs, 
especially in terms of what is working well.
    I am sure that you are aware--you have already indicated 
that the list of programs is not too awfully long, but there is 
more than one Federal agency offering assistance in rural 
areas, and the time available to me does not allow meaningful 
discussion about all of these opportunities. Therefore, in this 
testimony I would like to use some of the rural programs of the 
U.S. Department of Agriculture to illustrate my thoughts.
    The menu of USDA community programs contains some great 
examples of well-established initiatives. Some of these, in my 
opinion, help form the backbone of assistance in the areas of 
housing, infrastructure, business, and community facilities 
development, and their value is well documented.
    However, I would like to spend my time here discussing two 
perhaps less well known programs. I am referring to the Rural 
Business Enterprise Grant, or RBEG, and the Rural Business 
Opportunity Grant, or RBOG, programs. Although they are funded 
at smaller levels than their cousins, these two programs have a 
certain spark that sets them apart and dramatically increases 
their value to rural communities.
    The quality I refer to is that of flexibility. I have 
witnessed both the RBEG and the RBOG serving in an early role 
in community development endeavors. Examples of this might 
include strategic community planning for business development 
or feasibility studies also involving specific ventures. I have 
seen RBEG play a critical role in supporting early operations 
of small business parks and in discovering new ways to bring 
risk capital into the rural business development equation.
    The underlying difference in these programs is their 
ability to have great flexibility in meeting local needs. They 
can be part of the front end of community development work, or 
they can play a role in the actual implementation activities. 
This niche is one that few other public programs can operate 
within. This quality is invaluable for rural towns.
    I wish that I had some way to capture the difference I see 
in people's eyes, the difference when they are empowered to 
pursue their own community strategies; the difference when they 
are supported in putting their heads together to figure out 
local solutions. The difference between that kind of scenario 
and that of meeting strict program guidelines in order to 
receive a grant award is really stark and dramatic. I also wish 
that this spark of empowerment could be infused throughout all 
rural community assistance efforts. I don't think such an idea 
is that far-fetched.
    For instance, a little later on today, you may hear about 
the Inland Northwest Economic Adjustment Strategy, or INEAS. As 
you know, Senator, this is a blueprint to address severe 
economic distress in targeted counties across the four 
Northwest States. The local capacity-building model that RBEG 
and RBOG programs represent would find a welcome home within 
the INEAS concept. These qualities are transferable to other 
locations and programs as well.
    The other obvious thought that I should mention is to 
consider increasing funding levels for the RBEG and RBOG 
programs. These initiatives receive fairly low levels of 
funding, and any increase would, in my opinion, be money well 
spent.
    In my concluding remarks, I don't want to leave the 
impression that I am suggesting to just throw more money at 
programs. My emphasis is on being very strategic with adequate 
funding levels. The RBEG and RBOG programs are great delivery 
models for achieving that balance, and I also think this notion 
fits well in the rural setting. Today, more so than ever, rural 
communities are not asking for a handout. They could use a leg 
up.
    Thank you.
    Senator Crapo. Thank you very much, Mr. Birdsall.
    [The prepared statement of Mr. Birdsall can be found in the 
appendix on page 66.]
    Ms. Herring.

STATEMENT OF CARLEEN HERRING, REGION IV DEVELOPMENT ASSOCIATION

    Ms. Herring. Good morning, Senator Crapo and staff 
representatives.
    Senator Crapo. Pull that mic a little closer to you.
    Ms. Herring. Thank you for the opportunity to be here today 
to share the Idaho experience with Project SEARCH, Special 
Environmental Assistance for Regulations of Communities and 
Habitat. My name is Carleen Herring, and I am here this morning 
on behalf of Region IV Development Association where I am the 
Economic Development Division Manager. We are an economic 
development district serving the people of the eight counties 
of south-central Idaho with offices in Twin Falls.
    In 1997, as a member of the House, Congressman Crapo 
conceived Project SEARCH to demonstrate how a relatively small 
amount of Federal funds could greatly benefit rural 
communities. Discussion continued on the proposal until 1999, 
when Senator Crapo was finally successful in securing funding 
for Project SEARCH under the authority of the Independent 
Agencies Appropriations Act.
    The program was intended to show that a simple process 
could be used to get Federal funding down to the smallest 
governmental levels without excessive technical assistance or 
red tape. Originally envisioned as a demonstration project for 
the State of Idaho--championed $1.3 million of EPA's budget--
the program was to address small towns in Idaho and provide 
them access to funds to help them address infrastructure issues 
that were the result of Federal legislative actions. It would 
help resolve problems for which other funding sources were not 
otherwise available.
    The focus was to assist communities with less than 2,500 
residents in meeting their wastewater infrastructure needs. The 
program targeted these communities because they generally have 
small operating budgets, only part-time staff, and lack of 
financial reserves so critical to compete for the normal public 
sector financing programs.
    On the administrative side, Region IV Development 
Association was selected to implement Project SEARCH. As a 
501(c)(3) non-profit, we ended up being the primary recipient 
of grant funds.
    We embraced Senator Crapo's vision to help small towns and 
designed a process that would be easy to use by communities 
with limited administrative capacity. We created a process 
where the funding decisions would be made by a panel of local 
elected officials facing the same kinds of problems.
    The application consisted of a two-page outline describing 
the proposed environmental project with the reasons why the 
community believed that their town qualified. The criteria 
included such things as having exhausted traditional methods of 
funding--bonding; local, State, and Federal resources--or that 
they have experienced an unexpected problem or expense in 
implementing or starting their project; or that it was needed 
to comply with Federal or environmental statutes or public 
health requirements.
    The applications were then screened by a citizens' advisory 
committee comprised of representatives from each of the six 
State-designated planning regions. The members for that panel 
were identified by the local Councils of Governments 
representing each region.
    To demonstrate the timeliness of implementation and show 
how effective the program was, EPA awarded the grant in late 
August 1999. Notice went out to all the Idaho counties and 
communities with less than 2,500 people the first week of 
September that year. Additional notice was provided to the 
Association of Idaho Cities, Counties, Idaho Rural Partnership, 
USDA. Forty-seven applications were then received in November; 
21 communities were selected by the advisory committee on 
January 11, 2000. That is getting it to the people.
    Of the 21 funded applications, they ranged from a low of 
$9,000 for a facility plan so that a housing authority could 
solve its wastewater problems to a high of $319,000 for part of 
the funding for a wastewater treatment facility in a highly 
sensitive area.
    However, the implementation was not without its tense 
moments. The demonstration project grant through the EPA 
required a 45-percent match. As previously mentioned, small 
communities generally cannot come up with the matching 
requirements for most public infrastructure grant programs, 
effectively eliminating their potential for receiving 
assistance. As originally proposed, Project SEARCH was not much 
different in this regard, and many applicants couldn't meet the 
45-percent match requirements. To overcome this obstacle, RIVDA 
worked with EPA to structure the program so that each 
individual community would not be required but that match 
requirements could be pooled. The result of this common-sense 
approach--we easily met the requirements with matches ranging 
from 14 to 87 percent.
    Project SEARCH was designed to be easy to apply for and as 
simple as possible to administer at the local level. 
Communities didn't need professional grant writers or 
administrators to successfully apply for or utilize the 
program. EPA was very cooperative and accommodating to work 
with.
    We see the same potential now that the program has been 
moved over to USDA. Through this combination of local direction 
and Federal partnering, Project SEARCH enabled more direct 
infrastructure-building and environmental problem-solving 
dollars to reach the communities. Project SEARCH is not meant 
to replace traditional sources such as Community Development 
Block Grants or other programs administered by USDA Rural 
Development or Idaho's Department of Environmental Quality, but 
it was created to encourage communities to try collaborative 
methods to address their environmental needs.
    Project SEARCH was very beneficial to 21 of Idaho's 
smallest communities, helping make the environment safe for the 
future. Small communities across the Nation need a funding 
source that closes the gap as Project SEARCH did for our towns, 
and there are still many towns out there in Idaho that need our 
help.
    I encourage Congress to authorize funds for Project SEARCH 
through USDA, and we offer our experience and expertise to help 
in its implementation. Thank you for your time this morning.
    Senator Crapo. Thank you very much. I appreciate that 
review of a project that is very close to my heart. We are 
going to try to accomplish what you talked about.
    [The prepared statement of Ms. Herring can be found in the 
appendix on page 70.]
    Mr. Harper.

