[Senate Hearing 110-31]
[From the U.S. Government Publishing Office]



                                                         S. Hrg. 110-31
 
                  HEARING TO DISCUSS RURAL DEVELOPMENT
                      CHALLENGES AND OPPORTUNITIES

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

                                HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE


                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION


                               __________

                           FEBRUARY 13, 2007

                               __________

                       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



                       TOM HARKIN, Iowa, Chairman

PATRICK J. LEAHY, Vermont            SAXBY CHAMBLISS, Georgia
KENT CONRAD, North Dakota            RICHARD G. LUGAR, Indiana
MAX BAUCUS, Montana                  THAD COCHRAN, Mississippi
BLANCHE L. LINCOLN, Arkansas         MITCH McCONNELL, Kentucky
DEBBIE A. STABENOW, Michigan         PAT ROBERTS, Kansas
E. BENJAMIN NELSON, Nebraska         LINDSEY GRAHAM, South Carolina
KEN SALAZAR, Colorado                NORM COLEMAN, Minnesota
SHERROD BROWN, Ohio                  MICHEAL D. CRAPO, Idaho
ROBERT P. CASEY, Jr., Pennsylvania   JOHN THUNE, South Dakota
AMY KLOBUCHAR, Minnesota             CHARLES E. GRASSLEY, Iowa

                Mark Halverson, Majority Staff Director

                      Robert E. Sturm, Chief Clerk

            Martha Scott Poindexter, Minority Staff Director

                Vernie Hubert, Minority General Counsel

                                  (ii)

  
                            C O N T E N T S

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Hearing(s):

Hearing to Discuss Rural Development Challenges and Opportunities     1

                              ----------                              

                       Tuesday, February 13, 2007
                    STATEMENTS PRESENTED BY SENATORS

Harkin, Hon. Tom, a U.S. Senator from Iowa, Chairman, Committee 
  on Agriculture, Nutrition and Forestry.........................     1
Coleman, Hon. Norm, a U.S. Senator from Minnesota................     3
Klobuchar, Hon. Amy, a U.S. Senator from Minnesota...............     3
Nelson, Hon. E. Benjamin, a U.S. Senator from Nebraska...........     2

                                Panel I

Fluharty, Charles, President, Rural Policy Research Institute, 
  Truman School of Public Affairs, Columbia, Mississippi.........     4
Hassebrook, Chuck, Center for Rural Affairs, Lyons, Nebraska.....     6
Holz-Clause, Mary, Co-Director, Agricultural Resource Center, 
  Iowa State University, Ames, Iowa..............................    10
Kelley, Vernon, Three Rivers Planning and Development District...     8
Sertich, Joe, Chair Rural Community College Alliance, Chisholm, 
  Minnesota......................................................    12
                              ----------                              

                                APPENDIX

Prepared Statements:
    Casey, Hon. Robert P., Jr....................................    38
    Chambliss, Hon. Saxby........................................    39
    Cochran, Hon. Thad...........................................    42
    Salazar, Hon. Ken............................................    45
    Fluharty, Charles............................................    46
    Hassebrook, Chuck............................................    79
    Holz-Clause, Mary............................................    84
    Kelley, Vernon...............................................    89
    Sertich, Joe.................................................    98
Document(s) Submitted for the Record:
Harkin, Hon. Tom:
    Written questions for Mr. Kelley.............................   107
Salazar, Hon. Ken:
    Written questions for all witnesses..........................   108
    Written questions for Mr. Sertich............................   108
    Written questions for Mr. Hassebrook.........................   108
    Written questions for Mr. Fluharty...........................   108
Kelley, Vernon:
    Written response to questions from Hon. Tom Harkin...........   109
Sertich, Joe:
    Written response to questions from Hon. Tom Harkin...........   113
    Written response to questions from Hon. Ken Salazar..........   116
Pennsylvania's Recommendations for the 2007 Farm Bill............   119
Association of Farmworker Opportunity Programs, prepared 
  statement......................................................   131
Office of the Lt. Governor State House, Indianapolis, Indiana, 
  prepared statement.............................................   137
Proteus, Inc., prepared statement................................   141
Additional Material(s) Submitted for the Record:
Additional questions for Mr. Fluharty............................   144
Additional questions for Mr. Kelley..............................   146
Additional questions for Ms. Holz-Clause.........................   147
Additional questions for Mr. Hassebrook..........................   148
Additional questions for Mr. Sertich.............................   149
Question and Answer:
Holz-Clause, Mary:
    Written response to questions from Hon. Tom Harkin...........   150
    Written response to questions from Hon. Ken Salazar..........   155



                  HEARING TO DISCUSS RURAL DEVELOPMENT
                      CHALLENGES AND OPPORTUNITIES

                              ----------                              


                       Tuesday, February 13, 2007

                                       U.S. Senate,
                                  Committee on Agriculture,
                                    Nutrition, and Forestry
                                                     Washington, DC
    The Committee met, pursuant to notice, at 9:52 a.m., in 
room SR-328, Russell Senate Office Building, Hon. Tom Harkin, 
Chairman of the Committee, presiding.
    Present: Senators Harkin, Lincoln, Nelson, Salazar, Brown, 
Casey, Klobuchar, Lugar, Cochran, Coleman, Thune, and Grassley.

    STATEMENT OF HON. TOM HARKIN, A U.S. SENATOR FROM IOWA, 
   CHAIRMAN, COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY

    Chairman Harkin. The Committee on Agriculture, Forestry and 
Nutrition will come to order. This morning we are having 
another in our series of hearings leading up to the Farm Bill, 
and this morning we are having a hearing on rural development.
    I will just make an opening statement and then I will 
introduce Senator Chambliss, and I know some Senators also want 
to introduce some of our guests and I will ask them to do that 
at that point in time.
    Typically, when the Farm Bill is discussed, rural 
development and the challenges and opportunities facing rural 
Americans and their communities are not especially high on the 
list of topics. In the reality, the Farm Bill is the single 
most important piece of legislation we deal with, having a 
broad focus on rural development.
    Despite their unique challenges, rural communities offer 
many advantages. Ironically, rural America is a wonderful place 
to live and raise a family, too often, it is a hard place to 
make a living and support a family. The new Farm Bill hold much 
promise for helping rural Americans capitalize on the strengths 
on their communities to increase economic growth, jobs, and the 
quality of life.
    We need to examine the Department of Agriculture's numerous 
rural development programs to see what is working and what 
needs improvement. We also need to foster better coordination 
between the various Federal agencies, State and local 
governments, nonprofit and charitable entities, and private 
individuals and businesses.
    One innovation which has already proven its value involves 
a cluster of communities joining together to identify their 
strengths and their needs and then to work cooperatively with 
governments and businesses, educational, and nonprofit entities 
to carry out a rural development strategic plan. This is a 
sound approach and one I hope we can encourage in the new Farm 
Bill.
    We also have to opt to consider better focus in USDA rural 
development assistance toward those communities who have 
devised a plan to make the most effective use of Federal 
dollars. The experience thus far shows that certain strategies 
and Federal initiatives hold a lot of promise, for example, 
adding value to farm commodities and products, whether for 
energy or a host of other bio-based products helps to increase 
farm income, rural economic growth, and jobs, of course, while 
reducing our dependence on imported oil.
    The Value Added Agricultural Product Market Development 
Grants have worked well; I hope they can be strengthened. We 
also know that basic infrastructure is critical to the 
prospects of any rural community, from electricity, to drinking 
water and waste water treatment, and the high speed internet 
access which has now become a necessity.
    We put funding in the 2002 Farm Bill for the specific 
purpose of funding USDA's backlog of approved applications for 
water and waste water programs, and I hope we can achieve a 
similar objective in this bill.
    One last thing, quality health care is, of course, also 
essential, and I commend the Administration's proposal to help 
rural hospitals. I also support Senator Nelson's proposed 
legislation to help small rural businesses to get started and 
succeed. And we must continue to support cooperatives as they 
carry on their tradition of improving farm income and rural 
economic opportunities.
    We also need to do what we can, and I am not certain I have 
an answer here, but I hope to explore it, how we hope move more 
venture capital for investment in rural areas. Community 
foundations can also help communities assemble more resources 
to help themselves. As we now know, there is a good deal of 
accumulated capital, though much of it remains untapped as a 
source of investment in those areas.
    So those are just some of the areas I hope we can explore 
with the witnesses today, and others, as we move forward to the 
development of the Farm Bill. So I look forward to the 
testimony of our witnesses, and the valuable contributions they 
can make to our discussion in the rural development title of 
the new Farm Bill.
    I will reserve time for Senator Chambliss to make his 
opening statement when we comes. I know that Senator Nelson and 
Senator Klobuchar wanted to make a couple of introductions 
before we proceed, and I would first recognize Senator Nelson 
for that purpose.