  STATEMENT OF BOB HARPER, CITY COUNCIL MEMBER, RIGGINS, IDAHO

    Mr. Harper. Thank you, Senator Crapo. It has been my 
opportunity to represent the people of Riggins and citizens in 
that area. It goes on for quite a ways. We are 150 miles due 
north of Boise right where the confluence of the Salmon and 
Little Salmon come together and run for 30 miles north. The 
main part of employment up to 1983 was mining, ranching, and 
lumber. That year the mill burnt. This was one of Brown 
Industries' mills, and we lost a major employer.
    Living wages were gone. We are back into a low income. 
Demographics in the 1990's shows us that we had something like 
65 percent of the community was over 65. We have median income 
of less than $12,000, which leaves us a very low tax base and 
very little money to work with. We still have all the emergency 
services--water, sewer, which is very important to a small 
community like this. Rural development has been a major concern 
and a major source of our funding. If we hadn't had it, we 
would not be where we are today.
    Starting with many years ago, the old Farm Home 
Association, which we just paid up a 30-year note on our sewer 
district this month, that was a grant. It was a $120,000 loan 
with a large grant. Rural Development also came up with water 
upgrades in 1999. We delayed ours for a year and the State 
brought theirs up for a year. They were going to tear up the 
roads and put in curbs, gutters, sidewalks, lights. We put in a 
main line, a 10-inch line, 6-inch hydrants, a 450,000-gallon 
tank, and Viox fluoridation system. This improved fire 
protection, it lowered our rates, the whole works. That was a 
$350,000 loan to the city and a $490,000 grant.
    Public facilities--this was in 2001. The city hall was 
falling apart. We needed a new roof, we needed heating, we 
needed the whole works. The city came up with over $26,000, and 
we had a grant of $28,000 to help complete this. This was part 
of ADA standards that we had to redo the restrooms. We enlarged 
our library and at this time, the same time, we knew we needed 
off-street parking. Riggins was a tourist--we found a home just 
a block off the city limits that could be a large parking lot.
    The city bought this with a loan of $167,000, and we got a 
grant for $106,000 to remodel the house, pave the parking lot. 
There are about 20 parking spaces there. It is now a museum and 
a meeting place, which is great for the city. We call it the 
Heritage Center. Also in that grant, we have a walking museum 
which has been in the works for many years. We have 21 stations 
all over town telling the heritage of the city of Riggins, and 
you can walk from one end of the city to the other now.
    We also have a wellness center feasibility study which was 
$325,000; the event center, which was completed. Now, Jim 
Birdsall did these for us; he was our grant writer. The 
feasibility study on that was, I guess, deemed unfeasible for 
economic purposes.
    Anyway, we are still working our way to try to find 
something with a living wage. We also have a Rural Business 
Opportunity Grant and Overall Economic Strategy Study and a 
$46,000 grant, which is still in process at this point.
    The citizens of the Riggins area would like to thank Rural 
Development for all their help in our community, and in no way 
could we have done it on our own without your continued helping 
hand. Thank you.
    Senator Crapo. Well, thank you very much, Mr. Harper. I 
note that in the material here submitted by you and Mayor 
Zimmerman, there are some additional projects that you need to 
have some assistance on.
    Mr. Harper. Yes.
    Senator Crapo. Riggins is certainly just such a wonderful 
example of the benefit that some of these programs can provide 
to some of these communities.
    Let me just start--and what I may do, I may direct a 
question or two here specifically, but I would really like to 
just toss out questions and get people to jump in. We have 
about a half hour, if we stay on schedule, to talk and get into 
the issues. We may not use all that time, but let's see what we 
can do.
    Let me just start out by saying you all are probably very 
familiar with the budget climate we have in Washington, DC. I 
won't give you my budget speech. I sit on the Budget Committee, 
and we just spent 2 unbelievable weeks fighting a budget 
through. To give you a really quick summary, we project 10 
years out. I don't know how anybody can presume to do that, but 
we do it. Three years ago, we were projecting over the next 10 
years that we would have somewhere in the neighborhood of a $4 
to $5 trillion surplus in the budget.
    That was before the stock market fell apart, the 9/11 
attacks occurred, and we became engaged in defending our 
homeland, as well as engaged in a war on terror overseas. We 
have been in two wars since then, and spending has gone through 
the roof on things we weren't contemplating at the time, and 
revenue, the economy, has gone to the toilet. Our projection 
now over that 10-year cycle is nearly $2 trillion worth of 
deficit. It is about a $7 trillion swing from 3 years ago in 
our projection of what we are looking at in the Federal budget.
    In that context, we are doing everything we can to try to 
control spending and get out of the deficits that we are in. 
The projected deficit for this year is somewhere between $470 
and $512 billion. Just to give a little more perspective on 
that, it is about a $2.4 trillion budget. If you take the 
entitlement programs out--because they are basically on 
autopilot, and their spending just goes on regardless of what 
is happening in the rest of the world until we can get the 
votes to change it, and we don't have the votes to change it--
that is about two-thirds.
    That leaves about $800 billion that we actually have some 
discretionary control over. Now, I just told you we have a $512 
billion deficit. About half of that $800 billion is defense, 
and when you add homeland security into that, you get up into 
the 60- or 70-percent range.
    My point in putting this all out is in the budget we just 
put together, defense gets a pretty sizable increase for 
obvious reasons; homeland security gets a pretty sizable 
increase for obvious reasons; and the rest of everything else 
is held to less than one-half of 1 percent growth. We are 
dealing with basically a flat line for everything but defense 
and homeland security.
    What I am getting at is--we are not likely to get a lot 
more money in these budgets, but we are looking at ways--if 
there are things that are working, we should shift the money to 
the things that are working, and there are opportunities to 
shift. That is one of the things we are looking at right now to 
do.
    As I have approached economic developments in rural 
communities, it seems to me that the basic infrastructure--
which all of you in one way or another have talked about--is 
one of the key things we have to be sure our rural communities 
have. Maybe I need to define what that is, but in concept that 
it is the infrastructure necessary to be competitive and then, 
second, access to capital for businesses and for other economic 
opportunities. I am sure there is more to it than that, but in 
my mind that is where I am coming from, and I just wanted to 
toss that out to you to see if you think that I am heading down 
the right road.
    Do I need to expand on that or define it? Where are we--
where should we be focused in the broad--from the 30,000-foot 
level, what should we be focusing on for our rural communities 
in our Federal programs? Any suggestions?
    Mr. Birdsall. That is quite a question, Senator. Maybe I 
could lead off with just a few comments. Again, your comments 
about the budget are well taken and not lost on rural 
communities. In fact, there is probably some fear there. In 
general, the rural towns I work with don't view themselves as 
high on anybody's radar screen, although I can say they believe 
they are on yours.
    You have certainly done a good job of being a champion of 
rural Idaho, and that hasn't gone unnoticed. The communities I 
deal with, in general, they view Congress with some 
trepidation, whether rural programs, what the future might be 
in this current budget climate.
    I do think that the issues that you just mentioned in terms 
of infrastructure and access to capital are extremely 
important, so I would support what you are saying as far as 
appropriate tracks to pay attention to. Unfortunately, they are 
not the only ones, and I don't know that one is a higher 
priority than another. I guess the third leg of that that I 
would like to mention is the ability--furthering and supporting 
and empowering the ability for communities to find their own 
solutions.
    The reason I bring that up--it was in my comments about the 
RBEG and the RBOG programs, and I think there are others that 
support this as well. If you can nurture that spark of 
enthusiasm and empowerment, you will get more mileage for 
dollars spent out of all of the programs, out of the 
infrastructure programs, out of the business development 
finance programs. It is a third ingredient, that capacity 
building, flexibility, tapping into the creativity at the local 
level.
    I am always amazed at the amount of creativity that you can 
find at that local level if you will just give it the right----
    Senator Crapo. I agree with you, and I believe in that.
    Ms. Herring. Let me also add on to what Jim was saying. We 
had a situation just recently where the J.R. Simplot Company 
gave the city of Burley the entire plant site in Heyburn, about 
$15 million worth of assets. It comes back down to the two 
components you just mentioned: basic infrastructure and access 
to capital. What we have an opportunity to do down there is 
take that entire plant site, 270-some-odd acres, and create it 
into a business park that hopefully will get jobs back into 
that community.
    As it stands right now, we have talked with USDA about 
using the RBEG and RBOG programs to, for one thing, get a site 
development plan, strategy put together where we can figure out 
what those buildings can be used for, what the infrastructure 
is that we do have available for the sewer, power, water, 
natural gas.
    Then take a look at what is available to finance those 
small businesses that we could potentially generate from the 
community, that whole entrepreneurial spirit that we know is 
available in the Cassia area, using Small Business 
Administration's 504 fixed-asset financing, or the 7A programs, 
or using USDA's business and industry programs, but trying to 
put together a combination of those two resources and capital 
for that development. Don't know if you were watching the 
press.
    There is a new enthusiasm in that community after years of 
pretty much being in the doldrums, and here is an opportunity. 
They also recognize that because the economy's been in the 
doldrums, they don't have the resources to do what they need to 
do by themselves. We are looking at all the different partners 
in it, and USDA is definitely at the table.
    Mr. Miller. One of the programs administered by our agency 
at State government is the U.S. Housing and Urban Development 
Block Grant Program. In terms of programs like the HUD Block 
Grant Program, we could probably get bigger bang for what is 
already being spent on the program by adding some flexibility 
to the programs, at least as it relates to rural communities.
    The program was initially established for urban areas, so 
they take a one-size-fits-all approach to how they do things 
and the requirements that are attached to the dollars. A lot of 
those requirements don't really work well with rural Idaho and 
just simply don't fit.
    To give you an example, I will talk about the one everybody 
always talks about, and this might be the third rail of 
politics there in DC, but the Davis-Bacon Prevailing Wage Act.
    [Laughter.]
    Senator Crapo. You are right.
    Mr. Miller. The cap on that is $2,000, and that was 
established during the New Deal and hasn't moved upwards since 
then. we find that with a lot of the projects we try to put in 
Idaho; that regulation alone probably adds anywhere from 5 to 7 
to, in some cases, 10 to 15 percent of the administrative cost. 
On a half-million-dollar project, that is quite a bit of money 
that could buy extra pipe, that could put extra infrastructure, 
could put another bay on a fire station, whatever the project 
might be on the ground.
    The second thing I would urge Congress to look at is taking 
some of the existing programs and opening the array of projects 
or types of projects that could be funded under them. Let me 
give you an example.
    The Federal Emergency Management Agency has a program 
called the Assistance to Firefighters Program. Excellent 
program. Fire departments can get equipment through this 
program, they can get training, they can get the special hazmat 
gear. Doesn't really work well in rural Idaho. It doesn't do 
you any good to have a new fire truck if you don't have a place 
to put that fire truck.
    One of my pet peeves with that program or my suggestion for 
that program would be, at least for the rural community, to 
maybe open up to allow--some of those dollars could be used to 
even rehabilitate existing fire stations or maybe add to or 
remodel fire stations. Not to the point where you duplicate 
what is already being done with the USDA Community Facility 
Program or what can be done with the HUD program, but to 
address those small projects that are too small for the larger 
programs, but are vital needs nonetheless and need to be 
addressed.
    Those are the kinds of things Congress should look at. If 
you could just figure out, maybe, how to diminish some of 
administrative costs that are associated with these programs, 
that would be a way to get more money into rural Idaho and into 
those rural programs without actually having to add more 
dollars to the program.
    Senator Crapo. That is a good point.
    Bob.
    Mr. Harper. May I speak to--especially on this one. We had 
an emergency services building--one stall, basically, that was 
falling down. We went for grants, looking for some help on 
building an emergency with a double bay. We had two fire 
engines, and we had one ambulance. With the Davis-Bacon wages 
and all, it was going to be a $120,000 grant. We had to do a 
high match on it, which we couldn't do. We did it ourselves 
with about $68,000. A complete building--better than the one at 
Winchester for over a hundred and some thousand--and with 
volunteer labor. A gentleman came and took high school kids and 
built the building himself.
    Now, we did get a grant from Rural Development to put a--it 
is a meeting room inside, bathrooms, this type thing. Believe 
me, we couldn't have done it if we went through the grant type 
because it was just too expensive.
    Senator Crapo. Well----
    Mr. Harper. One more thing I want to share.
    Senator Crapo. Sure.
    Mr. Harper. In a small town, one of our biggest problems 
that we see is that we do not have living wages. We are losing 
our young people. Our school is in need right now. Maybe within 
2 or 3 years we could lose our school. We do not have an 
enrollment. The last 5 or 6 years, steadily, every kid that 
graduates, I would say within 95 to 98 percent leave town and 
go to Boise to work or some other place because all we have--
tourism's fine. Tourism is great. Our rafting business lasts 
about 5 months a year, our fishing lasts about 5 months a year. 
All this money, it goes into the businesses, but it does not go 
into paying a living wage. We are talking about entry-level 
positions, $6, $7 an hour. It is not living wages at $6, $7 an 
hour. We are going to lose our school.
    We are looking for some employer. How do we get hold of an 
employer that would come to a small community like ours, give 
us 30 jobs, living wage, $12 to $14 an hour, then young 
families will stay because they want to live there, just can't 
afford to.
    Senator Crapo. Oh, you bet. You have all raised very, very 
interesting and valuable points. Just a quick little aside. 
Another of the committees that I chair in Washington, DC--on a 
different committee, the Environment and Public Works 
Committee, I chair the subcommittee on Fisheries, Wildlife, and 
Water. We jokingly call it the fishing, hunting, and drinking 
committee.
    [Laughter.]
    Senator Crapo. Drinking water. We do get into a lot of 
resources you brought up. One of the things we cover, 
obviously, is water, water infrastructure. I have had a bill 
for the last 4 years that we have been working on to try to 
address the infrastructure needs of our communities to support 
their clean water and safe drinking water systems, particularly 
our rural communities who don't have the economy of scale. 
Project Circle was a way to try to get some of that money up 
fast.
    It is the Davis-Bacon law and the battle with urban and 
rural communities over the formula that has stopped that bill 
for 4 years. We have finally conceded the Davis-Bacon issue. We 
would at least like to pass the bill. Now we are fighting over 
the formula, but if you look at the votes in Congress--our 
Founding Fathers were so wise for small-population States when 
they established the U.S. Senate, because it is two votes per 
State regardless of population.
    In the U.S. House--and I am not criticizing the House. It 
was very wise to have a population-based part of the 
legislature as well. If you look at where the--I have seen a 
map that was actually done by a phone company that has every 
county in America, one of four different colors, red being 
heavy population, then orange the next heaviest level, and then 
green for moderate population, and white for light population. 
If you look at the map of the United States colored in 
gradation from red to white, based on population, the east 
coast is red and it is pretty much red and orange, with little 
counties of green and white throughout there until you get to 
the Mississippi River. Then it starts turning green, and pretty 
much in the farm belt there, it turns white and it is white all 
the way to the coast. Then it is red along the coast again.
    There are red spots. Boise is a red spot, and Tucson and 
Salt Lake City and Denver. For the most part, the whole middle 
part of the country is white. The reason I tell that is because 
that is how the House of Representatives votes. You can just 
look at that map, and you can tell the outcome of what the 
formula for clean water funding is going to look like. They are 
siphoning all the money into the red area. They battle the 
Senate where we try to pull it back into the white area.
    For 4 years now, we have lost--well, we have lost the bill 
because it gets filibustered. The other thing in the Senate is 
there is the filibuster, and the heavy-population States can 
filibuster a formula change, and that is where we have this 
battle.
    It is just interesting though. You have brought up among 
this panel the two key issues that have stopped us from putting 
billions. I sponsored the amendment to add $2.3 billion for 
water infrastructure systems for our communities across the 
country, leaving aside the formula battle. Just put it in 
there. We have the money in the budget now; we have won that 
fight. Now we are going to go back and try to battle this out 
again.
    I am just telling you some of the intricacies, the wars we 
have, to try to accomplish the common-sense things that you are 
suggesting that we need to do. You have given me a very good 
idea here--I have made a lot of notes--as to where we need to 
head in terms of getting flexibility for local control and 
flexibility in program fund usage, and trying to address some 
of these questions of how to get a living wage.
    Anyway, another question that I had is, getting to a little 
bit more of specifics now. A number of programs were mentioned 
here in your various testimony; the RCAT program, the small-
diameter timber projects, RBEG and RBOG--I am getting good at 
these acronyms.
    [Laughter.]
    Senator Crapo. It seems to me that what I am going to do 
is, from this panel and other panels that we have talked about, 
I am going to listen very carefully to the ones that work and 
where. With those that work, we can improve their effectiveness 
so that their scope and their flexibility are sufficient. I 
would encourage you to tell me if there are any others--and I 
don't know that you need to answer that right now--but just now 
or at another time, any other programs such as these that we 
need to pay attention to in terms of our focus in Washington to 
make sure they get funded. By the way, SEARCH is not funded. We 
are going to get it funded, one way or the other, if we can 
help it.
    Ms. Herring. It is one of those that works.
    Senator Crapo. It is one of those that works beautifully. 
Were you about to say something, Mr. Birdsall?
    Mr. Birdsall. No, Senator. Well, I just was having a 
thought of--trying to think of other programs, and I will 
continue to try to do that. I guess I would again like to 
stress, maybe the concept is just to look at these programs 
that you just mentioned in the model, and some of the answer 
might be in defusing that operational model out into other 
programs so we are getting more mileage.
    Senator Crapo. Because these are working----
    Mr. Birdsall. These are working very well, except for lack 
of resources.
    Senator Crapo. That is a good point. Well, let me talk 
about SEARCH for just a moment as an example, and then I want 
to talk about INEAS. Project SEARCH, actually, is just an idea 
that came up in my staff as we were struggling with this about 
4 or 5 years ago, trying to figure out how to get money to some 
of these really small communities, 2,500 or less, that just are 
hammered by Federal mandates and have the same environmental or 
infrastructure needs, but just do not have any kind of economic 
base with which to address the issue.
    Like you said, when you went through that, it reminded me 
of how well it worked. We spent 3 years fighting just to get 
the pilot plan done. We got the pilot project, announced it in 
August, and within 6 weeks or so, there were 47 applications. 
Within just a hair over 5 months, those applications had been 
reviewed, and the money was in the communities being utilized. 
It made a big difference for 21 communities in Idaho.
    In fact, when we went back and then got the concept 
authorized on a national scale, when we told them how well it 
worked back here in our committee--the Fisheries, Wildlife, and 
Water Committee--Senators from other States were saying, ``I 
want to be a part of the next pilot project.'' I said, well, 
actually the idea is we are going to make it nationwide now. We 
have done that, but we have these continuous funding battles 
for the obvious reasons.
    It seems to me that that kind of a system is needed. It 
was, in many cases, almost a complete drain because some 
communities just couldn't come up with the matching funds. 
Other communities could, and they were able to pool. It seems 
to me, for the really small communities who still have to put 
in the expensive systems, we need to find a way to just get the 
money to them without matching dollars.
    Ms. Herring. That was the case in several of those towns 
simply because, as the gentleman from Riggins said, having that 
small of a tax base or that small of population, you cannot 
generate the kinds of dollars you need to build a million-
dollar treatment plant. Whether you are 25 people or 200 people 
or 35,000 people, that million-dollar treatment plant still 
needs to be built.
    Senator Crapo. Right. The cost doesn't change.
    Ms. Herring. It doesn't change. Welcome to Castleford.
    Senator Crapo. That is right. Well, we are going to 
continue fighting for that. If the budget climate were the way 
it was 3 years ago, I would be able to tell you we are going to 
get some good money into that program. The way it is right now, 
we want to keep these good ideas alive, and that is the range 
of things to look at, and I appreciate all of----
    Mr. Harper. Excuse me. Like Riggins, we are in a situation 
with our sewers. We have certain standards there that are 
higher than most places. Our system is 30 years old; we need an 
upgrade on it to bring it up to standards, and we don't have 
the money. We do have some depreciation money that we could use 
to match, but I know it wouldn't be big enough, and it would be 
a pretty sizable outlay for us. It has to be done in the next 2 
or 3 years to meet the standards because we are tested two or 
three times a week. Just for--the water goes back in the river. 
Other places are not--they just have groundwater to worry 
about; we have the worry about the river.
    Senator Crapo. Mr. Harper, I agree with you about that even 
more than you might know, because I have stood in that river 
with about 100 other people, casting and turning for one of 
those salmon to come up. No, I understand. Your plight is one 
that is repeated dozens and dozens, hundreds of times over 
throughout this country in rural communities.
    Ms. Herring. Senator, one thing I would like to add to 
that. In funding such things, it may not be the capital 
expenditure with bonding mechanisms and granting resources of 
the USDA. It is that initial step--which Project SEARCH 
happened to fill--getting that initial feasibility study so the 
community could understand what their options were if they had 
a problem. Unless they had all the options, they didn't know if 
it was going to cost $1.98 or $5 million to fix the problem.
    By having that little bit of the seed money to get the 
engineering done or be able to get the analyses completed, put 
that thing out to the community for a bond election or approach 
some of the other resources available, that is the piece that 
was missing for some of these smaller communities. They 
couldn't even raise enough dollars to get to that level.
    Senator Crapo. That is something that I have had to become 
educated on. I approached it by saying why do we have to put 
all this money into a study; why don't we just go out and build 
the plant? I have learned that we have to analyze and figure 
out what law requires, and what is the most efficient and 
effective ways to meet the requirements of the law, and then be 
able to move on. Much of the problem that small communities 
face is exactly, as you say, that very first step.
    Let me just use our last little bit of time here on INEAS. 
As I believe everybody knows, I introduced a bill on INEAS last 
week, I believe it was. I have talked to several of the other 
Senators from the Northwest, and there is some significant 
interest. For those that aren't familiar with it, it is the 
Inland Northwest Economic Adjustment Strategy.
    Basically, it is the rural development people from 
government and private sector, basically--groups working 
together trying to find solutions to all these problems we are 
talking about here. This legislation is to create a Northwest 
strategy and to give us the ability to have a structure behind 
focusing on these issues.
    I am being vague about it because, to me, it is something 
where we want to have the flexibility to make it work and have 
this Federal entity that we are trying to establish by statute, 
have the ability to bring together the various people from the 
Northwest here. When I say that, it is Washington, Oregon, 
Idaho, and Montana, selected counties. All of Idaho is 
included. Then bring together the people who are on the ground 
doing this, have them--to have them help us identify solutions.
    For example, if they come together, I hope they think 
Project SEARCH is a great idea and that they figure out a way 
to collectively help us make that become a reality, just what 
we do. In my mind, that is what INEAS is. For those involved 
with that, could you tell me your picture of what you think we 
are trying to achieve there?
    Mr. Birdsall. I would be glad to, Senator. I should 
probably respond first. I am a member of the consulting team 
that is attached to this phase of that project, and, 
essentially, you have done a pretty good job of describing it 
in a nutshell, that initiative. At this point in time, it is an 
initiative that is focused on structuring that regional 
approach; taking some lessons, the good things learned out of 
prior activities like the timber initiative when the spotted 
owl issue surfaced, or like regional commissions in other parts 
of the United States. Although this is not either of those, it 
took some good lessons from those to put this approach 
together.
    The thinking, generally, is can we be smarter as a region 
and work together as a region to use adequate resources to 
answer our problems through creativity and collaboration and, 
if possible, streamlining the delivery of financial resources? 
It does take--it is an initiative that is taking a look at 
systemic change in the economies of the Northwest and how do we 
adjust and react to those.
    Senator Crapo. As we develop a strategy, which will include 
a lot of things we have talked about here today, it would seem 
to me that this--this group--I don't know what to call it. I 
guess that is as good as any--would have the collective power 
that individual Senators--I am talking politically now, back in 
the Congress. If we have the commitment of the Senators from 
Montana, Idaho, Washington, and Oregon, we will have bipartisan 
support, a focused strategy, and the ability to much more 
effectively advocate for the kinds of reforms and focus that we 
have been talking about here. That is what I, in my mind, 
imagine.
    Mr. Birdsall. That is accurate.
    Senator Crapo. Well, again, I would like to thank all of 
you for coming. We are about out of time. We have had some 
really good input from you, and I appreciate the effort to get 
here today.
    Mr. Birdsall. Thank you, Senator. We realize the challenges 
you face, and that is why we elect brilliant leaders to go to 
Washington.
    [Laughter.]
    Senator Crapo. We will go to panel No. 2, which is Mary 
Pridmore and Fred Cornforth. Mary is with the Neighborhood 
Housing Services, and Fred is with the Community Development 
Corporation. This panel will focus primarily on multi-family 
housing, I suspect. We welcome you both here. We have about a 
half an hour, so if you two will also pay close attention to 
the timekeeper here, we will have about 20 minutes for 
questions and answers, too.
    Let's see. Mary, you are welcome to start first.

 STATEMENT OF MARY PRIDMORE, DIRECTOR OF HOUSING DEVELOPMENT, 
                 NEIGHBORHOOD HOUSING SERVICES

    Ms. Pridmore. Thank you for the opportunity to be here 
today. The 515 Program is probably more complicated than we 
want to go into today, but it is the multi-family housing 
program through USDA Rural Development. They support seniors 
and families. Generally, in Idaho, it is 60 percent of median 
income, and I have provided you some information about median 
income. In Idaho, for rural counties that is generally $22,850 
or two people who are making about $5.50 an hour.
    Most of the portfolio of 515 properties, real estate, are 
owned by aging owners. They are ready to divest themselves of 
the properties, and under some regulations that were created by 
Congress in 1988 to protect the low-income population that are 
housed in these properties, there are pre-payment incentives 
that are provided by USDA Rural Development, and there are 
restrictions on when the owners can sell their properties. This 
is to protect the people that live there.
    The incentive programs provide higher rates of return, 
rental assistance, and some other features that would benefit 
the owners and encourage them to stay in the property. 
Unfortunately, the incentive program does not match the 
appropriation, and I am aware of the budget constraints. The 
appropriations are very critical to communities. As you heard 
earlier, many of these people are leaving communities, the very 
young people. Affordable housing is very difficult to do if you 
make $5.50 an hour, $7 an hour.
    There are waiting lists that USDA Rural Development has for 
these equity loans. One of the challenges for a developer to 
even be interested in acquiring or applying for new 
construction loans is that you have to be ready. You have to 
have spent money, you have to be sure your project is ready to 
go and prove that. Also, they compete with the red area. It is 
a national pool. It is a disincentive for a developer, a new 
developer to try to move into this area when there is a long 
waiting list and the appropriations are short.
    The challenge with that is, as non-profit organizations, we 
are resident-based, community-based. The population we serve is 
who we choose to serve, and so the funding available to try to 
stretch ourselves, to take that risk, is not there. Even if our 
mission is there, our opportunity for risk is very great. 
Sorry.
    Senator Crapo. That is all right.
    Ms. Pridmore. Somebody told me I get too passionate about 
this. Average property size in Idaho is 24 units; some of them 
are even smaller. I provided you a map. Here is an even larger 
map to show how much they are dispersed.
    When you were talking about the East Coast and how the red 
and white--some of these, as you can see, are just the palest 
white because of where they are located. When you compete on a 
national scale for funding for those areas, it is very 
difficult to say that you are going to compete to get the 
funding.
    I want to interject something here because--that is not in 
my written testimony--just so you will understand how strongly 
I feel about this. I have worked with developers on the other 
side who were trying to sell their own homes, and one of things 
they have said to us is that in the Northwest, the Rural 
Development Office here has most fertile minds in trying to 
make the most out of this money. Because they do, we want to 
make sure that we retain those appropriations. We like to get 
appropriations for our folks because they are resident-based, 
and as a non-profit, that is what we care about, just like the 
mayors and the city councils.
    The impact of losing these properties is critical. I have 
provided you some statistics, and I just want to run through 
those real quickly with you. The average adjusted annual 
household income for a particular property we picked was $4,676 
or $390 a month. A lot of these people are on disability; some 
are seniors on Social Security income. For instance, a working, 
single mom who has one child with her has an annual income of 
$12,000. She pays $269 for rent and utilities, and the USDA 
Rural Development supplements that with $302.
    Obviously, she can't sustain a job as a waitress or a clerk 
in a small community without that assistance. This funding is 
absolutely critical.
    We thank you so much for taking the time to hear this 
issue. I know you have many critical issues. This is the one we 
are passionate about.
    Senator Crapo. Thank you. Your passion is not only very 
evident, but justifiable, and we appreciate it.
    [The prepared statement of Ms. Pridmore can be found in the 
appendix on page 73.]
    Mr. Cornforth.

STATEMENT OF FRED CORNFORTH, CHIEF EXECUTIVE OFFICER, COMMUNITY 
                 DEVELOPMENT CORPORATION, INC.

    Mr. Cornforth. Thank you, Senator. It is good to be here. 
Our non-profit organization this year will do approximately 
$800 million of apartment development throughout the West 
Coast. Somewhere between 10 to 12 percent of that will involve 
Rural Development funding. The 515 program is a mature program 
that has generated many housing units throughout the United 
States. There are some inherent problems with it that could 
make it a better program.
    I just noticed in my reading last night that President 
Bush's proposed 2005 budget has no money for new construction 
in the 515 program. That money is being fully dedicated into 
acquisition and rehab, which is a critical need as well. I was 
a little concerned about that because striking a balance 
between new construction and rehabilitation is a worthy goal.
    One of the things that we have--our company has been 
approached, probably in the last 18 months, by six or seven 
owners of 515 developments, probably representing 7,000 to 
8,000 units just in the Pacific Northwest alone. Many of them 
were poorly built, poorly constructed. They are in a decision, 
a valid decision, deciding whether to convert those somehow to 
market units, losing the current housing stock or depleting 
part of the housing stock.
    There are really very few mechanisms in place to allow a 
transfer that makes economical sense to the current owner and 
to anyone wanting to acquire them, plus do the rehabilitation 
that is needed to the units as well. That has created quite a 
dilemma for many of us trying to figure out how to make this 
work.
    In 1986, with the IRS Reform Tax Act, the tax credit 
program was created, Section 42, Low Income Tax Credits, and 
our company has specialized in that. We fell into the 515 
program by having identified a need in the city of Emmett, and 
we were successful in competing on the national level, bringing 
about 515 rental assistance to Emmett.
    The problem we ran into as you find in many federally 
funded programs, they are written by different people, and they 
are administered under different philosophies. We found a lot 
of incompatibilities that made it difficult, in a practical 
sense, to have them come to work together to achieve the goal.
    One of them, in the tax credit program, the value of tax 
credits--one of the things that gives value to tax credits, 
changes every month. We have an ability in just a straight tax 
credit to go out and borrow additional funds if the tax credit 
value goes down, because usually the interest rate drops, 
allowing us to borrow more money. Unfortunately, there are some 
mechanisms that are part of the program that prohibit us from 
doing that, so that is a problem.
    In Emmett, it was remarkable. Within about 10 minutes of 
having talked with the mayor at that time about the need that 
he perceived, we knew we had a community that was in desperate 
need, especially for their senior population. We hung out at 
the senior center over a couple of weeks, interviewed several 
of the seniors over lunch, and learned that many of them were 
receiving $600 to $700 a month in Social Security, but the 
rents they were having to pay were $450 to $550. They were left 
with $100 a month to live on.
    It made it very difficult to buy medications, and many of 
them skipped meals. In fact, one man told me he had been living 
on Corn Flakes for about 8 months since he had had to add a new 
prescription to his monthly costs. He is now living in one of 
our units and--has it already gone that quick?
    Senator Crapo. I told you it would.
    Mr. Cornforth. It was just a neat thing to be able to see 
that his rent has dropped down to $180 a month. It has been a 
real benefit, the 515 program has.
    The last thing, and quickly, your office has been very kind 
to work with us, especially in the city of Caldwell, to get an 
exemption, but there is a gap, a population gap right now in 
our programs. Towns under 20,000 are served by Rural 
Development, and towns over 50,000 are typically served by many 
entitlement programs through HUD. The problem is that the towns 
that are in between that are in a no man's land, and there are 
very little funds, without exception, to see about helping the 
needs that those communities have identified. I still wish 
there was something we could do about that.
    In short, and in long, those are my thoughts for today. 
Thank you.
    Senator Crapo. Well, thank you both very much. Explain to 
me a little bit--both of you mentioned the fact that these 
funds are competed for nationally. How does that work when you 
say you have to compete nationally for these funds?
    [The prepared statement of Mr. Cornforth can be found in 
the appendix on page 75.]
    Ms. Pridmore. Well, there are a lot of housing programs 
that--well, the State of Idaho does have some allocations. Our 
sister States--Washington, Oregon, the more populated States--
have a housing trust fund that is funded. They may have layers 
of different funding that is set aside for that.
    Here, because of the population base, the money that comes 
from HUD is through an allocation for the State, and then 
outside of Boise, and certain metropolitan areas have to 
compete statewide for the moneys that Fred is talking about.
    In the RD program, there isn't a specific 515 allocation 
for the State of Idaho. There are staff members who can explain 
it better than me, but my understanding is in any competition 
where you are competing for national funds, there is a certain 
stage of readiness: you have to have the site, you have to have 
identified things that cost money. You are competing 
nationally, and there might be 20 units that might be 
available.
    Say there is $515,000 for the entire initiative that is 
available for new construction and accompanying rental 
assistance, as a non-profit developer in a State where we don't 
have other matching funds that we can put with it to say if you 
give us this, we can finish the project with this, then we need 
all of the money. It weakens the project.
    Does that make sense?
    Senator Crapo. Yes, it does.
    Fred.
    Mr. Cornforth. The way the pointing is worded, just about 
anybody can get a 30, and in the past, until about 4 years ago, 
that was enough to get funding at the national level. The 
weighting of the applications at the national level are favored 
now toward the 100 most underserved counties in the United 
States, which by virtue of their designation indicates that 
there is a terrific need.
    If I wanted to do a project in the Yukon Delta in Alaska, 
which we had actually looked at doing, which is $200,000 just 
to do one unit, we could compete on the national level and 
successfully get 515 money.
    I don't believe any RD staff are here. I don't believe we 
have one of those 100 underserved counties in Idaho.
    Ms. Herring. No.
    Mr. Cornforth. We don't have any, so we are immediately 
crippled there on being able to compete against anyone else in 
the United States, and that is 20 points. That is really--when 
you consider only 60--well, 65 total and you get a 30 in the 
past, 20 makes a big difference and gets you into that, what we 
call a ``kill zone'' where you can receive funding.
    Senator Crapo. This is not a case of the urban areas 
getting an undue benefit in the formula? It is a case of the 
most economically disadvantaged area getting an advantage that 
makes it difficult for those that fall just above that?
    Mr. Cornforth. That is correct.
    Senator Crapo. I guess what I am hearing you say is that, 
clearly, if we had enough budget money to put enough in to 
expand the pool, we could then expand the number of counties or 
change the formula. This is a case where we have--I was going 
to say a loophole. It is not a loophole, but we have a hole 
between those 100 disadvantaged counties and the other counties 
that can't compete but badly need the support?
    Mr. Cornforth. That is correct.
    Senator Crapo. How do we solve that? Give me some 
suggestions.
    Mr. Cornforth. Change the pointing.
    [Laughter.]
    Ms. Pridmore. Well, my suggestion would be to try to get an 
allocation for Idaho. The reason I say that is I believe that 
if you had an allocation for Idaho, then the most needy areas 
in Idaho would be reached. Another thing is, we do not have the 
funding allocations that some other States have. For instance, 
Alaska does have allocations for the natives where they get 
something like $60,000 a year, when it is a good year, for 
residents.
    Now, I don't want to minimize the issues in other States--I 
am a tropical person, and I do not want to live like that--or 
the homeless issues in Alaska, but the important thing is they 
do have other funding sources that take care of some things 
that we do not have in this State. An exploration of funding 
they get, by State, of the rural areas, that it might change 
the way that some of the allocations are done. That is just 
personal.
    Senator Crapo. That is a very good suggestion. You are 
saying we should--I know that my staff is out there making good 
notes on this.
    Ms. Pridmore. I can give them anything they need.
    [Laughter.]
    Senator Crapo. We should evaluate the funding matrix of the 
515 dollars by State to see how they go out.
    Ms. Pridmore. Well, the combination available, like Fred 
was talking about, for tax credits, home dollars--those are 
population-based, not necessarily need-based. Then each State 
allocates that. The CDBG funding that Jerry was talking about, 
how those programs work together in each State and 
availability. Essentially, as non-profits, we don't like to 
aggressively compete against each other because you deplete 
resources.
    Our organization tries to partner as much as we can with 
every community and every organization because, essentially, 
you are depleting resources if you are competing against 
another non-profit for funding coming into your State.
    In States like Washington, Oregon, and some of the other 
States, special ones like Alaska, they have different funding 
mechanisms that provide housing subsidies that we don't have 
here. Without comparing that, you are not really comparing 
apples to apples.
    Senator Crapo. When you say different funding sources, 
different Federal funding sources?
    Ms. Pridmore. Or State.
    Senator Crapo. Were you about to add something, Fred?
    Mr. Cornforth. I like this idea of having a State 
allocation. Washington and California compete very well at the 
national level in part because the States have oriented 
themselves. The State housing agencies or something, Governor-
appointed trust funds, those types of things have helped to 
attract those funds. That still doesn't get us over the hump.
    Matching leverage, again reflected in funds at the national 
level, counts some. When you don't have any of those 
underserved counties, you can have $2 or $3 million extra in a 
$5 million deal, and it still wouldn't get you to the point 
where you get funding. It really has to do with this 100 
underserved county designation. In my opinion, that is where 
things are being steered away from us.
    Senator Crapo. Well, it seems to me that if you go to a 
State allocation--and I assume there would have to be some 
formula where every State had an allocation to make it 
politically work. If you did that, then you would probably have 
to have the underserved counties be a subset of the State 
allocation system.
    Ms. Pridmore. Each State can designate its own underserved 
counties.
    Senator Crapo. Each State can do that. OK. I am learning 
some stuff here. I appreciate you walking me through this. I 
had a question in my mind. Fred, in your testimony, you talked 
about this funding gap between the 20,000 and 50,000 population 
mark, and you are right. For several years, we have just had an 
exception for Caldwell to try to get them past this problem.
    Is the solution there--well, let me ask you. What is the 
solution? Change the formula? The qualification categories?
    Mr. Cornforth. That would seem to make sense. However, the 
number of communities that suddenly would qualify then would 
grow tremendously and dilute the funds, so it is--and as I was 
sitting there listening to you describe your process in the 
Budget Committee, I began to feel just a little bit of the 
weight on my own shoulders of the decisions you must have to 
make.
    This--in fact, I was a little discouraged.
    [Laughter.]
    Mr. Cornforth. I was looking for a Prozac in my pocket and 
didn't have one. I really think communities should be able to 
somehow speak of their need and present their case, regardless 
of their population size. Then the objective process--hopefully 
it is an objective process--that is in place can then 
prioritize what communities are in the greatest need. Right now 
there is no forum, there is no voice for that group that falls 
between the 20,000 and 50,000 to allow that.
    Somehow, communities like Twin Falls, for example, at 
34,000, they are in that funding gap area. These areas should 
have a chance to present their case and should compete with 
everyone else as well. Just right now there is no forum for 
that.
    Senator Crapo. Tell me if I am understanding this right. 
For the communities between 0 and 20,000, we basically have the 
USDA Rural Development program; for the communities over 
50,000, we have the HUD housing programs?
    Mr. Cornforth. CDBG. In some States, a home entitlement.
    Senator Crapo. For those between 20 and 50, there is just a 
hole there? There are no Federal programs that apply?
    Mr. Cornforth. Some of the staff may be able to--I believe 
some of them have moving population targets; they change from 
year to year. I don't think the staff----
    Senator Crapo. Anybody got an answer to that question? Have 
I got a good picture of it, or am I simplifying too much?
    Mr. Cornforth. In regards to housing, it is 20,000.
    Audience Member. Every program has a different level. Some 
of our programs are 10, some are 20, some are 50.
    Senator Crapo. OK.
    Audience Member. Depending on the program.
    Senator Crapo. It is a program-by-program issue, but at 
least as to housing----
    Mr. Cornforth. The 20,000 seems to be the problem.
    Senator Crapo. Between 20 and 50 would face a problem?
    Mr. Cornforth. That is correct.
    Senator Crapo. Well, that completes the questions that I 
have. Anything you folks didn't get to say that you wanted to 
say? Other than this is really important.
    [Laughter.]
    Ms. Pridmore. Because interest rates have been so low for 
so long, a lot of people are moving into homeownership. Housing 
is not on a lot of people's agenda. If you look at income of 
those served by this program--unfortunately, housing does fall 
off the agenda of people with homeownership. The people who 
live in these communities and the people that we are talking 
about serving at these income levels could not buy a home with 
that income. I just would like to make sure that that is clear. 
I just can't tell you how much we appreciate the time.
    Senator Crapo. I am glad.
    Mr. Cornforth. A lot of rural communities want to stay 
rural. You have to be there a while to really get a sense, 
because you will have some visionaries that are speaking almost 
as prophets that could be stoned at any time, talking about 
wanting economic growth or additional infrastructure that will 
lead to growth. Some communities don't want to grow. They have 
the desire to stay the way they are.
    This is strange because it is usually--I am finding this 
trait in rural communities that are near larger towns. For 
example, in Caldwell, we had a lot of Rural Development-
sponsored homeownership take place probably in the last three--
I am just going to pull a number out of my mind--around 600 to 
700 homes that were made possible for first-time home buyers 
mostly to get a home.
    For example, take Caldwell out of that. What happens is 
there is a lot of pent-up demand that homeownership can only 
happen through the Rural Development program. That pent-up 
demand ends up getting pushed into some rural communities that 
don't want to grow or they don't have the infrastructure in 
place to be able to support it.
    Now, if you get a town like Caldwell--and I am not here to 
beat Caldwell's drum. It is just I am most familiar with it. 
They spent a lot of time and now have the money, now have the 
capacity to serve quite an increase in their population base. 
We are seeing a little bit of a slowing in homeownership there 
simply because now we are going to notice Wilder, Middleton, 
Parker, Homedale.
    You are seeing this ripple effect that is going to cause 
these rural communities to lose some of their rural nature, and 
some of them don't want that. Then you have this pent-up 
demand, too, of homeownership and a desire to own their own 
home. It does create a bit of a confluence there in 
intersecting trends, but that--thanks for listening.
    Senator Crapo. You have very clearly identified some of the 
dynamics of this issue as we move from urban to rural as far as 
achieving the goal of homeownership in this country. In fact, 
as you were talking, I was thinking about my own feelings as a 
kid growing up in Idaho and not wanting anybody else to move in 
here and get all of the population problems but, on the other 
hand, wanting to have a really strong, vibrant, dynamic 
economy. It is a conflict that we continue to deal with.
    Let me just conclude by saying, to come back to your point, 
Mary, I believe--everybody, almost everybody, believes, too--
that affordable housing and homeownership is one of the core 
parts of the American dream. It is one of the things that gives 
people the ability to get their hand on that ring and start 
economically improving themselves in ways that dramatically 
increase the quality of their lives. It is something that our 
Government is committed to, at both the Federal level and State 
level, and that we as a people are committed to.
    Even for those who aren't ready to yet move into the 
homeownership category, to make the ability to have housing, 
even if it is rental housing, affordable and high quality is 
just one of most important parts of the quality of life in 
America. Like I say, it is part of the American dream. I 
believe it is part of what is--when I talked earlier about what 
is needed in our rural communities for economic development, I 
believe that homeownership is part of infrastructure.
    We didn't get into it in as much detail as I should have 
with the previous panel, but at some point today or in the near 
future, I would like to put together a really good definition 
of what we mean when we say infrastructure. It is roads and 
bridges and schools and health care and access to the Internet 
and all sorts of technology needs that we have there, but it is 
also homeownership, and it is affordable housing.
    I have been in parts of Idaho where I have actually had the 
privilege of meeting people who were in some of the housing 
units that we were able to help them gain access to. They let 
us come into their homes and see what they have. It was a 
really remarkable thing. I don't know how many of you would 
just let some Senator come into your house and look at it and 
see what a Government program was providing or what it was 
facilitating.
    To look in the eye of somebody--well, I can tell you. The 
look in the eyes of the lady whose home we were in just tells 
you what you are talking about, what you are dealing with here. 
I can understand your passion and the passion of everyone who 
is involved in it. I can assure you that in our focus on trying 
to figure out what to do for our rural communities, Rural 
Development is going to have a homeownership component in it, 
very solidly in place.
    Well, it is 5 minutes to 12. We are supposed to be breaking 
at noon for lunch. We will excuse this panel, and we will 
recess until 1 o'clock.
    We will recess for lunch, and we will resume here at 1 
o'clock. Thank you very much.
    [Whereupon, at 11:55 a.m., the subcommittee recessed, to 
reconvene at 1 p.m., this same day.]
    AFTERNOON SESSION
    [1 p.m.]
    Senator Crapo. We will resume the hearing. I can see our 
panelists already know we are ready for panel No. 3. We welcome 
you all here. Panel No. 3 is John Lane of the Clearwater 
Economic Development Association; Mike Field, the USDA Rural 
Development State Director, Ron Williams from Mountain View 
Power, Inc; and we also have with us Mr. Steve Thorson of 
Forest Concepts. I don't know if you were all here this morning 
when I gave my iron-fisted speech about sticking to 5 minutes, 
but we have a timer here, and we are going to hold you to your 
5 minutes for your presentations, and then we will engage in 
some discussion.
    Mr. Lane.