   STATEMENT OF HON. E. BENJAMIN NELSON, A U.S. SENATOR FROM 
                            NEBRASKA

    Senator Nelson. Thank you, Mr. Chairman. It is my pleasure 
to introduce Chuck Hassebrook who is the Executive Director of 
the Center for Rural Affairs in Lyons, Nebraska. The Center is 
a nationally recognized research, advocacy, and rural 
development organization that promotes family farming and 
ranching, small business and entrepreneurial rural development.
    Chuck also serves on the University of Nebraska Board of 
Regents and is its past Chair. He formerly served on the on the 
U.S. Department of Agriculture National Commission on Small 
Farms, and was Vice Chair of the USDA Agricultural Science and 
Technology Review Board. He currently serves on the Nebraska 
Rural Development Commission.
    Mr. Hassebrook is a University of Nebraska graduate, a 
native of Platte, Nebraska where his family is engaged in 
farming. He lives in Lyons, Nebraska with his wife Kate and 
sons Anton and Peter.
    It is my great pleasure to introduce a very, very good 
friend, very strong advocate for rural development, and a 
partner over the years while I was in the Governor's Office and 
since I have been in the Senate, Mr. Chuck Hassebrook.
    Chairman Harkin. Thank you very much Senator Nelson, of 
course we all know Chuck Hassebrook, and that is a great 
introduction.
    I will turn to Senator Klobuchar.

 STATEMENT OF HON. AMY KLOBUCHAR, A U.S. SENATOR FROM MINNESOTA

    Senator Klobuchar. Thank you, Chairman Harkin. It is my 
pleasure today to introduce Joe Sertich. Joe is from 
northeastern Minnesota where, actually, my grandpa was a miner 
and my dad grew up. And Joe is the President of the Northeast 
Minnesota Higher Education District, which is a network of five 
community colleges, and one of them is Vermillion College, 
where my dad went to college.
    You might think that Mr. Sertich looks young, but you 
should know that his son, as Senator Coleman knows--his son 
Tony is the Majority Leader of the Minnesota State House of 
Representatives. So we are very honored to have Mr. Sertich 
with us on the panel. Thank you.
    Chairman Harkin. Thank you. Senator Coleman also indicated 
that he wanted to say something on behalf of Mr. Sertich.

 STATEMENT OF HON. NORM COLEMAN, A U.S. SENATOR FROM MINNESOTA

    Senator Coleman. This is a great Minnesota family, Mr. 
Chairman, really committed to the public services. These issues 
are critical. I just want to welcome Mr. Sertich to the 
Committee, and I look forward to hearing his testimony.
    Chairman Harkin. Thank you very much. We will now begin our 
testimony. We are going to try to ask you to limit it to 5 
minutes. I know a lot of Senators have questions and want to 
get engaged in conversation with you, so if you could--all of 
your statements will be made part of the record in their 
entirety, and I would as that if we could just start with Mr. 
Fluharty, and work down. I hope that your clock is working. I 
will give you 5 minutes. If you go a few seconds or a minute 
over, it is not going to bother us that much.
    Mr. Fluharty, welcome, again to the Committee. You have 
been a witness here before many times in the past. We welcome 
you back. Please proceed.

STATEMENT OF CHARLES FLUHARTY, PRESIDENT, RURAL POLICY RESEARCH 
     INSTITUTE, TRUMAN SCHOOL OF PUBLIC AFFAIRS, COLUMBIA, 
                          MISSISSIPPI

    Mr. Fluharty. Thank you, Mr. Chairman, members of the 
Committee. I appreciate the opportunity to be here, as we begin 
deliberations, again, on a new Farm Bill.
    Mr. Chairman, you asked us to look at the opportunities and 
challenges in rural America, and I believe we have given that 
fairly synoptic coverage in our written testimony, which I 
would ask is entered in the record. And I hope members and 
staff have an occasion to review the dynamic challenges that 
are there.
    You and your colleagues have a very difficult task this 
year, as you all know. This title is very broad and it 
addresses a number of very critical national needs, and you are 
entering a year in which the baseline for this Committee is 
going to be an increasing challenge. So in my written 
testimony, I really tried to make a case for, despite those 
issues, the absolute necessity that RUPRI believes must be 
addressed: significant new investments and a different policy 
approach in the rural development title this year.
    Simply put, there are two major reasons for that. One is a 
domestic consideration, and the other is an international 
consideration. I would like to review those just briefly for 
you.
    There are two particular domestic challenges that I would 
suggest you must look at this time in our Nation's history. One 
is the rural disadvantage in Federal fund flows for economic 
and community development. I have laid that out, I think, very 
clearly. It is an ongoing challenge. This year, it is a $550 
per capita difference, urban versus rural. Those are new 
numbers. That is very, very significant. That is a multi-
billion dollar challenge for rural economic development and 
entrepreneurship.
    The other is a unique challenge that results from your 
Federal designations and the growing interdependence of rural 
and urban areas. Counties are no longer adequate descriptors 
for this, and in everything from energy to food systems we need 
to think about the continuum of Federal commitment to rural 
strategies, from rural through urban areas.
    In fact, RUPRI believes that we are going through a set of 
socioeconomic and demographic changes that are as important as 
the great shifts in the 1950's. We think they will have 
significant long-term rural implications for what is going on 
out there in the dirt.
    The second issue is international competition. Every 
developed nation that we work with in OECD is going through the 
very same challenges this Committee is, but many of these 
public programs in other developed nations, frankly, are taking 
approaches that are more systematic, continuous, and at a 
deeper level of public investment. And these are the 
competitors that our rural regions must contend with, not the 
next county.
    I will simply mention two. The EU has a major new rural 
broadband initiative that is going to essentially put broadband 
in every community in Europe. In addition, they just announced 
a multi-billion dollar European innovation fund that will link 
their universities to rural regions. We have neither of those 
right now, and that is significantly disadvantaging rural 
entrepreneurship in the United States.
    My colleagues on this panel are going to offer a number of 
wonderful examples of the opportunities that are out there. 
There is much going on. We would endorse everything that is 
going to be mentioned as a sector-specific opportunity, but as 
a public policy institute, I would like to close with three 
policy challenges that you have to confront. You have to deal 
with the disadvantage that rural areas have in your Federal 
commitment, overall, to economic development.
    Second, I would urge you to provide leadership to rethink 
essential public services. The Administration's approach is 
excellent, in terms of funding to address backlog, but we must 
also look at broadband and broader community resources.
    Third, we really do need a new policy framework, and it 
needs to be a framework in which shared investments between the 
public, private, and philanthropic sector are scaled. There 
simply are not enough Federal dollars.
    So Mr. Chairman, in that regard, I want to commend the 
Committee. As you all know in the 2002 bill, you passed 
something called the Rural Strategic Investment Program. It was 
unfortunately not funded. There are problems with that in 
today's market, but I would contend that it is the right model, 
and I would contend, if we can think about a scaled investment 
model that does three things: looks at regional frameworks in a 
very significant way, has laser attention to entrepreneurship 
and institutional innovation, and assures continuous commitment 
so that State and private dollars can be addressed in a Federal 
framework. I think we are well there.
    Mr. Chairman, the recent New York Times article on ethanol 
was wonderful, and I will read your quote there. ``We need to 
think big and act aggressively.'' Ethanol is a wonderful 
opportunity, but there are 2,000 rural communities that will 
not have an ethanol plant. 2,000 counties. There are many 
advocates for ethanol. There are 90 million rural Americans 
that need attention as well, and we need entrepreneurship 
beyond the ethanol juggernaut. We contend broader 
entrepreneurship is the future, and we believe a new framework 
is necessary.''
    Thank you, Mr. Chairman. Thank you, members of the 
Committee. I look forward to your questions.
    [The prepared statement of Mr. Fluharty can be found on 
page 46 in the appendix.]
    Chairman Harkin. Well, Mr. Fluharty, thank you very much 
for that wonderful opening statement. It sort of sets the 
stage, I think, for our other witnesses and for our discussion.
    I just want to also thank you at the outset for all the 
work that the Rural Policy Research Institute does.
    Mr. Fluharty. Thank you, Mr. Chairman.
    Chairman Harkin. Great information that we get here on both 
sides of the aisle.
    I think I stole that quote from Dick Lugar, by the way.
    Mr. Fluharty. I am sure you did.
    Chairman Harkin. Mr. Hassebrook, we will recognize you 
next.