STATEMENT OF JOHN LANE, BUSINESS FINANCE SPECIALIST, CLEARWATER 
                ECONOMIC DEVELOPMENT ASSOCIATION

    Mr. Lane. Thank you. Thank you for inviting me to attend 
today. Clearwater Economic Development Association, CEDA, 
serves the five counties of north central Idaho. My role at 
CEDA is to operate and administer small business finance 
programs. Our total capital base at this point is approximately 
$2 million. Funding for that is a combination of USDA Economic 
Development Administration funding, USDA Rural Business 
Services through both the IRP and the RBEG programs providing 
funds.
    The DPA and the IRP programs primarily focus on gap 
financing. That fills a small niche in the market where we 
provide a small amount of financing relative to the total 
project, typically a third; two-thirds from either the bank or 
owner in combination thereof and one-third CEDA dollars. These 
borrowers are typically relatively strong in most areas but 
have some deficit in relation to normal banking guidelines to 
prevent the bank from doing the loan without the gap financing. 
These programs, as I said, do fill a niche in the market. They 
work quite well in that niche, and I would encourage continued 
funding for those.
    We also offer microloan programs. We have two tiers of 
lending, one 10,000 and under, and one 20,000 and under. Our 
RBEG program dollars fund the 10,000 and under projects.
    There are several unmet needs and challenges in our market 
area. It is common for banks to refer projects to us that are 
in the area of the $35,000, which is over our microloan amount, 
yet small enough to make it less than profitable for them to 
pursue the loan either through in-house loans or, particularly, 
when they need an SBA guarantee and they get flagged for the 
borrower. The gap is actually between $50,000 and $20,000. The 
amount they typically go after is $50,000; our microloans end 
at $20,000.
    We also have another unmet need in our market where, 
because of constraints on the USDA IRP program that we operate 
in cities outside of 25,000 population and up, we have some 
problems serving our largest community, Lewiston. Regardless of 
the economic development of the individual project or the 
economic need of the economic need applicant, we find it very 
hard to serve that niche.
    One of the major areas I would like to emphasize is we have 
a wealth of entrepreneurial people in our region who have 
products or services that typically would capitalize on the 
emerging markets and technologies that are targeted by the RBEG 
program. Due to the need for flexible repayment structures, the 
existing programs don't necessarily meet the needs. What I 
would propose would be a program with a more flexible repayment 
structure similar to an investment capital type program.
    However, one must recognize that the typical investor type 
program doesn't meet the needs of these small businesses, 
primarily because they are looking--these small business owners 
want to remain the owner of the business. They are not looking 
for a partner. These small business owners are focused more on 
keeping their business in their community and hopefully 
improving the economic condition of those around them, as 
compared to your normal investor is going to be looking for 
rapid and high return on investment. The two fall into 
conflict. A program that simulated investment capital, operated 
through EDC, funded with USDA dollars to focus on rural 
business development would be the best combination.
    Another need we have in our area is for technical 
assistance for these same individuals. An example would be, we 
recently assisted several businesses through an RBOG, a Rural 
Business Opportunities Grant. We found primarily that the 
program ran short in time. We ran out of dollars before all the 
needs were met. We had some success with a particular 
participant and had we followed up with them better, or had the 
resources, I should say, to follow-up with them better, we may 
have been able to better help them in the long term. Whereas, 
what happened was several of their needs were unmet because 
they, the business owner, didn't necessarily recognize it as a 
need, didn't ask for help from the Small Business Development 
Center.
    Had we had a better ongoing program developed to help these 
types of businesses, we may have been able to maintain what 
gains we did make with that business. We need consistent 
funding on established time lines for business development, and 
the best programs are the RBEG and RBOG programs for funding 
these because of flexibility.
    Senator Crapo. Thank you very much. That 5 minutes goes by 
way too fast.
    Mr. Lane. Yes, it does.
    Senator Crapo. I would say, Mr. Lane, in reviewing your 
testimony, you have a lot of good organizations and very good 
suggestions.
    Mr. Lane. Thank you.
    [The prepared statement of Mr. Lane can be found in the 
appendix on page 77.]
    Senator Crapo. Mr. Field, you ought to be feeling pretty 
happy with the programs you are administrating then.
    Mr. Field. I am pretty happy.
    Senator Crapo. Thank you for making the effort to be here 
with us.

STATEMENT OF MIKE FIELD, STATE DIRECTOR, USDA RURAL DEVELOPMENT

    Mr. Field. Mr. Chairman, I am pleased to be here today to 
talk about our programs in Idaho. I have a formal written 
statement and a copy of our annual report that I would like to 
submit for the record along with my oral testimony. I know that 
you have responsibilities across the Nation, and we are 
certainly glad to have an Idahoan as the Chair of this 
important subcommittee which addresses forestry, conservation, 
and rural revitalization.
    USDA Rural Development is committed to the future of Idaho. 
We have three main programs--jobs, housing, and 
infrastructure--all of which help to build the fabric of rural 
communities.
    We provide a variety of both single and multi-family 
housing options for rural residents. Our housing programs 
provide housing for low-income families and seniors. Our self-
help program allows families to build their own homes and 
create sweat equity in the process. I know that you had the 
chance to visit one of these properties in Kimberly. In fact, 
you laid some subfloor that day; is that correct?
    Senator Crapo. That is correct.
    Mr. Field. Most areas in Kimberly are not just building 
equity in their homes, but also equity in their community. As 
USDA Rural Development, we are interested in creating economic 
opportunities as well as improving the quality of life in rural 
America.
    We have concerns about our aging multi-family housing 
portfolio. We are at the point where we need to rehabilitate 
existing properties or build new ones. In Idaho a large 
percentage of our properties are 20 years old or older. Outside 
consultants are currently conducting a study of our properties 
across the Nation, and we look forward to discussing the 
findings with the Congress upon completion. Safe and sanitary 
housing for rural families is the core of our housing program.
    Our community facility and rural utility programs help to 
build infrastructure. There are few rural residents in the 
State who don't benefit from these programs. Whether it is 
delivering safe drinking water to a school or building a fire 
station or almost everything in between, we can make it 
possible.
    We are also very proud of our business and cooperative loan 
program. As you are aware, the building we are meeting in today 
was built with the help of Federal, State, and private funds. 
Ashley and Katrin Thompson have created new hope in their 
community by investing in its future. We are glad to be a part 
of that by working with Farmers and Merchants State Bank to 
guarantee the Thompsons' loan.
    There are several other programs I would like to mention. 
They are also important tools for economic development in our 
State. I am speaking of our distance learning, telemedicine, 
broadband, and electric program. Through these programs we have 
linked rural clinics and hospitals to larger regional health 
care facilities, thus providing more medical care in rural 
areas.
    Southern Idaho has one of the best broadband networks in 
the Nation. The Syringa network was partially funded from loans 
from USDA Rural Development to rural communication providers 
and cooperative. The Syringa network will provide rural 
communities the same economic advantage that the railroads 
provided to rural communities in the 1800's.
    This past year, the Coeur d'Alene Tribe received the 
largest connect broadband grant in the Nation. This grant 
allows the tribe to provide high-speed Internet service to all 
reservation residents and will link critical public services 
such as police, fire protection, and health care on the 
reservation.
    Senator Crapo, I have the opportunity to work for one of 
the best outfits in the Federal Government. We would not be 
able to provide our programs without the help of our partners. 
Today you are hearing from some of them. We want to take this 
opportunity to publicly thank those we work with to bring 
economic opportunity and improved quality of life to rural 
Idaho communities.
    We also want to thank the Idaho Congressional Delegation 
for their continued interest and support for USDA Rural 
Development programs.
    Last year I traveled with one of your staff members to a 
meeting in Twin Falls on a renewable energy farm bill. When we 
discussed rural communities in our State, we observed that the 
towns that were a long distance from one of our major cities 
seemed to need more economic help than those communities within 
a reasonable commute distance.
    As we talked about what USDA Rural Development could do to 
help these isolated communities, as he put it, that anything we 
can do to assist homegrown entrepreneurs would be beneficial. 
Our Business and Enterprise Grant Program and Intermediary 
Lending Program, both of which are delivered through our 
partners through cities and non-profit corporations, are 
designed to facilitate private business development through 
entrepreneurs. To be successful, these first-time or expanding 
businesses need technical assistance to help them put together 
a feasibility plan to assist them in evaluating their business. 
We will continue to work with our partners to look for 
additional sources to fund needed technical assistance for 
these entrepreneurs.
    The Small Business Development Centers in the State could 
provide technical assistance if they had the manpower. Any 
suggestions you may have as to how we might find additional 
technical assistance for these start-ups would be appreciated.
    USDA Rural Development is working with a broad coalition of 
partners for solution to the dairy problem in the Magic Valley. 
We are happy to report that through the renewable energy title 
in the Farm bill, a renewable energy grant was made for all 
three. We hope this will be one of three projects that will 
come online this coming year.
    In addition, we are working to provide partial funding for 
a feasibility study in the Magic Valley to look at the 
prospects of forming a generating co-op to collect methane, 
generate power, and sell the electricity to produce additional 
revenues for the dairy and main street businesses in the Magic 
Valley.
    I know that I have given a quick overview, but rest assured 
that we are here to serve rural Idaho. Our team of qualified 
professionals want to thank you and your colleagues for your 
continued support of our programs. On behalf of myself, USDA 
Rural Development, and the Secretary, I thank you for the 
opportunity to testify at this field hearing and will be glad 
to answer any questions you may have.
    Senator Crapo. Thank you, Mike. Thank you for being here, 
and for all the work you do to make this a success.
    [The prepared statement of Mr. Field can be found in the 
appendix on page 82.]
    Ron.

STATEMENT OF RON WILLIAMS, VICE PRESIDENT, MOUNTAIN VIEW POWER, 
                              INC.

    Mr. Williams. Senator Crapo, it is good to be here today. 
You probably remember me in other roles with other clients----
    Senator Crapo. I know. I did a double take there for a 
moment.
    Mr. Williams. I am one of the owners of a company called 
Mountain View Power. We recently won the bid to build a 165-
million-watt power plant that replaces a facility that Idaho 
Power wanted to build. That has taken us into energy 
development and renewable energy development as well.
    There are just two points I want to make. I have a written 
statement that goes much further in some of my ideas and 
concepts, but one of them has to do with conventional power 
developments in rural communities, and the other with the rural 
development, the biogas possibilities that Mike Field just 
talked about, because we are involved in that as well.
    On the conventional power side, we won a bid at Mountain 
Home because Mountain Home was an economically distressed 
community. They wanted the investment in their community that 
Middleton and Canyon County didn't. We worked with the city to 
locate our power plant in the industrial park. We had to beat 
Idaho Power's own construction group to win the bid. We told 
the city, we can't win the bid unless you give us a good reason 
why we can be here, because our pencils aren't that much 
sharper than theirs.
    The city said, We will take a real serious look at forming 
an urban renewal district to capture the property taxes that 
are linked to the power plant; take some of the bond money to 
offset some of the infrastructure costs of the industrial park. 
The industrial park now wins because it has high-quality gas 
lines, transmission lines, sewer and water service, and a steam 
production facility here so they will be able to sell their 
industrial park to other industrial uses. Meanwhile, the urban 
renewal district also reaches into downtown Mountain Home, 
again, if it gets formed, and revitalize that, again, for more 
business and development.
    It really was a partnership that was struck between us and 
a community, a rural community, that wanted a power plant as 
opposed to one that didn't. One of the wrinkles--we had to 
actually change an Idaho law. It is a bill that changes how 
utility property taxes--they were centrally assessed and 
apportioned out. Now they are local property tax revenues that 
just stay there. There are a lot of other communities that 
might have the correct variables to be smaller-scale power 
generating communities. Heyburn comes to mind as one, the 
Simplot plant that just closed.
    While peaking plants are not great job producers, they do 
provide very significant property tax revenues. Mountain Home 
is going to receive $400,000 to $500,000 annually, just 
property tax revenues related to the power plant. It is really 
a win for them and what they wanted to do.
    The second part that Mountain View Power is getting 
involved in is renewable energy. We are looking at some wind 
investment opportunities with Mr. Field and Commissioner 
Kjellander from the PUC. We have been asked to actually do a 
feasibility study on producing power from biogas from animal 
waste. We are still waiting to hear if all those pieces come 
together, but that project is going to be driven on, what we 
think, will be by some additional incentives or investment 
incentives that are going to be needed.
    There are bills tonight in the legislature to provide 
investment tax credits that will help it in the renewable 
energy area. I know that the Federal energy legislation that 
you are considering also has a matching tax credit for 
renewables and provisions that ratchets down the Federal 
credits and State credits, so in essence the State credits 
would go into the U.S. Treasury. That should be looked at.
    Bonneville was also looking at funding a portion of the 
feasibility study along with their nonwires group. Idaho Power 
and Bonneville are both very transmission constrained. You are 
familiar with the concept of avoided costs. That is a 
generation concept that we really need to take a serious look 
at, formulating the concept for avoiding transmission cost. If 
we can locate generation next to a large pumping station, using 
biogas energy, then maybe there should be some transmission 
investment in this and other locations because we don't have to 
build facilities. This may be the best way to get the money out 
to that kind of generation without it being taxpayer dollars.
    Senator Crapo. Thank very much, Ron.
    Steve.
    [The prepared statement of Mr. Williams can be found in the 
appendix on page 94.]