STATEMENT OF CHUCK HASSEBROOK, CENTER FOR RURAL AFFAIRS, LYONS, 
                            NEBRASKA

    Mr. Hassebrook. Thank you, Senator Harkin, and thank you, 
Senator Nelson, for that kind introduction.
    This Farm Bill presents an opportunity to invest in our 
future. There are proven strategies that work to revitalize our 
rural communities, largely based on small entrepreneurship and 
agricultural entrepreneurship. And if we invest in those 
strategies, we can set off a wave of development that 
revitalizes rural communities and creates genuine opportunity 
for rural people across this country.
    You know, small entrepreneurship really is key. We analyzed 
the most rural agricultural counties in our region, the Western 
Corn Belt and the Northern Great Plains. What we found is that 
about 60 percent of all new jobs came from non-farm 
proprietorships. It was people creating their own job by 
starting a small business. And perhaps what is most exciting 
and encouraging about that is that when we survey rural high 
school students in our State we find that about half of high 
school students in rural areas want to own their own business. 
This is a strategy that has the capacity to draw our young 
people back to rural communities.
    With that, I am very pleased that Senator Nelson is 
introducing a rural micro-enterprise and entrepreneurship bill 
that would provide $50 million in mandatory funding to provide 
loans, training and technical assistance to rural small 
businesses. This legislation is modeled after a program in 
Nebraska that was initiated by then-Governor Nelson. Last year, 
that program provided loans, training, and technical assistance 
to over 4,000 business, rural and urban and it has been a great 
success story.
    And when I measure the success of that program I think of 
the families. I think of families like the Gaster family out in 
Indianola, Nebraska, out in southwest Nebraska. It is an area 
that has been losing population, suffering from drought. It is 
a tough place to make a living. And Mr. Gaster always had this 
hobby of making wood and copper barrels. Well, they turned that 
into a business, and today they are selling wooden and copper 
barrels over this entire country, with clients, in part, from 
Hollywood movie sets. They have clients like 20th Century Fox, 
Disney, and the Smithsonian Institution. And it has been 
successful to the point that not only is supporting Mr. and 
Mrs. Gaster, but their son is coming into the business.
    My point is simply this: That is the kind of success that 
you can have when you invest in entrepreneurship. That is what 
we need to do, in my judgment.
    There are also opportunities for entrepreneurship on the 
farm. You know, I was struck by a consumer panel that Better 
Homes and Gardens pulled together a few years ago where they 
found that about two-thirds of consumers say they would pay a 
premium for pork if it is raised on a small farm that is humane 
and environmentally responsible.
    Now, those surveys usually overstate the demand, but let's 
say it is a quarter of consumers. That is a huge opportunity 
for small and mid-sized farms. And one of the programs that has 
helped farmers tapped that opportunity is the Value Added 
Producer Grants Program. It is a program that you created in 
this Farm Bill in 2002. I think it is the great success story 
of the rural development title of the 2002 Farm Bill. I would 
urge you to reauthorize that and strengthen it. Strengthen it 
by committing $50 million in mandatory funding, and strengthen 
it by putting a clear statutory priority on projects that help 
strengthen small and mid-sized farms.
    Now, I am not proposing a means test. I am not proposing 
something exclusive. I am proposing a priority. When we 
analyzed the grants made under that program under the current 
Farm bill, we found that there are a lot of good projects 
funded, but when we graded projects for their relevance to 
strengthening small and mid-sized farms, we found that about 40 
percent of the projects were graded an F for relevance in 
strengthening small and mid-sized farms. And I think a clear 
statement of priority in that regard by the Congress would 
really help strengthen that program.
    A couple of other points. One, we think it is vital that we 
infuse entrepreneurship across the titles of the Farm Bill. It 
is not just a rural development title issue.
    For example, in the research title, I would encourage you 
to include a program that provides mandatory funding for grants 
to be administered by the existing USDA rural development 
centers in places like Iowa State and Penn State, that they 
could turn around and then make grants to educational 
institutions, be they community colleges, be they the extension 
service--perhaps high schools, to provide entrepreneurship 
education to adult learners and to youth. The most exciting 
things I have seen in entrepreneurship in Nebraska is that we 
now have high schools that are teaching entrepreneurship.
    You know, that is a big deal to me, because our schools 
work pretty well in rural areas. They certainly do in rural 
Nebraska, and rural Iowa, and a lot of rural communities. But 
you know, I kind of sense that, over the years, we have taught 
a lot of young people to leave. And what we are doing with 
these programs now is, we will educate you to leave if you want 
to leave, but if you want to stay, we are also going to educate 
you in a way that gives you some of the skills you need to 
create your own future in rural America through 
entrepreneurship. And to me that is exciting and we have seen 
some great examples of it.
    One last thought I want to leave you with before closing. 
You might ask, those things sound neat, but where are you going 
to get the money for them? And what I would say is this, this 
Farm Bill will oversee about $50 billion a year in mandatory 
funding, most of it to address very real and very immediate 
needs. But if this Congress could just carve out 1 percent of 
that money to help create a future in rural America, $500 
million a year for entrepreneurship, it could set off a wave of 
new opportunities in rural America that would result in, the 
next time you do a Farm Bill, maybe not having so much need for 
immediate assistance.
    So thank you and I appreciate your time.
    [The prepared statement of Mr. Hassebrook can be found on 
page 79 in the appendix.]
    Chairman Harkin. Mr. Hassebrook, thank you very much for 
your statement. Again, I thank you for all your leadership for 
the Center for Rural Affairs and for your many years of working 
with us here and testifying. And thank you also for all the 
help you gave us on the 2002 Farm Bill.
    The ideas that you just rolled out are very provocative and 
I am sure we will have questions about entrepreneurship and how 
you teach it and who does it. I think I know it. I do not know 
how to define it and how to do it, but kind of a, I will know 
it when I see it kind of thing. So maybe you can help us think 
through how we carry it out.
    Next, we will turn to Mr. Vernon Kelley. He is Executive 
Director of the Three Rivers Planning and Development District, 
and past President of the National Association of Development 
Organizations.
    He is the author or father of what is called the Tupelo 
Miracle in his area.
    Mr. Kelley, welcome to our Committee.

     STATEMENT OF VERNON KELLEY, THREE RIVERS PLANNING AND 
                      DEVELOPMENT DISTRICT

    Mr. Kelley. Thank you, Mr. Chairman, honorable Committee, 
distinguished staff. I appreciate the opportunity to come today 
before you as you are considering the rewrite of the 2002 Farm 
Bill.
    I am probably the only panelist that actually represents 
rural governments and local governments where the rubber meets 
the road and where the pain really hurts, the people that are 
your constituents and represent your constituents, and I 
appreciate the opportunity to be here.
    I will warn you, I do not see, so the clock is not going to 
help me. That is the 100 percent truth and not a joke. So if I 
have to stop, you will just have to stop me.
    Chairman Harkin. You do not mind if Chuck Hassebrook just 
gives you the elbow, there.
    Mr. Kelley. That would be a tough one, because I am 
speaking from my heart, Mr. Chairman.
    Three Rivers, we cannot claim the Tupelo story, but what we 
can claim unquestionably is partnership building. We work for 
eight counties, and the local governments were created in the 
1970's, and I have over 30 years experience in economic 
development with local governments and rural governments.
    We have built an area in north Mississippi, if you stick a 
pin in the center of it and do a 50-mile circle, there are more 
manufacturing jobs historically there in that 50-mile circle 
than anywhere else in the State of Mississippi. We have done 
such by becoming the upholstered furniture capital of the 
world. We are now facing foreign competition, and in the last 
decade, have lost over 10,000 jobs in my region, in 
manufacturing jobs.
    And since July, and our workforce partnership that serves 
27 counties as partners with the community colleges, 
businesses, and industry, as well as local governments in 
promoting workforce and on the job training--we have lost over 
3,000 jobs. That is in 7 months.
    Rural America is suffering, and we are suffering in our end 
of the State. We have been partners in several successful 
endeavors, and I think partnerships are the only way to 
accomplish it. As one of our board members on our Regional 
Solid Waste said so effectively 1 day before his council in 
Tupelo, our largest city of 30,000, ``If I have to depend on 
the gates around on the city of Tupelo to make a living selling 
boats, I can close my office. I depend on the region.''
    We not only have to depend on the region now, but we 
compete nationally and globally. If you have read The World is 
Flat, you understand that what now happens across county lines 
happens across the oceans. We are successful in putting these 
partnerships together. We are the only region that I am aware 
of that has community colleges that serve as our one-stop 
coordinators and centers in our workforce area. We are very 
pleased that they are our partners. And without partnerships 
and building in the region, of your businesses and your 
colleges, as well as your local governments, you cannot be 
successful.
    We put the first regional landfill together owned by local 
governments in the South. And 6 years consistent we have had 
the same tipping fee with local governments, industries, and 
businesses all paying the exact tipping fee, as opposed to 
private facilities where local governments get a bargain and 
they rake small businesses.
    We are proud of that partnership. We have put a partnership 
together in businesses with our lending. Thanks to IRP and some 
rural development assistance, as well as other Federal 
programs, we have, since 1985, made over $69 million in loans 
in our region, with over 11,000 people working there today in 
these loans. During this 21-year period, we have less than 1.5 
percent loss rate over the combined total.
    We work with our banks, because without them we could not 
be successful. With these banks, we double that money, because 
we are always in a second lending position and made the banks 
our partners in economic development.
    One of our newest ventures in partnership is called the DUL 
Alliance. It is three counties and three municipalities that 
have ignored local boundaries and crossed lines in expenditures 
and revenue advantages, putting together a mega-industrial site 
to seek a major impact in industries such as an automobile 
facility. It is now one of the top five sites in the Nation by 
the consultant's recognition, and we hope to be very successful 
to help offset some of this.
    The point I am making is it has got to be in rural America 
regionally. No longer can the 5,000 town compete because it is 
not competing against the 10,000 town. No longer can rural 
America compete with the Atlantas, and the Memphises, and the 
Nashvilles individually, they have to group together.
    Mr. Chairman, I would like to request that this Committee 
continue its efforts on the Rural Strategic Investment Program, 
an outstanding concept, and you are to be commended for it--and 
to broaden it, and expand it, and hopefully initiate this 
nationwide.
    What I would also like you to consider in the Farm Bill 
rewarding partnerships--and I am going to have to go quick--
rewarding partnerships where local governments work together. I 
want you to consider the infrastructure nationally, as almost 
all local government programs are loans. Where Federal 
Government grants go to major metropolitan areas, my local 
governments are having to borrow it and pay it back.
    And Mr. Chairman, I wish the Committee would consider the 
structure of economic development in rural agencies similar to 
mine that have been very successful with nominal financing 
throughout the years in helping the local governments join 
together and be successful in economic development.
    Mr. Chairman, I appreciate the opportunity. I wish I had an 
hour to talk to you, because my heart bleeds and loves rural 
America. God bless each of you for your efforts in helping 
rural America and your constituents back home, and God bless 
America.
    [The prepared statement of Mr. Kelley can be found on page 
89 in the appendix.]
    Chairman Harkin. Well, Mr. Kelley, thank you very much for 
your profound statement, and also for the written statement, 
which I had gone over last evening. And thanks for being here 
today.
    Now we turn to Ms. Mary Holz-Clause, Co-Director of the 
Agriculture Marketing Resource Center at Iowa State University, 
and as I said, Associate Vice President for Extension, and 
Director of The Value Added Agricultural Program and 
Agriculture Marketing Resource Center.
    Welcome to the Committee.

   STATEMENT OF MARY HOLZ-CLAUSE, CO-DIRECTOR, AGRICULTURAL 
       RESOURCE CENTER, IOWA STATE UNIVERSITY, AMES, IOWA

    Ms. Holz-Clause. Thank you very much, Senator Harkin, and 
all Senators, for the opportunity to talk with you this 
morning.
    In addition to a few other of those titles, my husband and 
I are also family farmers in west central Iowa. I am going to 
speak with a lot of passion and from the heart when I talk 
about the Value Added Producer Grants today. They really are 
making a significant impact in rural America. The more than 46 
farmer-owned ethanol plants in the U.S. are fueling our 
Nation's energy supply, and the 95 biodiesel facilities are 
making a significant difference.
    However, we all know a lot about the excitement of the 
renewable fuels, but I want to talk about some other Value 
Added Producer Grants recipients. One of those is a farmer in 
central Iowa. His name is Kelly Biensen. Kelly raises certified 
Berkshire pork products and markets those on both coasts. Kelly 
received a Value Added Producer Grant a couple years ago, and 
just last year, to give you an example, he and the other 20 
pork producers in Iowa are just getting commodity prices, and 
an additional $1.6 million because of the assistance that they 
received from the Value Added Producer Grant. They used the 
VAPG money to leverage and work in market development. This is 
an example of the impacts that are happening in rural America 
with the Value Added Producer Grants.
    Another couple of example a Value Added Producer Grant is 
being used by a Texas marketing group that are now doing a 
value enhanced into a market that did not exist for them prior 
to receiving a grant. They used their funds and developed a 
market in Mexico.
    A California cooperative group, created a tracking system 
so they were able to further develop their export market for 
raisin products.
    The stories go on and on, and you can look at those in the 
official comments. Our producers have, for the most part, have 
some pretty marvelous examples of how they have taken those 
funds and leveraged that money to further develop either 
markets or coming up with new market strategies.
    For instance, many ethanol producers have used funding from 
VAPG to develop hedging scenarios so that they can assure that 
they can be successful in the future. The program has made a 
significant impact on the farmers and the rural communities out 
there.
    Closely tied to the Value Added Producer Grants is the 
Agricultural Marketing Resource Center. The Agricultural 
Marketing Resource Center is a virtual value added center, 
which means that it is all web-based. And on that website, 
generally there will be around a million to two million hits 
per month of farmers who are coming on and getting information, 
information on how to do business plans, feasibility, marketing 
studies. There is also background on about 250 different 
commodities and products. So this Agricultural Marketing 
Resource Center is truly a center for the whole United States.
    We have had inquiries on how to increase the market 
development for pomegranates, and how to develop quality 
management systems for wild salmon fishing in Alaska. Armed 
with the resources that we have, and partnering with the 
University of California, Davis, and Kansas State University, 
our producers are getting the assistance they need. We are 
working very closely either with service providers or producers 
in your States to answer their value added questions to explore 
or helping producers.
    Some of the studies that are going on right now include 
looking at the economics of producing ethanol from sugar beet 
pulp. Another one is looking at the impact of the current state 
of innovations and competitiveness for bioenergy in California. 
Researchers at Tuskegee University looking at the opportunity 
for meat goat production in the United States. The University 
of Nebraska is doing a project right now on specialty cheese 
production and looking at that marketing opportunity.
    At the Agricultural Marketing and Resource Center, we have 
tried to focus it so that it is there for all U.S. producers 
and farmers. I have included in my testimony some quotes of 
people who have used the Center. I thought one that was 
particularly interesting was a wine grower who had been growing 
and been involved in the wine business for 27 years. And he 
wrote to us after we had created a winery financial area, and 
he said, ``Thank goodness. Finally somebody is putting that 
together.''
    And that is what the Agricultural Marketing Resource Center 
really wants to focus on, is to have those tool, those things, 
that producers need. If you go on the web, there is much 
information about production. We have done a wonderful job 
through our extension services and others of telling people how 
to grow things, but what we really want to focus on is, how do 
we turn that production into viable markets?
    In conclusion, as I mentioned at the very beginning when I 
talked about the pork group, as I told you, they had made some 
significant metrics--$1.6 million additional money last year, 
but what was really amazing is perhaps a little harder to 
quantify. It is what the group has learned about the business, 
and marketing, and about themselves, and the attitude now that 
they say, you know what? There is a future out there in rural 
America. We can do this. We have the skill sets. We do have the 
confidence to go forward and do that.
    So I know that you are going to be very busy, and have many 
questions, and many deliberations, and many demands put upon 
you, but I would encourage you to ensure the seamless 
continuity of this program--the Value Added Producer Grants, 
and encourage you both to reauthorize the Value Added Producer 
Grants in the next Farm Bill, and provide full authorized 
funding right now for the upcoming appropriation process.
    Thank you very much.
    [The prepared statement of Ms. Holz-Clause can be found on 
page 84 in the appendix.]
    Chairman Harkin. Thank you very much, Ms. Holz-Clause, for 
being here and your great statement.
    Now we will turn to Mr. Sertich, President of the Northeast 
Minnesota Higher Education District, and Chair of the Rural 
Community College Alliance.