  STATEMENT OF STEVE THORSON, BUSINESS DEVELOPMENT DIRECTOR, 
                      FOREST CONCEPTS, LLC

    Mr. Thorson. Good afternoon, Senator. My name is Steve 
Thorson; I am the Business Development Director for Forest 
Concepts, LLC. We manufacture patented environmental erosion 
control devices, bank stabilization, and endangered species 
products from small-diameter timber. I appreciate the 
opportunity to appear before this hearing today.
    Because of your strong leadership, we now have the Healthy 
Forests Restoration Act of 2003. You are to be commended for 
your negotiating skills, tenacity, and floor managing skills in 
moving that mess forward. I watched it on C-SPAN, and it was 
quite an artful process.
    Senator Crapo. Thank you.
    Mr. Thorson. Let me start by providing some background. 
When the Boise Cascade Mill closed in May 2001, we determined 
that an opportunity might exist where we could fill the gap by 
harvesting small-diameter timber, creating local jobs, and 
returning the products to the landscape as a biodegradable 
product. We embarked on a healthy public/private partnership 
with the U.S. Forest Service, the city of Cascade, and Valley 
County.
    A Fire Plan Grant was received by the city which enabled 
them to purchase a building in the industrial park on the south 
end of town. Forest Concepts received a Fire Plan Demonstration 
Grant to build and install various structures in the local 
area. We moved into the city's building, started paying rent, 
and commenced operations. After extensive lobbying, the 
agencies approved our products for utilization.
    We procured our log supply through the U.S. Forest Service 
on timber sale contracts. I thought our efforts culminated best 
in our joint media event that you hosted last summer in 
Cascade, where Federal agencies, State and local government, 
industry, the environmental community, and yourself all came 
together to recognize the Federal unlimited quantities 
contracts and support the pending challenges ahead.
    We assumed this was going to be the beginning of a very 
healthy public/private partnership that would go on 
indefinitely and create numerous jobs in Cascade, and I just 
want to take a little side issue here to thank the people here 
from the Boise Forest--Ron Julian and Dick Smith, Julie Thomas 
in the Sawtooth, and a number of others, Mike Stewart, the 
mayor--because this was truly a community effort to try to pull 
this together.
    Since that time, Forest Concepts has spent nearly $500,000 
creating small diameter products and creating jobs in rural 
communities, including in Cascade. In addition to our own 
personal, private investments, we have received approximately 
$250,000 in Federal research grants and contracts for product 
development that is getting us off to some other new products 
that we are going to be working on. So far, however, the 
returns to investors have been negative, and the number of 
expected jobs created has been far less than expected. While 
the agencies have endorsed these products, they have not 
fulfilled the expected public/private partnership by also 
becoming a viable customer. Without their participation as a 
customer and support, the small businesses will not likely 
survive and prosper.
    So far, really, other than in the Boise Forest, nothing is 
really happening on the ground. The beginning of the next fire 
season is only about 60 days away. If a significant thinning 
process is actually embarked upon under the new legislation, 
what happens to the resulting logs?
    The agencies indicate our products are too expensive. That 
is because we are buying their logs and trying to pay a living 
wage to our employees. They also indicate we cannot compete 
with straw wattles, which is not surprising given that straw 
wattles are subsidized by $25 a ton by the California Rice 
Straw Commission just not to burn the straw. Further, the Local 
Government Advisory Council to EPA has taken a position that it 
will oppose burning the small-diameter timber thinning on the 
forest lands because of the Clean Air Act.
    The USDA is proposing new programs to use logs as a method 
of creating methanol, but that technology may well take 5 to 10 
years to develop and require huge Federal subsidies to cover 
research and development. Finally, the Forest Products 
Laboratory spends millions on research, but few products make 
it out to the marketplace.
    Perhaps a better interim environment would be a program for 
the agencies to earmark or mandate to commit a percentage of 
those funds to be used by small-diameter manufacturers to fill 
that intermediate gap and to create hundreds of new jobs. 
However, this would also necessitate the agencies stepping up 
to the plate in a partnership and cooperative manner and buying 
and using the products.
    We also need the local citizen representatives, 
Conservation Districts, Resource Advisory Council, and other 
local agencies to speak out that we need to use local round 
wood materials and local labor in our local market. One more 
sentence. Forest Concepts and the city of Cascade are not alone 
in this bind. Small wood companies through the West are facing 
the same reluctance, that Federal agencies will walk the walk, 
but they are not actually talking the talk. They are talking 
the talk, but not walking the walk.
    We need your help and continued leadership in Congress if 
we are going to solve this issue and make this into a viable 
and profitable industry. I have another letter that I have 
already submitted to you that I would like to make part of the 
record, if that is OK.
    Senator Crapo. That is very fine. Without objection, that 
will be admitted.
    Well, I thank all of you for this testimony. Mr. Lane, let 
me start with you with a couple questions. First of all, again, 
I note that your testimony is very well organized, and you have 
identified a number of concerns and promoted some solutions 
which we will pay very close attention to. You are 
knowledgeable of both the USDA and the SBA business plans and 
programs; right?
    Mr. Williams. Yes. Fairly well.
    Senator Crapo. Can you just give me a snapshot? Are they 
duplicative? Are they overlapping? Are there holes in them? Do 
we need both? How do they work?
    Mr. Lane. Well, they are definitely not duplicative. They 
complement each other often on the same project. In some 
instances, particularly in the most rural areas, we are banging 
our heads because of uncertain collateral values, which is 
again driven by the market and their ability to resell the 
property. We found that in order to get the bank to make the 
loan, it takes both CEDA participation to get the financing and 
they go after an SBA guarantee on their portion, on the bank 
portion.
    The structure of our gap financing product is similar to 
the SBA 504 program in that part of the money comes from the 
bank, part of it comes from CEDA, and part from the owner, in 
similar amounts, even. However, we typically take the smaller 
end of scale as far as loans go. SBA is doing the larger 
projects; we are doing the smaller ones.
    Our microloan programs, because they are funded with grant 
dollars, allows some flexibility on the smaller loans. The SBA 
loan program, I investigated, exploring that for CEDA, and 
decided not to pursue it because basically the SBA microloan 
program requires that the CBC guarantee the loan for the most 
risky borrower, which is pretty tough to do given the amount of 
work that goes into those microloans and the return on 
investment.
    I am told by those that operate them, it just doesn't--the 
SBA microloans loaned through the CBC just don't amortize, and 
they end up using principal to pay it back. Whereas, our 
microloan is funded by grants; we are more apt to take a 
riskier stance. The money is revolved. It is a win-win for 
everybody.
    Senator Crapo. How much business development opportunity do 
you believe is simply being lost because we don't have adequate 
access to capital?
    Mr. Lane. In our particular area during the last 6 months, 
I have had 130 inquiries for funding. Not that those would have 
turned into projects. I would say the top 5, 10 percent of 
inquiries end in projects, so getting an actual dollar amount 
would be difficult. I can tell you that of those 130 inquiries, 
19 of them were for requests between $20,000 and $50,000; nine 
of them were a better fit for investment capital than a loan; 
and 11 were located in areas that we are not able to serve 
either because of population restrictions or economic condition 
restrictions put on by the Federal funders. The result is that 
30 percent of those inquires didn't make it past step one 
because they didn't fit a program that we had to offer.
    Senator Crapo. Either because of the size of the loan or 
population or geographic location of the business?
    Mr. Lane. Yes. There is another 12 percent that were just 
totally dismissed for borrower issues.
    Senator Crapo. OK.
    Mr. Field, first of all, let me again thank you for the 
great work that is being done under your leadership. Also in 
your testimony, you did a very thorough job reviewing your 
written testimony, as well as going through the programs and 
some of the individual successes that we have had in those 
programs.
    Can you tell me--at the outset, I talked about the tight 
budget times that we are facing right now. If we are going to 
have to make priorities--and I am not suggesting that we are 
going to not fund anything. If there are some areas where we 
need to put our emphasis in terms of the programs you 
administer for the purposes of rural revitalization, can you 
highlight what do you think are the cornerstones that we should 
focus on?
    Mr. Field. Certainly. First of all, I would like to thank 
you for recognizing Rural Development and our contribution to 
economic development in our rural communities. I can't accept 
any of that praise because it is really on the part of our 
employees in the agency and also our partners' participation 
and support. It is just fun for me to be there and try to be 
that enthusiastic spark plug on some occasions. They are the 
real pros here.
    It is a very hard decision because all of our programs 
work.
    Senator Crapo. That is right.
    Mr. Field. All of our programs work and every one is 
important to different segments of the rural community. For me 
to say what is most important----
    Senator Crapo. I know that wasn't a very fair question. 
There are all these people behind you waiting to see what you 
are going to say.
    [Laughter.]
    Mr. Field. Sometimes I ask my employees, I say, OK, do the 
jobs we create, do those fuel the houses that then fuel the 
need for infrastructure? Or do the houses we build increase the 
jobs that fuel--where does this egg take us?
    I guess they are all very important for us and for our 
communities. I do think there is a big need in the start-up 
entrepreneur side of things. If there is something we could 
focus on, could we get some more funding through RBEG or IRP 
programs through the lending program to help start-up folks? 
Because it is not the communities close to Boise and Twin Falls 
and Coeur d'Alene.
    There are people there that live in rural communities, they 
are working, there is income coming. It is those isolated 
communities that are too far away to do the work in the larger 
areas. If we can grow some entrepreneurs in those communities, 
three or four a year, whatever, with small loans that are 
administered through the economic development agencies, with 
some technical assistance to help those folks be successful, 
that is one we should probably do.
    Senator Crapo. Thank you.
    Mr. Williams, you brought up a number of important things. 
You discussed specifically the efforts in animal waste and bio-
energy, alternative fuels, and renewable fuels. As I am sure 
you are aware, that is an area I have been very interested in. 
In fact, I was instrumental in getting the animal waste 
amendment added to the Farm bill so we could qualify with them 
for some of our alternative energy sources.
    Do you think those are working at this point? Let's assume 
that we are able in the energy bill to extend the tax credits 
and have the tax credits apply. Is that sufficient? Is that 
going to do what is necessary to boost these types of fuels?
    Mr. Williams. Senator Crapo, my gut reaction is to say no, 
that probably won't be enough when I look at the animal waste. 
The tax credits probably won't be enough to bring wind into a 
competitive position. That is one that is on the cusp of being 
price competitive with new generation, and utilities are 
starting to change the way they look at wind. In California, 
wind is actually more predictable, in a capacity standpoint, 
than hydroelectricity. There is a lot of hydroelectricity in 
California.
    Senator Crapo. I would believe that.
    Mr. Field. We are trying to get anemometers up across 
southern Idaho in inexpensive sites to do that. The FCC has 
towers, utilities have towers. So far, everybody is telling us 
no, we can't use their towers. That would be nice if we could, 
but that is probably not something you want to mandate.
    On the biogas, my gut reaction--and we are going to do the 
feasibility study to answer that question with collections of 
money from different pots. We were asked to do that. Initially, 
we don't do feasibility studies, we do projects. They asked us 
to do this one, to take greenfield concepts to final 
completion. There are some real institutional barriers right 
now in the markets.
    The last one just occurred to me reading Sunday's paper 
because what if we--you need a long-term power sale agreement 
to finance this, to give the security that is needed. All of a 
sudden in Sunday's paper, I am reading about a dairy cow farmer 
that says, if I lose my water, my animals are gone in a few 
days.
    Well, I have a 10- or 20-year contract with a fuel source 
that is tied to some other resource that could be gone in a 
week's time. We didn't do that in our feasibility study--and it 
is tied to the resource--that is going in to also look at water 
availability. There are so many variables out there, we are 
probably going to have to do more to quantify and assign an 
economic value to the environmental costs that aren't being 
picked up right now in the Magic Valley for this thing. People 
don't recognize the environmental costs that people right now 
are paying, but we are going to do our best to inform them 
about that.
    Senator Crapo. In terms of these various alternative and 
renewable fuels which are in various stages of being able to 
economically compete, with the exception of wind which may be 
on the cusp and might be put over the cusp with the tax 
credits, what is it that we need to do for the others? Do we 
need some type of additional subsidy? Do we need to have 
feasibility studies? Do we need to have a financing program 
that----
    Mr. Field. The financing for feasibility studies is in 
place. We are probably going to need some subsidies initially 
to get the systems working and the pilot projects up and 
running so we can better understand what is going on. These 
subsidies can be as direct as through Mike's department. I also 
think it can be indirectly, if the utilities can buy into the 
concept of paying and avoiding transmission costs.
    Looking at these 1- and 2-megawatt generating plants 
located for peak demand of local transmission that they are not 
having to buy, it is like buying conservation. I don't think 
the utilities are going to buy into that.
    Senator Crapo. Thank you.
    Mr. Thorson, again, thank you for your testimony and for 
all your work trying to make this work out of small diameter 
timber. We are not done fighting yet. You raised some 
interesting points. As I talked to both of the earlier panels, 
and we will get into it, building up the infrastructure in the 
rural communities is one of the key things, and we need to 
define what that is. We talked about a few extra things here 
like power and--well, actually the tax policy came up on a few 
of these things.
    You raised another aspect, Mr. Thorson, and that is the 
Federal Government through its policies can also help to 
generate markets for products through, for example, a 
requirement or some incentive in the Federal purchasing 
programs to purchase small-diameter timber products to 
accomplish the environmental and economic purposes of our 
Healthy Forests Restoration Act. Or I can think of some other 
ideas that might come. There are Buy America proposals. Maybe 
we should have Buy Rural America proposals or something like 
that. Could you expand on that concept a little bit?
    Mr. Thorson. Yes, Senator. Thank you. When we first came 
here, part of this was about creating infrastructure--and I 
don't want to steal Mike Stewart's speech because he is going 
to speak in a little bit. We came here with the idea of being 
their anchor tenant. If being an anchor tenant could then 
generate other kinds of wood products jobs that would come to 
this industrial park, they could then get the infrastructure 
they needed to form an industrial park and do those kinds of 
things. We came to be a tenant and not to essentially own that.
    The problem we have had, as you well know, is we have gone 
through an extensive lobbying process to get the products 
approved, going through all the regulations and so on, which 
was accomplished. We got to this public/private partnership 
that we all felt so strongly about, and so far it just hasn't 
materialized. Now, if they had some incentives to make that 
materialize through procurement--we are not asking for 
subsidies. We just want them to procure this and put it back on 
the watershed and complete the watershed cycle.
    If that can happen, that gives us a base market from which 
we can go forward with all these other river restoration 
products that we are doing. We did a big project up at Coeur 
d'Alene; we did a big project out here at Tamarack where we put 
in 18 river restoration logs with school kids. It then follows, 
but you have to have that base thing to come to a small 
community and hire good people and keep them sustainable.
    Senator Crapo. Well, that is a very important aspect of all 
this because the Federal Government through its procurement 
process does have a significant ability to impact markets and 
to establish or facilitate markets. On the one hand, there is 
the need to get the best price for the objective that is being 
sought to be accomplished; on the other hand, there are social 
and environmental objectives that we are demanding that we 
achieve at the Federal level, not the least of which are 
environmental objectives and policy objectives in the 
management of our forests that require that we utilize the 
small-diameter timber.
    Reaching those kinds of balances on the policy side, it is 
important to point out, as you did, that that has an impact on 
our rural communities.
    Mr. Thorson. As I said last summer when we had our media 
event up here, we spent the year before $140 million on 
restoration products. We had 1 percent of that market off those 
20 jobs in Cascade. It is that kind of incentive. We are not 
talking about wanting the whole marketplace; we just want a 
niche for where we do well.
    Senator Crapo. That is right. Given the intense battle over 
policy in our forests, it would seem to me that that is a 
reasonable approach to market these ideas that are going to 
help these rural communities.
    Mr. Thorson. Well, you are going to have to find something 
to do with the logs if you are going to thin.
    Senator Crapo. Well, they don't want you to burn them.
    Mr. Thorson. No.
    Senator Crapo. Let me just conclude with this panel by 
going to something that all the panels have talked about a 
little bit. I discussed earlier the notion that it seems to 
me--and I really want you to help me either flesh this out or 
redirect it if I am not focused, or refocus it for me. It seems 
to me that in the broad sense, as we look at what needs to be 
done for economic development in our rural communities, that 
again building up the infrastructure so the infrastructure is 
in place and then making sure that access to capital is in 
place are the key two big pieces of it.
    We have talked about a lot of other pieces. We have talked 
about making sure that local solutions and flexibility and 
empowerment are a part of the programs that are implemented; we 
have talked about housing; we have talked about power; we have 
talked about tax policy as it facilitates some of the economic 
decision-making that will be necessary as we move forward here 
with regard to building up infrastructure or creating markets, 
and about doing what we can at the Federal level in the 
procurement process and generating markets.
    Am I approaching it right? Are there things that I am not 
picking up? When I say infrastructure, in my mind, I am talking 
in a broad sense--education, health care, transportation, water 
quality, air quality, power, housing. I am sure I am leaving 
out some glaringly obvious things. Those things that are 
necessary--oh. There is broadband. Those things that are 
necessary for an entrepreneur to be able to access a market 
with a product or a service. Am I heading in the right 
direction? Any suggestions?
    Mr. Field. Well, let me take a stab. We have a very active 
partnership with RD--Rural Development partnership in Idaho. 
They have taken on to try to--and I am not going to steal 
Dwight's thunder either. They have taken on the tasks that were 
pointed out by the Governor's task force on rural Idaho. We 
have the majority of the tools that we need, and I am a rural 
kid myself. I look at it from that perspective.
    If anyone wants to be a success, there has to be a spark 
plug. There has to be a bang, somebody in that community that 
really wants to see something happen there. The Thompsons were 
a spark plug here in Cascade. Somebody has to take that risk.
    We have to--well, it is two parts for me. To help folks 
that facilitate--help those folks that do have vision, and then 
help those communities that don't have vision to gain it. 
Because you can't help the community that doesn't want to grow. 
If it doesn't want to grow, there is no amount of government 
programs you can give to it that would make it any different, 
so education is a very important part of the rural 
revitalization effort across rural America.
    Senator Crapo. Very helpful.
    Ron.
    Mr. Williams. Senator, I would just like to echo Mr. 
Field's comments. Our success in Mountain Home was related to a 
couple of key people. One of them was Ron Swearinger, the 
Economic Development Director, who just wouldn't let this thing 
die, as it died four or five times, and really was instrumental 
in saying we want you to win that bid, and we are going to 
invest in that--your bid. There was definitely leadership on 
their council and their investment in an Economic Development 
Director who was willing to work on something for 3 or 4 years 
without knowing if it was going to work or not.
    Senator Crapo. Good point. Anything else?
    [No response.]
    Senator Crapo. Well, again, let me thank you all, not only 
for your attendance here today and your presentations, but also 
for your very excellent testimony, which is going to be very 
helpful to us. We will excuse this panel, and we will call up 
our next panel.
    Senator Crapo. This next panel is going to focus a little 
more specifically on--well, I hope they are going to focus on--
I am not sure what they are going to talk about, but I hope it 
is on the Healthy Forests Restoration Act.
    [Laughter.]
    Senator Crapo. If you came here to talk about something 
other than the Healthy Forests Restoration Act or the small 
timber business development issues, feel free to go into 
whatever it is you wanted to talk about.
    [Laughter.]
    Senator Crapo. While the panel is taking their seats, I 
want to correct an oversight that I made. We have with us our--
what is your formal title?
    Court Reporter. Court reporter.
    Senator Crapo. Our court reporter, Sue Wolf, from Boise who 
is here to record these proceedings. Sue is a new resident of 
Idaho. Relatively.
    Court Reporter. Two and a half months.
    Senator Crapo. Well, we welcome you to Idaho. We welcome 
you to Cascade, and we thank you for all of your good work here 
for us today.
    Court Reporter. Thank you.
    Senator Crapo. This panel is made up of Joyce Dearstyne of 
Framing Our Community. How are you, Joyce? Dick Smith of the 
Boise National Forest; Phil Davis, Valley County Commissioner. 
I had my page turned over here. Our first one on the panel here 
is Mike Stewart from Cascade Forest Resource Center. Mike, even 
though I said your name last, we are going to have you be the 
first, so why don't you go ahead.

     STATEMENT OF MIKE STEWART, FIELD DIRECTOR, USDA RURAL 
                          DEVELOPMENT

    Mr. Stewart. Well, welcome again, Senator, to Cascade, my 
hometown. On behalf of the city and myself personally, I want 
to thank you for all the work you have done in the past to help 
us address unemployment, catastrophic wildfires, and restoring 
forest health in rural Idaho. Under your leadership, getting 
the Healthy Forests Restoration Act passed last fall was 
critical. The work done by you and your colleagues in Congress 
has been most appreciated here.
    I realize we are preaching to the choir here, but it seems 
our message still hasn't gotten through to some.
    Cascade is the perfect place for this hearing. It is a 
typical rural community that has seen the economic ups and 
downs that go with being tied to this Nation's resource 
industries. It has been almost 3 years now since the closure of 
the Boise Cascade mill--a closure that company officials blamed 
largely on the uncertainties of timber supplies on Federal 
lands.
    Though we weren't necessarily prepared for what happened, 
we have survived the loss of the mill and its $4 million 
payroll. Since then, though, we have seen a dramatic shift from 
a resource-based economy to one that embraces recreation and 
tourism. Short term that is good, as just about every 
construction worker with a tool belt around here is working 
right now. Long term, those good-paying jobs are going to be 
replaced by low-paying service jobs. What we need here are 
family wage jobs that are part of a diversified economy. We 
have had all of our eggs in one basket before--that is, the 
Boise Cascade basket--and we don't intend to repeat that error 
by putting them all in the recreation and tourism basket.
    More help is needed to develop sustainable rural economies 
based on biomass and small-diameter timber as tens of millions 
of acres of forest land across the West are treated. In 
Cascade, as in many areas, we have almost entirely lost the 
infrastructure--there is that word again--to deal with the 
biomass.
    Senator the HFRA was a very positive step in the right 
direction, but more help is needed for the innovative small 
businesses to take the lead with new ideas for using that 
material. I disagree with the oft-heard refrain that with 
passage of the HFRA, ``the job is done.'' That has quotes 
around it.
    First off, the $760 million authorized has not yet been 
appropriated. Second, the bill mentions only $5 million that is 
specifically directed at rural areas in a category called Rural 
Revitalization Technologies. There is another $5 million that 
is authorized in a category called the Biomass Commercial 
Utilization Grant Program, but combined, that is just more than 
1 percent of the total authorization. Granted, everyone will 
have a right to tap into that $760 million, but right now rural 
areas are at a disadvantage when it comes to the economic 
capital needed to rebuild that infrastructure.
    In addition, of that total authorization, only $80 to $100 
million can be considered ``new money.'' Again with quotes 
around it. Most of it will be shifted from existing programs, 
some of which have proven valuable in the effort of restoring 
forest health.
    For example, Economic Action Program funding has been 
zeroed out in the National Fire Plan's 2005 budget. The EAP 
money is very flexible and a very valuable source of help for 
small business. Last week--I don't know if you saw it--Alaska 
Senator Murkowski issued a statement bemoaning the loss to her 
State of EAP funding.
    Another piece of legislation that a coalition of community-
based forestry advocates will push for this year is revival of 
a bill co-sponsored a couple of years back by Senator Larry 
Craig and others--the Community-Based Forest and Public Lands 
Restoration Act. While some aspects of that legislation were 
ultimately incorporated into HFRA, some were not.
    One thing that was left out was creation of Restoration and 
Value-Added Centers proposed for small communities around the 
rural West. That proposed bill focused on small businesses and 
gave them contracting preference on an annual escalating scale.
    Senator you are aware of the size of the problem--it is 
huge--and the scale of the work needed to solve it. That is 
also huge. From my perspective, we can approach it a couple of 
ways: using large corporations, using small business, or a mix 
of both. Referring back to my eggs-in-one-basket comment, there 
is stability and flexibility in small business, and I much 
prefer that approach for Cascade.
    Federal agencies also need to walk the talk. You are well 
aware of the Forest Concepts story, but here is another 
example. We have seen a number of new Federal buildings around 
here in recent years. While the cost effectiveness of heating 
those buildings with wood chips, for example, may be iffy, new 
technology is making it more feasible all the time. Alternate 
sources of heat and construction methods using small-diameter 
timber in areas that are rich in those resources should be 
considered.
    Last, Senator, we need an energy bill, one that includes 
transportation subsidies for biomass. Several good projects in 
this region presently aren't viable because of the high costs 
associated with the haul. Projects that would use the material 
that has to be removed anyway from the forest is going to be 
removed by burning--which we are not hearing good things 
about--or another disposal method. We might as well put that 
material to good use, create some jobs and economic activity, 
and also recover some of the costs of forest health 
restoration.
    Senator thank you again for holding this hearing. Again, I 
thank you for all you have done for this area in the past, and 
I hope you can carry this message back to Washington, DC.
    Senator Crapo. Thank you very much, and some good points 
there.
    [The prepared statement of Mr. Stewart can be found in the 
appendix on page 100.]
    Joyce.