    STATEMENT OF JOE SERTICH, CHAIR RURAL COMMUNITY COLLEGE 
                 ALLIANCE, CHISHOLM, MINNESOTA

    Mr. Sertich. Chairman Harkin, and members of the Committee, 
I thank you for the opportunity to testify today.
    As we heard in the gracious introduction by Senator 
Klobuchar, I am Joe Sertich, President of the Northeast 
Minnesota Higher Education District in Chisholm, Minnesota. The 
district consists of five comprehensive community colleges in 
six towns: Iron Rapids, Eveleth, Virginia, Ely, International 
Falls, and Hibbing.
    What Senator Klobuchar did not say is, long before she was 
a U.S. Senator, we recognized her father as an outstanding alum 
of Vermillion Community College in Ely.
    Ely, by the way, some like to think of as the end of the 
road. The people there call it the beginning of the road. As a 
matter of a fact, if you were to walk out the backdoor of our 
college and walk to the North Pole, you would cross one tarred 
road, and that would be the Trans-Canadian Highway. So it is 
remote. It is rural.
    We also have had an opportunity, thanks to the Rural 
Renaissance Initiative of Senator Coleman--and thank you for 
your welcoming comments, Senator--to host two town meetings, 
one in Hibbing and one in International Falls where the Senator 
comes out and utilizes us in the way we see us as a community 
center.
    I am also privileged to serve in the elected position as 
Chair of the Rural Community College Alliance, a membership 
organization of over 100 rural community colleges, advocating 
for the 957 rural serving community college campuses across 
this country.
    The Arrowhead region of northeast Minnesota, including the 
Iron Range has relied on a natural resource-based economy for 
over 100 years. In the early 1980's, mining accounted for 50 
percent of the jobs and 60 percent of the income in northeast 
Minnesota. Today, mining represents 10 percent of both.
    Seven years ago, massive layoffs occurred. Higher education 
saw these developments as an opportunity to serve as a 
catalytic intermediary for the region which was ripe for 
change. At the same time, community colleges saw the need to 
pool their resources to save administrative costs. The 
Minnesota State Colleges and Universities Board of Trustees 
chose to create the Northeast Higher Education District 
effective October 1st, 1999. The mission is to provide quality 
higher education to the communities throughout northeast 
Minnesota by developing a regional structure that will preserve 
college autonomy, but will also align programs and services to 
better prepare residents for learning, employment, citizenship, 
and life.
    We quickly realized that new governance for rural northeast 
Minnesota must go well beyond the community college. By seeking 
new partnerships with the region's business and governments we 
created a new commitment to the future of the region.
    The Northeast Higher Education District was selected as one 
of 36 participants in the Ford Foundation-funded Rural 
Community College Initiative.
    The Blandin Foundation provided inter-community leadership 
development and startup financial resources to the Itasca 
Technology Exchange in Grand Rapids. The Northland Foundation 
was an initial investor to brand this regional initiative as 
True North. Iron Range Resources share a workforce development 
position with the District, because workforce has been 
identified as a major challenge in the region.
    These are examples of how a region must work together to 
survive in this global economy, based on local assets and 
strategic investments. Technology was used as a tool to create 
living wage jobs across the region. In addition to attracting 
Blue Cross Blue Shield to the region, new healthcare training 
programs have spurred new investments by healthcare providers. 
And a heavy emphasis on creating new information technology 
firms, the business community is plugging gaps in the region's 
support network for new businesses.
    This technology strategy was in direct response to 
outsourcing and offshoring Minnesota companies and others 
across our country were moving toward. Our goal was to create 
insourcing opportunities, proving our rural regions could 
compete.
    In northeast Minnesota, we referred to insourcing 
recruitment strategies as ``lakeshoring,'' which highlights the 
quality of life benefits available to workers seeking 
employment in information technology fields.
    Eight years later, our economic health has improved with 
new economic projects under development. Rural community 
colleges throughout the country are taking more proactive roles 
in developing their communities and regions, and most of these 
institutions are 2-year granting community colleges.
    A new international collaboration was formed in 2006 when 
representatives from the United States and Canada came together 
to identify common approaches to rural issues. My rural 
Community College Alliance colleagues are also members of the 
American Association of Community Colleges, and we work to 
coordinate our efforts together.
    Because community colleges give students the skills desired 
by local industry, they have become the educational institution 
of choice for many rural businesses. Rural communities must not 
be left behind. Community colleges are in a unique position as 
place-based institutions utilizing their capacity to serve and 
assist rural regions.
    Across rural America, innovation driven by entrepreneurial 
thinking must be encouraged and implemented. Now is the time 
for all regional leaders to play forceful roles in community 
development. Your rural community colleges are ready to step up 
and assist in this leadership challenge.
    Thank you again, Mr. Chairman, and members of the 
Committee, for this opportunity to testify today. I appreciate 
your continuing leadership, and look forward to answering your 
questions.
    [The prepared statement of Mr. Sertich can be found on page 
98 in the appendix.]
    Chairman Harkin. Thank you very much, Mr. Sertich.
    Thank you all for being here today. We will start a round 
of 5 minute questions. Five minute or 6 minute? Five minute. 
Whatever it says there, anyway.
    [Laughter.]
    Chairman Harkin. One of the common themes I hear coming 
from all your testimonies and your written statements is this 
idea that somehow we have got to get away from this, what I 
call, categorical or silo approach to rural development and the 
need for more framework that is regional in nature that will 
leverage existing funding of Federal, State, local, private, 
philanthropic.
    That all is very good. We have tried some regional 
approaches in the past. We have had regional councils of 
governments and things like that, and I am not certain it 
really worked very well. We have had some of these things in 
the past, since I have been on the Agriculture Committees, but 
nothing ever seemed to be the glue that held everything 
together.
    And so, as I go down the line, I just want to say, what one 
or two things come to your mind right away, that could we do 
differently than what we have done in the past that would 
foster this kind of regional approach?
    What programs need to change from how they do it right now? 
What do we need to do on the ground? Just give me one or two 
things that leap to your mind that--if you could write Farm 
Bill, what would you change to make that regional approach 
work?
    We will start with Chuck Fluharty.
    Mr. Fluharty. Mr. Chairman, I am just a farm boy from 
Appalachian Ohio, fifth generation on the farm. I love 
agriculture in my soul. I spent a lot of years in an 
agriculture association as an executive.
    Mr. Sertich's testimony is very instructive. In my area of 
eastern Ohio, we lost our mills, we lost our mines, and our 
small farms could not compete. We did not have the regional 
framework Mr. Sertich talked about, and our region lags 
horrible.
    Let me just share with you what we are competing with. The 
European Union, each year, spends a billion dollars on 
something called the LEADER Program, and that is a French 
acronym, but it essentially links agricultural commitments to 
regional strategies for shared investment.
    It is a billion a year, and working in OECD countries, Mr. 
Chairman, you can see in the dirt how that works. The private 
sector links to philanthropy and it links to sub-regional 
development.
    The key seems to me to be the shared investment strategy. 
And everyone here has talked about a model in which funding 
streams come together. I will say three things:
    As I shared in my testimony, our rural development programs 
are excellent, but they do not have a vision. We do not have a 
policy goal right now in rural development. We have great 
programs. They are successful. If our goal is regional support, 
we are going to have to change a bit how we fund programs, 
because we are going to have to incent regional leadership to 
do this. It is a new model. It is working in a lot of regions 
simply because the private sector did it. I would argue that we 
need to think systemically about how we do that across rural 
America.
    I think our Governors, I think our legislators, and most of 
our sectors are trying to do this. It is simply not been 
integrated, Mr. Chairman.
    Chairman Harkin. Well, again, we need some advice from all 
of you. You are the experts on what programs we need to change.
    Mr. Hassebrook.
    Mr. Hassebrook. Well, what I would say is put some money 
into--put some money into leadership development at the 
grassroots level, and engaging people in each small town in 
this process, because if you put together a regional plan, but 
the people involved in it are just agency folks and regional 
leaders, and you do not have leaders in each community that are 
invested in that and take it home and live it, that will not 
work.
    So that is the key to me is, how do you engage local people 
in the local small communities.
    Chairman Harkin. Mr. Kelley.
    Mr. Kelley. Thank you, Mr. Chairman.
    I partially disagree. I think it has worked in areas. I 
think it has worked in north Mississippi. And I think our 
Senator Cochran coming from the senior center would acknowledge 
that.
    But I think what has to happen is fund the program. Turn 
around and give some credit for partnership. Cannot do it by 
themselves, Pontotoc cannot compete with the work by 
themselves. They cannot put internet services throughout the 
region by themselves. Right now, there are no incentives toward 
working together. In fact, it is almost a disincentive, as well 
as the incentives, grant-wise, to carry out plans are in 
metropolitan U.S.A., now it rural America where most of the RDA 
programs are loan programs.
    My water and sewer systems are just totally depreciating 
[sic] in our small towns when all they can get is loans, where 
metropolitan areas get $3 billion a year in grants, CDBG, that 
they can prioritize and work within the existing system of EDA 
districts like myself that have proven over the years that they 
can build partnerships and work, and build the partnerships 
between local governments and community colleges.
    Chairman Harkin. Yes. I think we really need to take a look 
at what you have done down there. I am not familiar with it, 
but I think we really need to take a look at it.
    Ms. Holz-Clause.
    Ms. Holz-Clause. One very specific program that I think 
would be a relatively easy fix is that Rural Cooperative 
Development Center funding is only for 1 year at a time. And 
what this group does is, these Rural Cooperative Development 
Centers, help people, and they go after these on a competitive 
bid, but they help businesses develop business plans, marketing 
plans. As many of you know, you cannot develop a business in a 
year time period, and so just in that situation, just allowing 
them to be able to have at least a 2-year time period to expend 
their money for the Rural Cooperative Development Center would 
allow those centers to be around for at least 2 years, to stay 
with businesses, and help them develop. But that is a 
relatively simple thing and can make a big difference, because 
there will be staying power there.21Another one is, I guess, 
just providing funding for some things. For instance, the 
Northern Great Plains Economic Development Authority was 
authorized, but that never got any wings underneath it. And 
that would have allowed for a regional approach to economic 
development. So perhaps just being a little more aggressive 
about what is already in there and making sure that it is being 
enforced.
    Thank you.
    Chairman Harkin. My time has run out. Mr. Sertich, I will 
get you in my next round.
    Senator Chambliss is unable to attend. He has another 
Committee and would like to have his statement entered in the 
record, and that will be done without objection.
    [The prepared statement of Hon. Saxby Chambliss can be 
found on page 39 in the appendix.]
    Now, this is the order that I have: Senator Nelson, 
Salazar, Casey, Klobuchar, Thune, Lugar, Coleman, Lincoln, 
Cochran, Brown.
    Senator Nelson.
    Senator Nelson. Thank you Mr. Chairman.
    Mr. Hassebrook, as you mentioned, the Nebraska Micro-
enterprise Partnership Fund has worked well in Nebraska. What 
has been done to really connect it with goals and a vision as 
to what we want it to accomplish? How do we connect the program 
in Nebraska to a vision for rural Nebraska, and how has that 
worked to bring in grassroots acceptance and partnerships?
    Mr. Hassebrook. Well, I think the key has been that the 
Nebraska Micro-enterprise Partnership Fund has had an active 
board that included broad representation. It put together plans 
and priorities in terms of how they want to drive this out, and 
then made sure that they did a good job of funding programs 
that reach across the State.
    This program has been a success. For example, I mentioned 
that last year it served 4,000 businesses. Well, those 4,000 
businesses are responsible for keeping and, maintaining, and 
creating 7,500 jobs, and they were served at a cost of $330 a 
job. Now, to anybody doing economic development, $330 a job is 
a bargain.
    And so I think the key has been, again, the broad board 
that sets goals, sets strategies, and then keeps the focus on 
small entrepreneurship.
    Senator Nelson. I appreciate your pitching the bill which I 
am introducing today, which I hope some of my colleagues will 
take a close look at. Can you give us some idea of how that 
would work and how we have taken the experience in Nebraska to 
try and apply it to a broader base?
    Well, the bill that Senator Nelson is introducing is a bill 
that essentially works through intermediaries. It would fund 
programs that could be run by public institutions, they could 
be run by nonprofit corporations, what have you, around the 
country, who would then turn around and provide loans, 
training, and technical assistance to micro-businesses, 
businesses with fewer than five employees.
    And I cannot stress enough the training and technical 
assistance, because in our experience, when Central Affairs 
runs one of these programs, we make loans, but in fact the 
business planning that we help people do enables them to get 
twice the volume of loans from banks and other lenders than we 
actually lend. So it is really the training and technical 
assistance to these businesses that is most helpful.
    And the last thing that I think is really critical about 
this bill is that, if you just put the money out there for 
existing programs, there are some States in some areas of the 
country that do not have programs and would not be served. So 
one of the most important features of this bill is that it 
creates a program that would provide assistance that would help 
new programs get started in areas that are currently 
underserved, which I think is critical.
    Senator Nelson. And it is not overrun with staff, right?
    Mr. Hassebrook. In fact, there is very little staff. There 
is about one-and-a-half staff in the Micro-enterprise 
Partnership Fund in Nebraska.
    Senator Nelson. You might think we rehearsed this in 
advance, but we did not.
    [Laughter.]
    Senator Nelson. I just learned a long time ago that it is 
better to have somebody else qualify your expert witness.
    As you look forward to the future, what other kinds of 
programs, you mentioned one or two--what other kinds of 
programs would attach vision to what you are attempting to try 
to do? In other words, what kind of achievable goals can you 
set, and then measure success toward those goals, as we have in 
this program?
    Mr. Hassebrook. Well, are you talking about the program 
that you are proposing?
    Senator Nelson. Well, any other program that might--I think 
you mentioned about $500 million across the board.
    Mr. Hassebrook. I think the key is that we have to measure 
the number of opportunities that we are creating, and then we 
need to measure the quality of those opportunities.
    Again, for example, one way you measure is you look at how 
it has impacted people's lives. The program in Nebraska, the 
Micro-enterprise Partnership Fund, when we analyze the 
businesses that have participated, and their situation going 
into the program, and their situation 3 years later after 
participating, we found that their business assets had grown 
substantially, their personal assets had grown substantially, 
their incomes had grown substantially.
    And that is the kind of measure that you need to do. You 
need to look at how many jobs you are creating, whatever the 
program. I cannot stress enough self-employment as being one of 
the best forms of jobs. But then you have to look at how it 
impacts people's lives. Are their lives better as a result? And 
I think that is a key to measuring success, because we want to 
create quality opportunities that help people build assets and 
improve their lives.
    Senator Nelson. The goal is to get them in a position where 
they can go borrow money themselves through the commercial 
banking and lending arrangement to where they have made their 
own income, they have their own profitability as well as the 
quality of life combination; is that accurate?
    Mr. Hassebrook. Exactly, and, in fact, banks see this 
program in Nebraska as a great asset, because, first of all, 
the loans made through this program cannot be made to people 
who could get a loan from a bank, but what they do is they 
create a pipeline of customers by helping new businesses start. 
They create a pipeline of new customers for the banks.
    Senator Nelson. Thank you, Mr. Chairman.
    Thank you, Chuck.
    Chairman Harkin. Thank you, Senator Nelson.
    Senator Salazar.
    Senator Salazar. Thank you very much, Chairman Harkin.
    And thank you, for the witnesses, for your testimony here 
today.
    I have a comment and then a question to Chuck, and then to 
Ms. Holz-Clause. First let me just say that I think that, for 
all of us who sit on this Committee, this is a great 
opportunity for us to focus in on that part of America which is 
really, in many ways, a forgotten America.
    I would imagine that for the last 50 to maybe 100 years 