 STATEMENT OF JOYCE DEARSTYNE, DIRECTOR, FRAMING OUR COMMUNITY

    Ms. Dearstyne. I would like to start by thanking you for 
the opportunity to testify today about how rural Idaho 
communities are addressing economic development needs and how 
the Healthy Forest Restoration Act does and does not help in 
our efforts. My name is Joyce Dearstyne, and I am the Director 
of Framing Our Community, a community-based forestry non-profit 
organization located in the Clearwater Mountains of north 
central Idaho.
    Our focus today is on how Framing Our Community programs 
facilitate the utilization of low-value timber in the 
production of valuated wood products and how HFRA will assist 
us in accessing these materials to use for business development 
while reducing the extreme fire hazard in the national forest 
that surrounds our community.
    This will be accomplished through the development of value-
added wood products manufactured from small-diameter, standing-
dead, and diseased timber that result from fuels reduction and 
defensible workspace projects. Urban, niche, and emerging 
consumer markets were researched. Then businesses were 
identified that would utilize the available low-value timber to 
manufacture desired wholesale and retail products. They include 
timber frame buildings; rustic and high style home and office 
furnishings; round pole structures and bridges; custom doors, 
windows, and moldings; and quality gift items.
    The most important product that the incubator will sell is 
Framing Our Community's story about how our rural community is 
using forest restoration and fuels reduction projects to 
improve the health of the forest and the health of the 
community. HFRA, multiyear agreements with the BLM and the 
Forest Service, used in conjunction with categorical exclusions 
and stewardship contracts, will facilitate FOC's ``Jobs in the 
Woods'' program which trains unemployed workers in methods of 
forest restoration and fuels reduction. The University of Idaho 
and FOC will spearhead a pre-planning and monitoring process 
that brings diverse and often opposing groups to the table to 
help plan and monitor projects.
    At the local level, we expected HFRA to be a silver bullet 
that would reduce fire hazards, interrupt insect infestation, 
and create opportunities for employment. What we have found is 
that, as requested, we will play a bigger role in the 
management of our surrounding national forest, and that with 
work, and in time, there will be opportunities for local 
employment. We learned that categorical exclusions do not apply 
to areas that are well into the NEPA process and are not the 
quick fix expected to eliminate the danger of catastrophic 
fire.
    Under the Communities at Risk definition, larger population 
centers are targeted to receive the majority of the funding, 
and small rural communities will have limited funds to work 
with. Our Nez Perce Forest has a Class 1 fire condition because 
we have yet to miss a hundred-year fire cycle when, in fact, we 
have the highest fuel load in Region 1, and the million-acre 
fire of 1910 started outside of our town and burned to the 
Canadian border.
    We applaud Congress for enacting HFRA because it promises 
to be an important tool that FOC will use to treatments 
necessary to reduce the potential of a catastrophic fire and 
create economic stability for our rural community. With the 
extreme fire hazard and poor economic conditions that we face, 
we urge you not to stop there. We need you to pass further 
legislation like the Community-based Forestry and Public Lands 
Restoration Act that will allow rural communities that are on 
the front line to build the infrastructure necessary to reduce 
fire hazard on public as well as private lands.
    To this end, we urge Congress to appropriate funds for HFRA 
so legislative actions can get on the ground; develop a method 
of funding, interaction, and coordination of efforts among the 
Rural Development, Forest Service, and BLM; set in place 
mechanisms for non-profits to build capacity, purchase 
equipment, and train workers for available jobs; fund the EAP 
program.
    This year FOC applied for a National Fire Plan EA grant to 
help purchase equipment that would create from three to four 
jobs in fuels reduction and forest restoration work. This work 
would have been completed for $1,000 less per acre than it 
costs the Forest Service to effect. We needed $66,000 to 
complete this purchase, but because the funds for the entire 
State were zeroed out, we were not funded. Now those jobs may 
not happen, and our fire hazard will not be diminished.
    Create restoration and value-added centers that are located 
in communities that are within or adjacent to national forests. 
Pass legislation that provides funds to communities with 
populations under 5,000. Infrastructure, like equipment and 
building construction; capacity building, training and tools 
for towns and organizations to become self-sufficient; product 
development, technical and financial assistance directly to 
small and microenterprises in the form of grants, revolving 
loans, or lines of credit to provide access for the growth or 
start-up capital.
    Our hope is that you will help us in this effort and take 
the next steps necessary for creating rural economic 
development and getting work done on the ground.
    [The prepared statement of Ms. Dearstyne can be found in 
the appendix on page 103.]
    Thank you.
    Senator Crapo. Thank you very much.
    Dick, we welcome you here. Go ahead, please.

  STATEMENT OF DICK SMITH, FOREST SUPERVISOR, BOISE NATIONAL 
                             FOREST

    Mr. Smith. Thank you, Senator Crapo, for the opportunity to 
present this testimony on behalf of the USDA Forest Service. 
The President's Healthy Forests Initiative and the Healthy 
Forests Restoration Act of 2003 will help us improve the health 
and vitality of the national forests and may also provide 
economic benefits to many rural communities, just as the 
previous two testimonies have indicated.
    I would personally like to thank you for your efforts in 
helping us, as Mike Stewart mentioned, in getting this 
legislation passed. It is a definite asset and tool for us in 
the Forest Service. The Healthy Forests Restoration Act 
provides the tools for the Forest Service to address the 
problems where our forests have become overgrown and unhealthy 
and to address the threat of fire and fuel buildup in order to 
reduce the risk of private property lost to wildfire. It will 
take active management and lots of hard work to treat lands 
that currently need help. Mechanical treatment and prescribed 
burning are the two primary we have at our disposal.
    Prescribed burning is a valuable tool but cannot be used in 
all situations. Factors such as high fuel loading, air quality 
restrictions, weather, and risk of fire near communities can 
limit its use. That leaves us the mechanical treatments, such 
as thinning crowded stands, as another very value and necessary 
tool. In order to fully implement this tool, we need to 
overcome the higher costs associated with its use, and also the 
dilemma of how to dispose of the significant quantities of 
standing-dead trees that we need to remove to improve both the 
health and fire security of our community.
    In addition to the existing authorities already available 
to the Forest Service, HFRA also addresses the economic and 
community developments implications and challenges of handling 
the small-diameter materials. Mr. Chairman, as you know, the 
focus of the administration's efforts in implementing HFRA to 
this point has been largely focused on Title I, which focuses 
on treatment of fuels on public lands.
    Plans are underway, however, to develop the other 
authorities, like the authorities that Mr. Stewart spoke to 
earlier. These other authorities addressed by this legislation 
may provide a foundation for rural community development 
opportunities. If we can make progress, add value, find markets 
for this small-diameter materials, we can offset the high cost 
of mechanical treatments, dispose of small-diameter material, 
and hopefully assist communities that are dependent on these 
natural resources.
    Section 201 of HFRA amends the Biomass Research and 
Development Act. Forest Service research and development has a 
comprehensive research program currently underway to look at 
forest biomass assessment, management, harvesting, utilization, 
processing, and marketing. These efforts are in their early 
stages and are being led largely by our Forest Products 
Laboratory in Madison, Wisconsin.
    The Forest Products Lab is a world leader in developing new 
technology and uses for wood products, and it is actively 
exploring new opportunities for using small-diameter materials. 
These research programs are exploring new opportunities for 
utilizing small-diameter material and technologies to help 
business operators to become more efficient and environmentally 
friendly in their operations.
    Section 202 of HFRA, Rural Revitalization through Forestry, 
will help communities and businesses create economic 
opportunity through the sustainable use of the Nation's forest 
resources. While the key to this will be largely centered in 
the private sector, the likelihood of success is greatly 
expanded with our active participation, both of the U.S. Forest 
Service and our partners in our State forest programs.
    The Forest Products Lab, as I have already mentioned, works 
closely with many of the non-profit and for-profit 
organizations that are working on community development 
throughout the Intermountain West.
    One promising development for the use of biomass is the 
Fuels for Schools Program, and I will just use that as one of 
many examples that we hope can help us in dealing with this 
small-diameter material. The Fuels for Schools Program is a 
cooperative effort involving the Forest Products Lab, Forest 
Service State and Private Forestry, State foresters and local 
communities. The aim of the Fuels for Schools Program is to 
promote and encourage the use of wood biomass as renewable 
natural resource to provide a clean, readily available energy 
source suitable for use in heating systems in public and 
private buildings.
    Removing hazardous fuels from our forests by developing a 
viable commercial use for some of the small-diameter material 
is necessary to effectively implement HFRA. Using wood biomass 
as a renewable energy source, such as for heating schools and 
public building, makes good sense. The first Fuels for Schools 
project is currently in operation in Darby, Montana, and 
additional projects are being considered for Idaho.
    In conclusion, I would like to say that we are working hard 
to address the threats to the health of our forest. The 
President's Healthy Forests Initiative and congressional 
passages of HFRA have provided us with new and valuable tools 
for accomplishing this work. In Idaho we are making good 
progress on developing community-based County Hazard Mitigation 
Plans across the entire State that will identify activities and 
treatment needed for reducing wild land fire threats to homes 
and communities.
    While there is much that still needs to be done, we are 
working with Governor Kempthorne's Idaho Rural Partnership to 
find additional solutions that will benefit rural Idaho. We 
feel that the treatment and use of this thinned material 
presents both a management challenge to us, but also a 
potential economic opportunity for rural America.
    Thank you.
    Senator Crapo. Thank you very much, Mr. Smith.
    Commissioner Davis.