people who have sat on this Committee have taken a look at the 
Farm Bill as the opportunity to address those areas of our 
country which continue to struggle on the vine.
    I know in my own State of Colorado, even though the 1990's 
brought a big boom to our State, it was really confined mostly 
to about 12 of the 64 counties, which meant that the rest of 
the State was in decline, while overall, the State appeared to 
be doing very well. And I think with most of my colleagues here 
we have that kind of reality in the States that we live in.
    My question to you, Chuck, is, first of all, with respect 
to the disparity in funding that our government provides to 
metro areas versus rural America, you said that it is a $550 
disparity. To me, that is unconscionable. How is it that we can 
create support for our people in this country and then to have 
this disparity that you have described. My question to you is, 
how do we fix that? I would like you to be as specific as you 
can on that.
    Mr. Fluharty. Sure.
    Senator Salazar. And my question to you, Ms. Holz-Clause, 
has to do with Agriculture Value Added Programs. Obviously it 
was part of the 2002 Farm Bill. It is something that you 
described as working well in your community and your 
experience. We have been talking about Value Added Programs, 
and many places you might say for a very long time, and it 
seems like we have had some affect, but I think there is a lot 
more that we might be able to do.
    So my question to you is, how can we take what we have and 
improve upon it and make it more effective?
    Chuck, would you go first?
    Mr. Fluharty. Thank you. I am going to come back to 
systemic issues, because I think there is a solution. The most 
recent data is a $300 disadvantage, just for community and 
economic development, per capita. Just run it out times 90 
million rural Americans and you see the challenge.
    Part of that is the CDBG formula, in which MSAs get a place 
entitlement. There are a lot of maps in my testimony. Let me 
tell you why they are important.
    There are 40 million rural citizens in your MSAs. Those 
rural citizens are not eligible for your non-metropolitan 
grants for entrepreneurship. In CDBG moneys in those MSAs 
usually go to your urban and suburban areas. We have 40 million 
potential entrepreneurs trying to get ahead, who you do not 
target at all right now with CDGB, first thing.
    Second, the purpose of a systemic commitment would be for 
this Committee to finally say this disadvantage will get 
addressed, but it gets addressed to advantage the programs 
these panelists are mentioning.
    Senator Lugar is here. I will just give one great example. 
The State of Indiana, and it is to Chuck's point of how we 
integrate research with the various titles in the bill. The 
State of Indiana has engaged in a phenomenal enterprise, as 
Martin Jiske, the President of Perdue, created a Center for 
Regional and Rural Innovation, and a discovery park. The 
administration in Indiana created a Center for Rural Affairs. 
They took general revenue money and linked their small city 
CDBG which Governor Nelson did a phenomenal job of linking for 
regional collaboration when he was Governor of Nebraska.
    Fire trucks are very critical. First responders are very 
critical. But the bottom line is, if small city CDBG gets eaten 
up by an entity over time and we never get scale, we cannot 
build budgets. We cannot build long-term investment plans 
regionally. It is a structural failure right now in how this 
government invests long-term in the 90 million people in rural 
America that want to build a business. It is a structural 
failure.
    Senator Salazar. I would appreciate you working with us as 
we move forward on the Farm Bill to address that disparity.
    Mr. Fluharty. I appreciate that.
    Senator Salazar. Will you address the Value Added Programs?
    Ms. Holz-Clause. Thank you, Senator.
    Certainly, as I look at the Value Added Producer Grants 
that have gone to Colorado producers, I was going to say there 
have been some, but there have not been as much as other 
regions of the country. And I think it goes back to what we 
talked about at the very beginning, and that is that we have to 
create a culture of entrepreneurship. We need to be starting 
that discussion and we need to be having entrepreneurial 
education in our high schools so that we are creating a long-
term attitude among our producers, among our farmers, through 
our FFA programs, through 4H, to encourage that 
entrepreneurship.
    And then from there, too, is having a greater 
infrastructure in place. For instance, your cooperative 
development center in Colorado is the Rocky Mountain Farmers' 
Union Center. Again, I told you, thy are just going year-to-
year with funding. And so what we need to do is have a more 
systemic service providers there through the extension service 
and so forth that are funded that can help producers to really 
imagine what the possibilities can be. And so I think we--what 
I was going to say is that we have to develop a lot stronger 
infrastructure than we have in place: stronger SBDCs, Small 
Business Development Centers, stronger EDA Centers.
    And again, part of that is education and full funding of a 
lot of those programs that are probably in existence now.
    Thank you.
    Senator Salazar. Thank you, Mary. My time is up.
    Chairman Harkin. Senator Casey.
    Senator Casey. Mr. Chairman, thank you very much for 
putting this panel together and for this hearing. I want to 
thank those who have testified already for your insight and for 
the real world experience that you bring to these issues as we 
do our work on the reauthorization for the Farm Bill.
    I have a couple of questions. I did want to put, and I will 
submit it for the record, but as a highlight, of some of the 
recommendations that were made by the Pennsylvania Department 
of Agriculture. We all have to bring our States into these 
hearings. And I just wanted to highlight a couple of the 
recommendations that the leadership of our State has provided.
    One of the recommendations, and I ask the panel members to 
react to this in addition to the question I am going to ask, 
one of the recommendations was a single definition of ``Rural 
community,'' that can be applied to all rural development 
programs.
    The second one is creating a new rural tourism development 
subtitle.
    Third, and I know other States may have these priorities as 
well, funding projects in non-rural areas if the primary 
beneficiaries of the projects are rural citizens.
    So they are among recommendations that come from my State, 
and I would ask you to respond to that. And then the second, 
the basic question I have though--well, maybe two, if I have 
time--revolves around access to capital, and I know that has 
come up in different ways, generally, but in particular, if you 
could speak to the question of access to capital in the context 
of health care, because one of the problems we have had in 
Pennsylvania is, other than Philadelphia, and Pittsburgh, and 
some of our major urban areas, and their being the two, we have 
a State of a lot of rural communities and a lot of small towns. 
For them to go to the marked and borrow money for a new MRI 
machine, or some kind of new technology, or some kind of 
expansion of their hospitals it gets very difficult. I also 
want to talk about cuts, but we will get to that in a moment.
    But if you could respond generally to those 
recommendations, and then second to the question of access to 
capital either generally or specifically in the context of 
healthcare. I will open it up to anyone that wants to jump in, 
any and all.
    Mr. Hassebrook. Well, I would jump in on the question of 
tourism. I think there are great opportunities in tourism in 
many places rural America, in part, in the 21st Century, access 
to uncrowded, natural space is going to be a premium. And I 
think that one of the things that we need to think about in 
this Farm Bill is, as we design our conservation programs, to 
design them in ways that get multiple benefits, including rural 
development benefits.
    So for example, we are talking about a cooperative 
conservation partnership initiative that would provide the 
opportunity for communities to partner with USDA. So for 
example, if they want to use natural space as an asset to draw 
more tourists and support more businesses in their community, 
that would be considered by USDA, and there might be some 
additional incentives for landowners to participate and some 
additional cost-share funds for communities to put that 
together. I think that is a way that we could get more bang for 
the buck, by designing conservation programs to serve multiple 
ends.
    Senator Casey. Thank you.
    Mr. Fluharty. Senator, just quickly, I caution the 
Committee. There are 68 different rural definitions right now 
in Federal statute. They are there because, in different 
sectors, unique needs need addressed. One of the challenges I 
see is, if we build rural regional from this Committee, we will 
fail. It needs to go into the dirt and be rational.
    There are different rural regions. As I said, rural America 
does not exist. There are very, very diverse rural Americas. 
What is going to work in South Dakota is not going to work in 
Pennsylvania.
    Second, in terms of capital, it is essential that we get 
linked funding flows. Under Secretary Dorr makes a phenomenal 
point, 90 percent of rural America's lands have equity at that 
level.
    Now the question is, how do we move those to common 