      STATEMENT OF PHIL DAVIS, VALLEY COUNTY COMMISSIONER

    Mr. Davis. Well, I would certainly like to welcome you to 
Valley County. It is my pleasure to do so today.
    Senator Crapo. Thank you.
    Mr. Davis. You have picked a nice day to show up.
    Senator Crapo. Too bad we are inside, right?
    Mr. Davis. It is. Yes, sir. I also am going to talk about 
the Healthy Forests Restoration Act, and I was going to start 
my comments with all the catastrophic circumstances of 
wildfire, and then I got to thinking, why would I want to do 
that? You made the same argument much more eloquently in the 
Senate when you were arguing on behalf of this, only you that 
had the visions of Southern California burning in the 
background, and how could I match that?
    There is not much point of bringing up the downside of 
catastrophic fires, but what I do want to visit about is the 
opportunity, hopefully, with this Act to mitigate those fires 
or prevent them as much as possible. The hope is this bill will 
give us the tools that we need to stop those catastrophic fires 
which threaten our homes and watersheds.
    Obviously, one thing that will depend on this is funding, 
and that has been addressed already and we do hope that the 
appropriated funds will be allocated to implement this.
    Also the Healthy Forests Act, I will hope, will bring back 
local decision-making. Over the last number of years, we saw 
quite a lot of decisions on public lands being made in 
Washington, DC, which is not the most efficient decisions. You 
will get a lot more comprehensive benefit by local decision-
making.
    Under this Act, also, I would like to talk a little bit 
about the gridlock we saw prior to this Act and hope that this 
Act will somehow alleviate that to some extent. Part of that 
will be--with direction from Congress--into directing the field 
line officers regarding biological assessments, and the Forest 
Service biologists will need to be directed to reexamine the 
threshold which may affect how determinations will be 
evaluated.
    One other addition to this bill that is so valuable, I 
feel, is the evaluation and no-action alternative. I have sat 
in many commission meetings with Forest Service people looking 
at the alternatives, without the opportunity of saying what is 
the opportunity of doing nothing and what will the result of 
that be? Maybe the best part of this Act and maybe the lack of 
active management will now finally be addressed, and I 
appreciate the fact that you were able to get that into this 
bill, where we can at least evaluate that, because the true 
State of the environment at this point is very important, I 
feel.
    I would like to talk a little bit about the history of the 
Forest Service and the 1908 Act. I don't feel that anything 
with the responsibilities and goals of the Forest Service has 
changed because of this. The responsibility and the goals of 
the Forest Service, in my mind, has always been for the local 
community and the watershed that is dependant upon that.
    Gee, that is quick.
    Senator Crapo. Everybody thinks we run a fast clock on 
them.
    Mr. Davis. I can't get past the fact that Forest Service is 
supposed to work for the benefit for local communities, and we 
do have the Gregg-Wyden Bill, H.R. 2389. The goal there is to 
get back actual receipt, and somehow we have to do that. 
Besides a healthy forest, we also have to have some economy off 
the National Forest. What we have seen since the mill shut 
down, which we talked about, was devastating to families due to 
the socioeconomics of this. Somehow we are going to have to get 
some infrastructure. I know we were talking about 
infrastructure before. Somehow that will include some way of 
utilizing the biomass, the bottom of the forest to burn it for 
heat, but also for boards. You certainly can do that. I am 
hurrying as fast as I can.
    We need cooperation between the Forest Service, with County 
oversight from--excuse me. We need cooperation between the 
counties and the Forest Service with oversight from the 
congressional delegation. I know we have been assured of that. 
We always have in the past. We have risk assessments. We are 
just about to finish fire risk assessments.
    I know your staff has offered to come in when we get that, 
and we will coordinate with the Forest Service, and we will 
talk about how we implement that in conjunction with the 
Healthy Forests Act. I know we don't have a complete 
understanding of it, and I know your staff wants to come in and 
help us out with what your vision of that bill was, and so we 
are looking forward to that, although we don't have the tools 
in place yet.
    [The prepared statement of Mr. Davis can be found in the 
appendix on page 108.]
    I could probably quit any time. Did you ding that?
    Senator Crapo. Time is up. You are finished. We will get 
into some discussion here anyway. Let me, first of all, thank 
this panel. We felt this Healthy Forests Initiative issue was 
significantly important enough to have a specific panel on it.
    Let me just start out this discussion, just give you a 
little perspective. Many of you followed the debate that we had 
in Washington over this, and I believe several of you in 
testimony today said that Healthy Forests Restoration Act was a 
very good Act but should not be perceived to be the end of the 
fight or the ultimate solution. Believe me, we understood that 
very well.
    This bill focuses primarily on giving us a paradigm in 
which to move forward in some of the easier aspects of forest 
management, some of those dealing with protecting against 
wildfire and insect infestation. It doesn't, in my opinion, 
even reach into the--it starts to get into, but it doesn't even 
reach, as it should, as our policy should, into the question of 
logging, commercial logging on the forest.
    Now, we are going to be talking today about how we can get 
commercial utility out of the activities that this bill opened 
in the forest. The bill focused on protecting against wildfire 
and protecting against insect infestation, and did not even get 
into the whole arena of--what I am getting at is the whole 
arena, because it is important, of how we need to start 
reforming our approach to forest management with regard to 
commercial activities.
    I will state once again for the record that I believe that 
we can very effectively manage our forests and have very 
vibrant forests in perpetuity and still have meaningful 
economic activity on the forests. There is a lot that this bill 
didn't get into. What this bill did was set up a new approach 
to decision-making about forest management. Even with regard to 
the issues which it did get into--insect infestation and fire 
management and those kinds of things--it was limited in acreage 
and in time and in dollars.
    Frankly, one of the most important parts of this bill, in 
my opinion, is going to be that as it is implemented, it is 
going to show that those who were--the naysayers who were 
saying these are the environmental catastrophes of the decade, 
we are going to destroy all the forests, we have eliminated all 
the environmental protection, we are conceding to those who 
want to go in and destroy our forests, it is going to show just 
the reverse. It is going to show that the improved policies and 
procedures that we put into place to allow us to start making 
and implementing management decisions actually can be done, 
done effectively well, and in a way to protect and preserve our 
forests.
    Now, at the same time, as many of you have pointed out, 
those of us who managed this bill--I was fortunate. It just 
happened to land in my subcommittee. This subcommittee, the one 
I am serving on, had jurisdiction over this bill, so we got to 
write the Senate Bill. As we did so, we wrote it in a way that 
also focused on rural revitalization and the economic potential 
that could be obtained, even from this first step into 
returning to good forest management decisions. That is why we 
talked about small-diameter timber and some of the other things 
that are going on here.
    With that having been said, I want to just say at the 
outset that I absolutely concur with what has been said by many 
on the panel today that this is not the end but the beginning 
of our efforts to move back into rational forest management 
policy; and that we need to be sure we have the adequate 
funding, whether it be from the overall funding authorized, the 
EAP funding, or the other aspects of this issue that need to be 
addressed. In difficult budget times, I consider this to be one 
of the priorities that I will fight to make sure we get 
adequately and fully funded to the full extent of the bill.
    Where I would like to focus is a discussion on where we are 
right now, and maybe I would start with you, Mr. Smith, because 
as you indicated in your testimony, at this point the Forest 
Service has been focused mostly on centralization and Title I. 
I understand that as a new bill is passed, it takes time for 
the Forest Service to gear up and implement the new policies 
that we have put into place. However, there is a serious amount 
of frustration out there.
    The concern for the communities that are impacted like this 
one or Elk City or others, is, A, will we get from the 
implementation to actual projects occurring in the forest and 
occurring rather quickly? We need to see some of this--we need 
to see action on the ground. Second, what about all this effort 
to focus on the economic potential that can be obtained here if 
we do it properly, such as the effective utilization of small-
diameter timber? Would you like to take a stab at that?
    Mr. Smith. Sure, I will take a stab. From the standpoint of 
activities and things getting started, let me share a couple of 
numbers. These are national numbers. From the fuel treatment 
standpoint, we are going from 1.4 million acres of treatment 
last year to 1.6 million acres of treatment this year.
    We are proposing and planning, hoping to get to 1.8 by 2005 
and 2 million acres by 2006. I can assure you from the 
standpoint of the Forest Service, this has probably been the 
No. 1 topic of discussion we have had since HFRA passed as to 
how we can do exactly the question you are asking and somehow 
see some measurable results on ground. That is where we are 
heading on that side of things. That is moving forward.
    The other component is we realize that the dollars we 
receive strictly for fuels treatment isn't the only answer. 
There are a number of other tools. Commercial timber sales are 
one. Stewardship contracting is another. Partnerships with 
rural communities are another vehicle that we hope to be able 
to expand those acreages of treatment even beyond those figures 
I just shared with you.
    As far as it relates to the economic development side of 
things, what I do know has happened is this particular year, we 
had the good fortune of having our appropriations bill passed 
prior to HFRA being passed. For example, there are some new 
provisions in HFRA that you will see nothing in the 2004 
appropriation for because, again, it was passed before. In our 
funding mechanism, unfortunately, we already submitted our 2005 
budget, so that has some room to be modified by Congress, 
obviously, as this year unfolds----
    Senator Crapo. We intend to do that.
    Mr. Smith. I expect that.
    [Laughter.]
    Mr. Smith. The point--from the internal agency standpoint, 
we are working hard right now to get--we are in the process 
right now of formulating our 2006 budget, and we are looking at 
getting both policies in place and getting funding mechanisms 
in place for the rest of the provisions.
    Senator Crapo. Could you tell me--and I know this is 
potentially putting you on the spot, and you may not be able to 
answer this. How does what you just said translate into, 
particularly, the projects that you were talking about? The 
acreage expansion and a couple of other things quickly, how 
does that translate into action in Idaho as soon as possible?
    Mr. Smith. I can share some numbers off the Boise because I 
know it quite intimately, so let me share a number there. From 
the standpoint of the same acreages, we are going from 4,000 
acres to 9,200 acres of treatment between this year, 2003, and 
2004 this year. We have almost doubled on the Boise National 
Forest.
    The numbers you are asking for, Senator, we are actually in 
the process of compiling those. We have an interagency group 
that is working very effectively between Idaho Department of 
State Lands, Bureau of Land Management, and the Forest Service. 
If you like, I would be happy to share those numbers when we 
get them, probably within the month.
    Senator Crapo. All right. I would like to see that. I know 
I haven't let anybody else get in here yet, but we will open it 
up and start going back and forth here in a moment.
    There was also testimony about the question of how 
effective our ability to move in quickly with the help of the 
Forests Restoration Act authorities is being implemented by the 
agency. In other words, are we going to see litigation, do you 
believe, that is going to stall it? Our effort was to forestall 
any kind of litigation and let us move forward. Are you seeing 
any potential litigation still being a threat that diminishes 
the effort?
    Mr. Smith. In fairness, it is an unanswered question at 
this time. We don't have anything that we are aware of 
occurring, but we are also just in the infancy of projects both 
under HFRA and the categorical exclusions that we mentioned 
earlier under the Healthy Forests Initiative. At this point in 
time, we haven't seen a big increase in litigation, but it is 
probably a little too early to say. It takes a little time to 
work through the legal system.
    Senator Crapo. I understand. Anybody else want to make a 
comment or jump in here at this point?
    Mr. Stewart. I would just like to publicly thank Dick, I 
guess. The Boise Forest has been really good for us to work 
with. They have been very supportive, very supportive of Forest 
Concepts, and what we are trying to do. I don't know how much 
that spirit is lacking across the country, but I wish it would 
spread a little bit.
    Senator Crapo. Well, I can join with you in that. I don't 
know how many of you know that Dick worked for me in my office 
for--how long was it?
    Mr. Smith. About 7 months.
    Senator Crapo [continuing]. About 7 months as a special 
fellow, or whatever the title was, and did an awful lot of good 
work. Helped us on that side of the issue as we were trying to 
move things forward. We were real pleased to see him move into 
this role here in the Forest Service. We know he has his heart 
in the right place.
    I just answered your question by saying when we passed this 
legislation, we had a big bill signing over in the Department 
of Agriculture's headquarters. Everybody showed up and the 
President came and signed it. I can't tell you how many USDA 
forest officials came up to me and thanked me personally for 
this. I believe the attitude there at headquarters in 
Washington, DC., was positive and receptive toward this. They 
want to implement it.
    That is why some of us are a little frustrated that it is 
not being implemented as fast as we thought it was going to. 
Tell them the Chairman of the committee is asking you why it 
isn't happening faster.
    Mr. Stewart. Senator, there is one other thing I wanted to 
point out, and you are probably more aware of this than I am. I 
guess I am a rookie at this testifying thing, so I had my stuff 
all written up.
    On Friday I heard that there was an amendment to the budget 
resolution of half a billion dollars for the next 2 years to 
help the Forest Service and BLM with their overexpenditures in 
fire fighting, fire suppression, if that happens. Also I 
understand that Senator Wyden was successful in getting an 
amendment through the Senate for $340 million of new money that 
will help with implementation of the HFRA. Does that----
    Senator Crapo. That is correct. Let me tell you how all 
that is going to shake out. I will give you just a real quick 
Budget 101 for how all this works. The budget which we adopt--
first of all, the Senate just adopted one. The House either has 
or will adopt a budget. Then we go into conference and come out 
with a conference-able budget that we all then vote on again.
    Last year we never got that conference budget passed 
because it got filibustered in the Senate, so the House worked 
on its budget, the Senate worked on its budget to try to cobble 
something together at the end. This year, we expect that that 
is a potential outcome as well, but we are going to go ahead. 
In the conference, some of these amendments don't survive. The 
fact that they have made it in the Senate is good, but they 
were not necessarily a sure thing. If you were here this 
morning when I gave my little pitch on what the budget looks 
like right now, it is miserably difficult.
    I will be very honest, there is about a half a percent 
growth for the entirety of all the funds, with the exception of 
Defense Department and Homeland Security. What the ultimate 
number will be I don't know, but you have to assume that 
something like the Healthy Forests Restoration Act doesn't have 
a baseline because we are just starting it. We have an 
authorization of $760 million, and we are trying to get to 
that. Many of us will try to get to that, but I just don't know 
how close we can get. Those things are in the budget now. They 
are being fought for, and we will try to fight for them as 
aggressively as we can.
    That having been said, once a budget is passed, whether 
each House is working on its own or we get one out of 
conference, it is, in essence, a set of numbers in categories. 
Then the budget is broken into 13 pieces by the Appropriations 
Committee, and each of the 13 Appropriations Committees gets an 
allocation of the budget.
    The Appropriations Committee doesn't have to break it out 
the same way the Budget Committee did. If they do, at the end 
they have to come back with the same bottom-line number, but 
they can shift it around inside. There is another point at 
which you could either lose something or gain something as the 
appropriators do their work.
    I am on the Budget Committee; Senator Craig is on the 
Appropriations Committee. I do my part on the budget side, and 
he tries to save what I have done and improve on it on the 
appropriations side. We have several bites at this; it is not 
just going to move along in a very unhealthy budget climate for 
a while, but you have some very strong advocates for it. Those 
dollars are there, but I am telling you not to spend them.
    [Laughter.]
    Mr. Stewart. Right. I would never presume to do that.
    Senator Crapo. Yes?
    Ms. Dearstyne. If I might, Dick mentioned the fact that now 
basically there is the authorization to remove those fuels from 
the forest, but what do you do with them? To take from Mike, 
also, when you have all your eggs in one basket, as most of our 
communities have, we have been timber-based, we are talking 
about mills, sawmills, and we know that that is not going to 
work any longer. What we have to do is realize that any 
beginning has to have a driven end, and the driven end is the 
market. If we don't create markets for this material to be 
utilized in the production of different products, we are going 
to end up with this huge pile----
    Senator Crapo. Slash pile.
    Ms. Dearstyne [continuing]. Slash pile sitting in the 
forest with nothing to do. Framing Our Community, as we were 
putting our program together, we watched it grow, and it ended 
up truly being holistic. We realized that we need to help 
facilitate the removal of the small, the standing-dead, and 
dying materials from the forest, and that we needed to take 
that material and find the markets where we could deliver it to 
and create jobs along the way. We still ended up with this pile 
at the end, and that is where the biomass comes in.
    We need the support at the local level to be able to get 
that off the ground. Our community has been so decimated. Elk 
City is at 64-percent poverty level. At that kind of level, it 
is wonderful that there might be loan programs out there, but 
the fellow who has the idea is worried about keeping the roof 
over his head and food on the table. That is the last thing he 
still owns. There is no way he can look at taking out a loan 
that might lose that final piece.
    We need to look at other mechanisms to help drive this so 
we can get these small, promising, solid--I am not saying 
support somebody who has had a bad history, but take these 
solid projects and move them forward.
    Senator Crapo. You raise a very valid point.
    Dick, you are going to be the one we look to to give us a 
good answer on this. I will tell you right now, we have already 
got some directives from the President, directives to the 
agencies to try to purchase this material and so forth. They 
are not doing it, and they don't know how to do it. Part of 
what we did in this bill was to direct the Forest Service to 
figure out how. What I heard you say in your testimony, Dick, 
was that you are starting that, but we are really at the early 
stages of that part of this bill. We have the indication.
    We have a situation--Steve Thorson, on the last panel--we 
have been working in the community here with him for some time 
where the agencies could have created a market there. We did 
everything but go out and print the contracts for them, and 
they didn't happen. Can you tell me why that is not happening?
    Mr. Smith. The best answer I can give, which Steve actually 
alluded to pretty well, is just as Congress is driven by trying 
to work within a budget, we are also. Part of what happens 
there is we are using scarce dollars to try to accomplish as 
much as we can on the land, and we are also looking to find the 
most efficient way and the most economical way of getting that 
done. Sometimes that does conflict with utilizing a new 
product, as we discussed here. Sometimes it is just getting to 
be aware of it, but sometimes it is also the cost factor.
    It is balancing those two and trying to spread our dollars 
to treat as much ground as effectively as we can with the 
dollars we have. That is one part of the answer as to why that 
is happened.
    I guess the question I would raise, and Steve raised 
earlier on the other panel, is whether or not, from a Federal 
procurement standpoint, we want to build in some actual 
incentives that are currently not there, that I am aware of, 
for utilizing this type of material.
    Senator Crapo. How would such an incentive be constituted? 
Would it be some kind of financial incentive to the agency? If 
they purchase these products, they get some extra budget 
allocation or how would that work?
    Mr. Smith. I don't have an exact answer for you, Senator. I 
would think it would be more in the context of--we have some 
very rigid procurement regulation to ensure that we in the 
Federal Government are utilizing the public's money as 
efficiently as possible. It may be as simple as recognizing in 
those procurement regulations that in addition to getting the 
best buy for the government nickel, there are some other 
objectives.
    Senator Crapo. There are some policy objectives that 
justify that expense?
    Mr. Smith. It might be in there that--I am sure there are 
some folks in the Washington office that could look at that and 
help identify what the best method might be.
    Senator Crapo. Is there more, Joyce, to--we talked about 
some of the--one piece of the answer. Your focus is broader?
    Ms. Dearstyne. Much broader. We found--and it is possibly 
because our size; we are only 400 now. We were 1,200 in the 
1990 census, but we are down to 400 because our greatest export 
has been our youth and those that have skills. What we ended up 
doing was looking at the broad picture, because we needed to 
work with the Forest Service and build upon the initiative to 
get this started, to get access to those materials. Our forest 
has been pretty much a no-cut forest. We have an unbelievable 
insect infestation that last year was estimated at 130,000 
acres. What it is going to be this year, I won't even venture.
    We realized that we needed to help. Working with the Forest 
Service, find ways to make it sensible and reasonable to get 
this material out and have something to do with it. We had 
actually started with our small business incubator that focused 
on standing-dead, the dying, and the small-diameter. It was a 
natural fit for us to go out and say, what, there is no 
infrastructure there to get this out in a low-impact method 
that leaves the least amount of soil and vegetative 
disturbance.
    We need to train those crews and get the equipment to do 
that. When we open the forest up, it becomes healthier, the 
trees will grow to a much better diameter, which helps the 
sawmill in the long run. Just producing the product is not you 
can end. Those products must have somewhere to go.
    Senator Crapo. You mean the market?
    Ms. Dearstyne. What we have been doing is working with a 
Pacific and Inland Northwest coalition of organizations, and we 
have been developing urban markets in the Seattle and Portland 
areas; we will be moving into Northern California. Even more 
importantly for us, because of our distance, we are going to be 
utilizing the Internet, and we will be utilizing e-commerce. My 
little description is we are the rural Amazon.com.
    You can come to the incubator web site and take your 
shopping cart and go to Mike's store and purchase a lamp, and 
go to Dick's store and purchase a table, and then go to check-
out, pay for everything, be told how much your shipping is, and 
you will know that it will be shipped out and delivered to you 
just like Amazon. We had to do that because being a commodity-
based town and having such a slim margin, shipping was the end-
all, be-all to whether you made it or failed.
    We needed to find businesses that the buyer paid the 
shipping, that eliminated that problem. By going to a secondary 
and tertiary market, we had a much better margin to work with. 
The other problem is, if you go back just to being a sawmill 
town, even if you can get the logs out, there is no commodities 
market. It is in the tank. It doesn't matter if you cut those 
trees; they are not going to have far to go.
    We need to diversify. We have to make our community 
stronger by doing that. Our town is Forest Service and right 
now the sawmill, and the sawmill is on skeleton crew. That is 
how we ended up doing the whole spectrum. It was because of our 
partnership with the BLM that I ended up at the Biomass Energy 
Conference in Denver and talked to the gentleman in a booth for 
what is known as the FENCE Program. We will have a feasibility 
study done this May about putting a biomass cold generation 
plant at the district office, which is right next to the 
school. My hope is it will heat the Forest Service compound and 
the school and provide electricity to our community.
    We are at the end of the grid; we are the most expensive 
grid for a utility. Over a 20-day period during the Christmas/
New Year's holidays, we had 16 days with one or more power 
outages. What production we have is totally disrupted because 
after the power's off for more than an hour, the mill sends the 
workers home, and the school sends the students home, as do 
other small businesses. Our goal is that this cold generation 
plant will hold up the grid or support the grid when our power 
goes off. The way the system is set up, not only will it 
provide heat, when it provides energy the electric gets metered 
back to the utility in good times; in bad times, it actually 
provides the electric for the community.
    Senator Crapo. Well, those are all very good--and many 
private sector side--pieces of the solution. Before I turn to 
the commissioner--because you got cut a little short on your 
testimony. If you want to say anything else, you are going to 
get your shot.
    Dick, could you tell me, in the legislation as we 
authorized it, is the department exploring ways such as this, 
such as Joyce has been talking about--is the department 
taking--has it received a legislative charge in the 
legislation, as you understand it, to investigate the 
development of markets for utilization of these products?
    Mr. Smith. Let me address that from the standpoint of going 
back to the Forest Products Lab again. I don't want to say that 
that is the whole answer, but that is an entity within our 
organization, within the Forest Service, who is very 
aggressively looking in that area. Now, from our perspective, 
hopefully that generates seeds.
    There is probably not a silver bullet out there that is the 
one solution, but we are hoping that through the Forest 
Products Lab, our State or private forestry branch that works 
specifically with communities and the private sector, that we 
can identify probably a number of different options, and 
options for utilizing that biomass-type material. I can assure 
you that that is ongoing as we speak.
    What I can't address at this point to my satisfaction, just 
because, unfortunately, Senator, I don't know the answer, is 
where the department sits in this discussion. From the 
standpoint of the agency, the Forest Service, we are very much 
focusing on that, and we are just in the process of putting 
some additional funds in place. It is getting our attention.
    Senator Crapo. All right. Thank you.
    Commissioner, do you want to jump into this in any way or 
get in some of the licks you didn't get in before?
    Mr. Davis. If I was to bring up anything in particular, I 
guess it would be the cooperating agency status that a good 
many people have talked about, including the President. It 
seems that we got so far from local decision-making in the 
past, I guess it made us hungry to get back because we were out 
of the loop, as you well know.
    Senator Crapo. That is right.
    Mr. Davis. Fortunately, the Council on Environmental 
Quality has been elevated to cooperative agency status for 
local government. I guess the other reason that comes to my 
mind is, over the last number of years, whenever we were 
talking about a solution to the gridlock that we all saw was so 
evident, it was typically brought up that it was the 
consultation process that was so difficult to get through.
    Now, of course, we haven't worked with the Act, the Healthy 
Forests Act, enough to recognize when CEs are going to work and 
when they are not. I know there's a number of exemptions when 
they won't work. I guess we are going to try and keep your ear 
quite a bit and let you know how we are working through this 
process.
    I know we are going to meet with your staff on what the 
envision of Congress was for this. What kind--can you give us a 
heads-up on that you envisioned the cooperating agency status, 
sections on consultation, and so we can break that gridlock?
    Senator Crapo. Yes. My vision, which I won't promise you is 
the one that is achieved yet, but I believe is the direction 
the administration is trying to take. Jim Condon, the Deputy 
CEQ, and I have talked about this a number of times, and I have 
actually held hearings in another context, as the chairman of 
the Fisheries, Wildlife, and Water Committee on the Endangered 
Species Act to address this specific issue.
    My vision is that there is a significant amount of room 
under the Endangered Species Act, as we now have it without 
other agencies, to move forward in significantly expanding 
opportunities for State and local government to work together 
with them in the cooperating agency role. I know that that is 
the direction that CEQ would like to see the agency go. The 
reason I said that that opportunity is there without amending 
the Act is right now we just don't have the votes to amend the 
Act in any way.
    One of my initiatives over the last 3 or 4 years has 
focused specifically on trying to get through the consultation 
process. We have concluded that that is achievable, but it is, 
at least in the short run, mostly achievable through 
administrative action. We see that moving along. It is not 
moving as fast as we would like to see it, but I am very 
concerned and very focused on it. If you don't see the kind of 
headway being made there that you would expect, I would 
encourage you to let us know because we will hold some more 
oversight hearings and find out why it is not happening.
    Mr. Davis. I appreciate that.
    Ms. Dearstyne. If I could also just mention the Forest 
Products Lab, FPL had received the authority to assist 
organizations like ours by taking some of the products and 
putting them on the ground. They have no funding. If they had 
funding, they could actually make the investment that has been 
put in the research, worthwhile, and put it on the ground by 
giving start-up funds for some material and some labor.
    Senator Crapo. This would be funding through the Forest 
Products Lab?
    Ms. Dearstyne. It is through the Forest Products Lab, and 
they do have the authority to help with that, but they have no 
funds to do it.
    Senator Crapo. OK. That is another point. We will--as I 
said, I am working on my side, and Larry is working on his 
side, and we both help each other. That is something we will 
pay attention to.
    Mr. Stewart. Senator, I would just like to echo that. The 
Forest Products Lab has been doing some great things. They are 
coming up with some great ideas for utilizing all this stuff. 
They are a very valuable resource. It seems that they move 
slow, sometimes, but that is just the nature of the beast, I 
guess.
    Senator Crapo. We will try to light a fire under them.
    Mr. Stewart. Some of the things we have talked about--like 
Joyce and I have talked about these a lot. These ideas for 
shelters, picnic shelters made out of round wood; bridges, 
recreational type bridges that are made out of round wood; and 
they are all potentially very great ideas. We want to see those 
kinds of ideas continue.
    Senator Crapo. Well, good. Well, I appreciate this panel 
coming forward. I will just now include a couple comments of my 
own, then I will excuse you to get to our last panel.
    You probably all followed this as closely as anybody in 
America, but the legislation to get the Healthy Forests 
Restoration Act was interesting. We are basically in a gridlock 
in the Senate. It takes 60 votes to get passed any significant 
issue you have--that is, to beat a filibuster. It takes 60 
votes to beat a filibuster. In this political climate, almost 
everything is filibustered, so there was little hope that we 
would get the bill this year or this last year. We knew if we 
did, we would have to get it on a bipartisan basis, and we just 
didn't really think that that was likely.
    In other words, we didn't think that what we would get, if 
we gave up enough to get 60 votes, would be worth getting. We 
started working on it, and we had some really good negotiations 
with a group of Democrats who very sincerely worked with us, 
and we came up with a bill. We gave up a lot, and they gave up 
a lot, but we had something that was still pretty darn good. We 
only had 56 votes that we could count for sure. We did a little 
more tweaking and we actually improved it a little bit, and we 
got up to where we thought we had 58 votes for sure. We were 
thinking we might have 60 votes, but there were two votes we 
weren't sure of.
    We figured we were as close as we were ever going to get. 
We convinced our leadership to let us put it on the floor. We 
said we will never get those last two votes if we don't make 
them vote, so let's put it on the floor and see if we can't get 
the 60 votes. The leadership actually scheduled it to the 
floor. Then the California forest fires started and we got 80 
votes.
    [Laughter.]
    Senator Crapo. I can tell you, from a very close count, 
that the California forest fire gave us 20 votes, maybe 22. 
Anyway, it is a tough issue. We are looking to use this 
legislation as proof that you can manage the forests well 
without gridlock, which is what we have been having on the 
forests in the past.
    From there, we are going to expand it. While we are doing 
it, we are going to try to accomplish the objectives we have 
talked about today. I thank this panel for coming today.
    Senator Crapo. We will now call up our fifth and final 
panel: Karl Tueller from the Idaho Department of Commerce; and 
Dwight Johnson of the Idaho Rural Partnership.
    While Karl and Dwight are taking their seats, I am going to 
announce to everybody that my schedule is so tight that when 
this panel is finished, I am going to have to get up and leave. 
I don't want you to be offended if I rush out of the room. I 
will try to shake your hand as quickly as I can when I leave, 
but they say they have a fast car waiting out there to rush me 
back to Boise, and we will try to get me back on schedule and 
back so that I am not at least too late for the next round of 
meetings tonight.
    I just wanted to apologize to everybody up front. I don't 
want you to think I am being rude if I hop up when we are done 
and rush out of the room.
    OK. Karl, I introduced you first, so you get to go first.

STATEMENT OF KARL TUELLER, DEPUTY DIRECTOR, IDAHO DEPARTMENT OF 
                            COMMERCE

    Mr. Tueller. Well, thank you, Senator Crapo. One week ago 
today, I was in your office, actually, and you were under the 
weather. I am glad to see you are feeling better.
    Senator Crapo. In fact, you can probably still hear a 
little of it in my voice.
    Mr. Tueller. I had a chance to meet with Peter and the rest 
of your staff there. I am even more pleased to be here today 
representing not only the State of Idaho, but the Inland 
Northwest Economic Adjustment Strategy. This has been an effort 
started back in 1998, and it includes the four States of 
Washington, Oregon, Montana, and Idaho, as well as the 
affiliated tribes.
    It has been evolved into what is a very unique, sustainable 
relationship and partnership. The group, we have done our 
homework. We have gone to considerable length to document the 
distress and its impact to the rural counties in this area 
experiencing the socioeconomic consequences of these natural 
resource policy issues that affect us all. We have looked a lot 
at developing national plans, regional plans, and I am going to 
leave with you, along with my comments here, just this little 
handout of our executive summary about the Inland Northwest 
Economic Adjustment Strategy.
    I don't want to spend a lot of time on that. I want to 
thank you on behalf of the Inland Northwest Economic Adjustment 
Group for Senate bill 2162. We really appreciate your 
leadership on this. It is a great effort. The four States, the 
23 tribes, and 137 counties, and numerous community leaders 
that have collaborated on this project is great testimony in 
itself. As you know, more than half of the Inland Northwest 
Territory is the Federal Government's, and many of the players 
made their living in agriculture, forestry, grazing, mining, or 
recreation. For decades that has been our major economic 
stream. Things have changed; we have lost much of that 
competitive advantage, as you know, and we are struggling to 
regain.
    You also know that rural development in the policy arena is 
very fragmented, not only at the Federal level but the State 
level. We have more programs. They are all great programs; they 
just overlap and it is hard the get a handle around them all. 
What is unusual about the Inland Northwest Economic Adjustment 
Strategy is it really was a grassroots effort among the States 
and the departments and players here to really make this 
happen.
    I want to identify briefly three regional collaborative 
perspectives the Inland Northwest Economic Adjustment Strategy 
provides. One of those is efforts by the member States to 
foster cluster businesses. This is really an opportunity to 
help businesses that can work better together--collaboration--
take advantage of supplies and training work forces and 
incorporating new technologies.
    For example, as we have talked about today, making use of 
small-diameter trees, value-added food products, and renewable 
energy come to mind. Other clusters are emerging on national 
trends, including information technology, health services for 
rural seniors, and biotechnology.
    The second collaborative network is the networking of 
practitioners from public agencies. Everywhere from 
entrepreneurs and business incubators--we really have worked 
hard to work with all the various organizations and entities 
out there, and many of them are represented or have been 
represented here today.
    The third example of this collaborative effort really falls 
parallel to your Inland Northwest Revitalization Act and would 
create a 40-member Inland Northwest Regional Partnership 
comprised of ten representatives from each of the States. These 
partners will be active players in regional development. They 
have already committed time, energy, and resources. We believe 
that this partnership and your particular bill will provide the 
glue to make this synergy happen. It also ties very directly, 
companions with this Healthy Forests Restoration Act. You see, 
that is the synergy. That was giving the local forests 
ecosystems, and this Inland Northwest Act provides for local 
socioeconomic developments.
    We look forward to being ready to define and expand 
business opportunities. It is an economic development effort, 
and we are going to be accountable in the sense that we can 
measure--in your bill you outlined--we are going to identify 
these 137 counties as distressed, competitive, or attainment. 
If we can move them all to attainment, then we will think we 
have been successful.
    How much will all this cost? As you know, other initiatives 
in the past have cost billions. We don't think it will take 
nearly that much money at all. We know the tight budget issues. 
We think a range of 10 to $12 million per year during the next 
8 years will be sufficient. There will be, however, need for 
special consideration as other needs are quantified.
    I want to thank you, again. We are very excited about the 
potential and the opportunity. We have collaborated and worked 
with many players in the Inland Northwest Economic Adjustment 
Strategy in supporting your bill.
    Senator Crapo. Thank you very much, Karl.
    [The prepared statement of Mr. Tueller can be found in the 
appendix on page 114.]
    Dwight.

 STATEMENT OF DWIGHT JOHNSON, ACTING ADMINISTRATOR, RURAL AND 
 COMMUNITY DEVELOPMENT DIVISION, IDAHO DEPARTMENT OF COMMERCE, 
            ON BEHALF OF THE IDAHO RURAL PARTNERSHIP

    Mr. Johnson. Senator, it is a pleasure to be with you today 
to highlight some of the recent activities of the Idaho Rural 
Partnership. I am the past IRP executive director, currently 
the Acting Administrator of the Rural and Community Development 
Division at the Department of Commerce. I bring the regrets of 
current executive director, Sara Braasch, and our two co-
chairs, Trent Clark and Roger Madsen, who happen to be in 
Washington, DC, today. Too bad for them.
    Senator Crapo. I will second that.
    Mr. Johnson. It is much nicer to be in Cascade. As you 
know, IRP is one of over 40 State Rural Development Councils as 
authorized by the Rural Development Title of the 2002 Farm 
Bill. Based on that direction from Congress and a January 2003 
Executive Order from Governor Dirk Kempthorne, IRP has three 
specific duties.
    First of all, we facilitate collaboration among Federal, 
State, local, and tribal governments and the private and non-
profit sectors in the planning and implementation of programs 
and policies that have impact on rural areas of Idaho.
    Second, we monitor, report, and comment on policies and 
programs that address or fail to address the needs of rural 
areas of the State.
    Last, as part of the partnership, we facilitate the 
development of strategies to reduce or eliminate conflicting or 
duplicative administrative or regulatory requirements in 
Federal, State, local, and tribal governments.
    To fulfill these duties, IRP has a 30-member board of 
directors. They are comprised of individual members 
representing the private sector, people that live in rural 
Idaho, such as Ashley and Katrin Thompson that served on the 
IRP board, and representatives of Federal, State, local, and 
tribal agencies and organizations.
    As an example of some of the things we do to try to garner 
broad input on the current needs and priorities for rural areas 
of the State, we organized the 2002 Idaho Rural Summit in Coeur 
d'Alene last year in the summer. The audience was a very 
diverse mix of private and public sector people of almost 200 
individuals.
    They basically brought together a whole list of action 
items they wanted to see and then prioritized those items. 
Based on those priorities, the IRP board identified a number of 
strategic issues for the coming year, including serving as a 
champion for rural Idaho; expanding competitive access to 
domestic and international markets; seeking resolution of 
conflict, especially on environmental issues; providing 
leadership training and leadership in rural communities; and 
then serving as a one-stop shop, specifically having an 
electronic-access inventory web site for information of 
programs and services of rural communities that we are moving 
forward aggressively on.
    In addition, in order to tap the expertise of a large group 
of individuals outside the board of directors, we have 
established a number of standing committees and have asked 
volunteers and other people from rural Idaho to serve on those 
committees, including Economic Development, Education and 
Workforce Development, Environment, Leadership Training, Policy 
Development, and Planning and Funding.
    IRP works to achieve its goals. As we do so, we are working 
with the National Rural Development Coordinating Committee that 
was authorized in the 2002 Farm Bill, and per that 
congressional direction, we look at that group to cross agency 
lines to solve problems and create opportunities for rural 
America.
    In closing, I would like to publicly thank you, Senator, 
and the other members of the congressional delegation for the 
tremendous efforts you have made in funding this program, 
specifically in Idaho, and across the country. Within the 2002 
Farm Bill, we have that funding that comes traditionally 
through the U.S. Department of Agriculture Rural Development. 
In addition, this past year we have gone beyond that, got some 
private sector funding, specifically two funding sources: 
Betchtel BWXT Idaho and Monsanto. We have achieved some State 
funding as well through the Idaho Workforce Development 
Training Fund.
    We look forward this coming year to expanding both State 
and private resources to match the Federal resources. We have 
truly a collaborative effort in that.
    [The prepared statement of Mr. Johnson can be found in the 
appendix on page 118.]
    Senator Crapo. Thank you very much, Mr. Johnson. I want to 
thank both of you, Mr. Tueller and Mr. Johnson, for the efforts 
of the Idaho Department of Commerce and Idaho Rural 
Partnership, respectively, for their focus to try to address 
the issues that this Committee's focused on today.
    Karl, you mentioned and discussed a lot of the approach 
that you are engaged in in working with the INEAS group, and I 
would just like you to expand on that a little bit. As I look 
at this, it seems to me that we have a lot of programs, at many 
different levels of government, and a lot of private sector 
involvement. As others have said today, we probably have the 
programs in place. We have the necessary system in place, but 
we have a tremendous complexity out there, and that complexity 
is made even more complex by the fact that we have how many 
counties in INEAS? One hundred forty-seven, I believe?
    Mr. Tueller. One hundred thirty-seven.
    Senator Crapo. In the hundreds, between 100 and 150 
counties that each have their own unique nature. They are in 
four different States. There are tribes, there are State 
governments, county governments, city governments, tribes, 
Federal Government, and then all kinds of different private 
sector impacts as we try to figure out how to best accomplish 
this objective of boosting economic development in rural 
communities. Somebody said earlier that flexibility was needed. 
Clearly it is.
    Is the focus of INEAS the right focus? I know I am asking 
somebody who is an advocate for it. Tell me how you see INEAS 
solving some of this.
    Mr. Tueller. Well, Senator Crapo, having been in this 
business for over 30 years, I have worked with a lot of these 
Federal and State programs. Particularly in Idaho, the Rural 
Partnership has really tried to address and cut across a lot of 
those programs, cut down some of the barriers to collaborate, 
and that is working fairly well. Your particular bill is based 
a lot on that by the fact that you have identified ten from 
each of the various States. We think they parallel very well.
    The thing of it is, it is not creating a new, different 
level of bureaucracy, of new players. It really engages those 
who are already doing this economic and community development 
from the States. It allows us, then, just to pick up and start 
the implementation process without some new, higher level 
type--like a regional commission.
    Senator Crapo. Let me interrupt and ask you a question. 
Earlier, it was Mr. Birdsall, but others said that we really 
need to be sure that we don't get caught up in a bureaucratic 
system where cookie-cutter solutions get invoked. INEAS will 
not cause that, I hope. How will INEAS facilitate this 
flexibility for local decision-making that we have talked about 
today?
    Mr. Tueller. Well, I believe it is by bringing all the 
partners to the table, which we have demonstrated can happen, 
from county commissioners to local officials to private 
industry, plus all the service providers, whether it is local 
or State or non-profit group. It is always dangerous, 
obviously, but we are committed. We have the infrastructure.
    I have confidence, almost as much, in the other States. 
They are all different and unique, as you know, in terms of 
getting all the right players to the table. I know that all of 
them that I have worked with are committed. They have been an 
effective method to really work with local community leaders.
    Senator Crapo. We have all of these players anyway, and 
they are engaged anyway. By bringing them together in a 
collaborative fashion, we should expedite bureaucracy problems 
and facilitate flexibility?
    Mr. Tueller. Absolutely.
    Senator Crapo. Dwight, again, the Idaho Rural Partnership 
is to be commended for all of the tremendous work that it is 
doing. We rely on you guys tremendously in our efforts. Let me 
ask you, if you will, I know you are familiar with the INEAS 
project. How do you see IRP working in this context? Let's 
assume that the legislation passes and we establish the 
framework that the bill proposes and that Karl has talked 
about. How do you see IRP working with that?
    Mr. Johnson. Well, they are, Senator, really a mirror image 
of each other, to a large degree, on a State level, doing the 
same type of thing that IRP is trying to do, and continuing to 
work to do in collaborative efforts to bring the partners 
together to make real things happen.
    Just to give you a very simple example, at our last August 
meeting, board meeting last year, someone brought up the fact 
that--a local county service provider brought up the fact that 
as they do various different projects, economic development 
projects and community development projects, they get various 
different funding sources to make those things work. For each 
funding process, they had to set up a different sign to 
acknowledge the different funding source, whether it be State, 
local, or Federal, et cetera, and sometimes multiple local and 
multiple State signs.
    They brought that issue to the table, and we said that 
doesn't make a lot of sense. We developed an easy sign that we 
can have one sign with everybody acknowledged. Save expense, 
save programs, frustration on a local partnership level. On the 
local level to actually implement that, a simple solution was 
arrived at because everybody was sitting around the table and 
someone didn't have to approach every single different agency 
and get the runaround. That is just a very simple example of 
what can happen when you have people at a table making a 
decision.
    Senator Crapo. That is a good point.
    In the context of the access to capital and some of the 
USDA programs we talked about today--RBEG and RBOG and the 
others I have forgotten already. RCA or whatever it is. I can't 
remember.
    [Laughter.]
    Senator Crapo. In the context of those capital programs and 
other programs to provide resources for communities or business 
start-ups, do you believe that both the IRP and the broader 
INEAS concept work well in helping to facilitate those 
programs, make them more effective?
    Mr. Johnson. Senator, absolutely. As I mentioned, to make 
those things happen, in large regard, you have to have 
partnership. It is not just one funding source that is going to 
get the job done. You have to go to numerous different funding 
sources to accomplish what you are trying to do. The 
coordination and collaboration between all of those players is 
absolutely critical to accomplishing it. That is why the 
collaborative effort of IRP and, by extension, INEAS is the 
exact process that you need to go through to make things 
happen.
    Senator Crapo. Karl?
    Mr. Tueller. I would just like to add that we for some time 
in Idaho have assembled all those infrastructure providers to 
these communities. We sit down around the table on a regular 
basis to find out whether transportation is planning a road 
consistent with the sewer project, or whether the Office on 
Aging's got processes going into it. We have had a very 
successful collaborative process that we are saying, this 
community is ready now from all aspects. We can bring the 
resources of EDA or USDA in partnership with State money to 
make the project happen with limited resources.
    Senator Crapo. There is another benefit that I see, maybe 
selfishly, from my role in all of this at the policy level with 
the Federal Government, and that is--you can all, everybody 
that has stuck it out all day--as you can tell, I am trying to 
soak this all into my mind, figure out all these programs. 
There are some for communities under 20,000, and there are some 
for over 50,000, and all that.
    It seems to me that if you have a situation where you have 
all the players working together collaboratively, and you have 
a circumstance where there is somebody fallen in a hole and 
can't get serviced because of various regulatory requirements 
of various programs, that that could be, A, identified, and 
hopefully, in many cases, a creative solution found to solve 
it.
    If there is just no work-around, then it would seem to me 
that the group could come to me and say, the program needs to 
be changed. This program or this set of programs need to be 
adjusted so they work this way, not that way. In fact, there 
have been five or ten suggestions here today of just that 
nature by people who work in the system.
    It seems to me that the INEAS group or the IRP could come 
to me as a Member of Congress and say, look, here's a reform 
bill, or whatever you want to call it, for economic development 
in rural areas. If you would make the following X number of 
changes, you would significantly enhance and expedite the 
access to capital or the solution to this problem. Do you 
envision INEAS working that way?
    Mr. Tueller. I do, and also the rural partnerships do that, 
do a better job. Make our job of trying to coordinate all these 
programs would be much easier if it were simplified in a way 
that makes sense both from your perspective and Congress's 
perspective and rural communities. Many of these have grown up 
through sizable ground over the years, and they don't get 
adjusted and kept up with the current circumstances of the 
need.
    We welcome that opportunity, and we have probably 
underutilized your office and other offices to really channel 
those suggestions and recommendations.
    Senator Crapo. Well, ideally--I said at the outset, there 
are 88 programs and well over 16 agencies working on them. 
Ideally, I would think we should refine the number of programs 
and expand the reach of the programs and reduce the bureaucracy 
and expand flexibility. I guess I am guilty myself. I created 
one of those, Project SEARCH, and, of course, I want to see 
that stay in. I am sure that that could be woven into some 
other program or project in such a way that we streamline. In 
my opinion, streamlining is probably a good objective to 
achieve here as a long-term objective.
    Well, anything else that either of you would like to put 
in?
    Mr. Johnson. I just want to acknowledge Bob Ford, thank him 
for the good work he does on behalf of the State and your 
office, and acknowledge Dick Gardener and Jim Birdsall, who 
also are on contract with the Inland Northwest Economic 
Adjustment Strategy, as we move that project along. I know 
Governor Kempthorne and Roger Madsen, the Director of Labor and 
Acting Director of Commerce----
    Senator Crapo. We are working with all the other offices in 
the Northwest to try to make this happen. I should also 
acknowledge that Emily McClure is the Bob Ford of Washington, 
DC. She does all that. Bob does it out here, and she does the 
Washington, DC, side of it, and she is doing a great job of it.
    I just want to say to everybody who has spent the day here, 
thank you for your attention and interest in these issues. It 
has been very educational and enlightening to me to learn about 
these things, but it has also been comforting because I have 
come to know--as I knew before but it is reaffirmed to me--that 
there are a lot of really great people working on these issues 
from each different perspective from which you all come. You 
will help guide me in making sure I do my job right, and I will 
help--not guide you--but I will help assist you in making sure 
you can do your job to the best of your ability.
    Again, I just want to thank you for both your commitment 
and your time, not just today but always. With that, the 
hearing is adjourned. Thank you.
    [Whereupon, at 3:15 p.m., the subcommittee was adjourned.]

      
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                            A P P E N D I X

                             March 16, 2004



      
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                             March 16, 2004



      
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