investment strategies that makes sense for those people in the 
dirt. It can be a patient capital fund. The challenge is, when 
you look at new markets, the banks have not been able to get 
that money on the street as well as the VC and entrepreneurship 
firms have. We need flexible markets to allow regions to 
express in everything from local food systems to heritage in 
the arts, the way to go do that.
    There is capital out there. We are not pulling it out. And, 
in that regard, what community and regional foundations are, in 
terms of match for seed capital development, is a phenomenal 
opportunity, to Senator Harkin's case that philanthropy can 
cede a great deal of this in regional models to start it.
    Senator Casey. Thank you.
    Anyone else on those?
    And the last question--oh, I am out of time. We will talk 
about cuts another time, Mr. Chairman, but I am sure that will 
go longer than 15-16 seconds, maybe.
    [Laughter.]
    Chairman Harkin. Thank you.
    Senator Thune.
    Senator Thune. Thank you, Mr. Chairman. I appreciate you 
holding this hearing. Thank you, panel, for your excellent 
testimony and insights.
    This is an issue which I am extremely interested in. And if 
you look at what has happened in the last several decades, in 
the middle of the 20th Century, nearly 40 percent of the rural 
population lived on farms, and about a third of the rural 
workforce was laboring in production agriculture.
    Currently, we have fewer than 10 percent of rural people 
living on farms, and only about 6.5 percent of the rural 
workforce is directly employed in farm production, which means 
we have a lot of people in rural areas no longer living on 
farms or deriving their livelihood from farms, although I would 
argue they all do indirectly.
    And what we are facing in my State and a lot of other 
States is just chronic out-migration of young people. We are 
just losing them, and that is our greatest resource.
    And what is left behind is 340 of our Nation's 386 
persistent poverty counties are in rural America. So we have 
got some very difficult economic conditions in that part of 
that country. And I believe be that part of the focus of the 
Farm Bill ought to be, how do we revive and bring rural America 
back to vitality? In addition to the things we do with the 
commodity title of the Farm Bill and things that directly 
impact agricultural production.
    But I have a couple of questions that I would like to pose 
in that regard. One has to do--the Value Added Producer Grants 
Program was something that--that was an amendment I offered to 
the House version of the Farm Bill in 2002. It seems to me, at 
least, that there have been some good projects that have been 
funded under that, but I guess the question that I have, and 
perhaps Ms. Holz-Clause can answer this, is are there, other 
than the issue of funding, which is obviously an issue that we 
have to address--are there statutory changes that can be made 
to that program that would make it more effective?
    Ms. Holz-Clause. Again, I would go back to--one of the 
statutory is to look at having a longer time period for that 
money available for the producer recipients. Oftentimes, that 
has a year to a 2-year time limit on that. As you know, 
business development oftentimes takes longer than that. And so 
we are not able to maybe see and quantify the types of results 
that are there, because the producers are required to use that 
money within a short time period. And so I think that could 
allow for more judicious use of that funding.
    Another area is perhaps putting, when people are recipients 
of that, requiring some types of education, perhaps board 
education, so that all the board members understand their 
fiduciary responsibilities.
    Again, there have been some magnificent results from that 
program. There have also been some that are not as successful. 
So what can we do to help educate those individuals who are in 
that business? And again, part of it, too, is, I think if we 
look longer term now we have seen more successes recently. When 
the program was young, I think both producers did not 
understand, perhaps, the program, and some of the value added 
businesses maybe were not ready for applying for the money when 
they did.
    And so now that the program has been in existence, 
producers look at that and say, well, our business is not quite 
ready for it this year. We will wait until next year. Which 
then enhances and increases the success that they will use that 
money judiciously and wisely, and also better market 
development.
    So those are a few suggestions I would have specific to 
that program. Thank you.
    Mr. Hassebrook. I would place a priority on projects that 
strengthen small and mid-sized farms. Perhaps set aside a small 
percentage, 10 or 15 percent, for projects that address the 
needs of beginning farmers, minority farmers. Put a small 
amount of money toward outreach and assistance, because 
oftentimes small groups of producers who are not trained to 
write grants have a hard time getting access to the program.
    And one last thought on that, maybe a modification allowing 
up 5 or 10 percent of the funds to be used for innovative 
projects that strengthen family farms, but are not technically 
value added.
    For example, there are groups of farmers in Iowa trying to 
put together machinery cooperatives, because by owning 
equipment together, mid-sized farms can get their machinery 
costs down to levels of big farms. They need some help to do 
that, though. It takes some legal help in different things. And 
if we could use just a little bit of this money for say, any 
innovative idea out there to strengthen family farms, whether 
it is technically value added or not, that would be good.
    Senator Thune. Eighty-eight programs and 16 agencies that 
target rural economic development--it has already kind of been 
mentioned--in this Farm Bill, is there a way, and I know there 
are jurisdictions that run the gamut of this when it comes, but 
it just seems like, if you are somebody who wants to access 
some of this assistance, you would not even know where to 
start, really.
    Is there a way that we can bring some efficiency and 
structure in a place where people could do one-stop shopping, 
for lack of a better phrase?
    Ms. Holz-Clause. That is an excellent idea, and actually, 
in the Agricultural Marketing Resource Center, we have started 
to do that, because as we work with farmers we discovered that. 
So at least that is something that is in process right now.
    But you have definitely outlined, kind of, the frustration 
that farmers' have as they are looking for those opportunities.
    Mr. Fluharty. Senator, let me say that it is not just 
farmers. Under Secretary Dorr and the Administration have moved 
in a significant way by rationalizing the grant formulas.
    But we are working very closely now in Mississippi and 
Alabama with Governor Riley and Governor Barbour in their 
Department of Labor wired labor project with the community 
colleges of Mississippi and Alabama. That wired project builds 
regional dynamics. Commerce and EDA builds regional dynamics. 
Rural education builds community college dynamics. We have not 
figured out a way to link those flows in a logical cross sector 
way.
    The reason is rural development does not have a 
congressional mandate to be clearer about advantaging in a 
regional framework. Their programs are in stove pipes. This 
Congress could mandate some of that, and I would argue that it 
should go to other departments, because the people in the 
ground do not care. They just need to link up and do good 
things.
    Senator Thune. Thank you, Mr. Chairman.
    Chairman Harkin. Thank you, Senator Thune.
    Senator Lugar.
    Senator Lugar. Thank you very much, Mr. Chairman.
    Many journalists are beginning to discover the energy 
transformation in rural America, but it is very difficult for 
some of us around this table to discover this data.
    And I appreciate so much your idea about reasonable 
organizational, or even State-wide programs, but I just wanted 
to ask, out of curiosity, for any of you who have sources of 
information or reports that have been written that would help 
frame these issues.
    For example, ethanol is being produced at least in 15 
States from corn, biodiesel in many of the same States. 
However, the promise of cellulosic ethanol, as the President 
mentioned it, could be a 50-State situation. And in due course, 
and in arguments about how many years and how fast the 
research, still the possibility of all sorts of things coming 
from farms into energy is likely.
    Now, in addition to that, some have integrated the process. 
Fair Oaks Dairy, in Indiana, for example, 17,000 cows, need a 
lot of farm land for the feed to begin with. They produce a lot 
of manure, and from this comes methane, so they heat, not only 
their own situation, but prepare it to send back to the 
electrical grid system, and trade, at least, electricity power, 
and that probably is not the end of it. It is sort of the 
beginning of the thought of how many different things can occur 
on the farm if there is sufficient capital. But likewise, a 
grid system, some place for the milk to go, the integration of 
all this is tremendously important.
    On the same farm, why, they are putting up some windmills. 
The beginning, once again, of something in which not all States 
have the air current or volume to do this, but many do.
    Finally, let me just ask, is there any research on what 
this may mean to a single county or region? For example, 
clearly, money is coming in to county seats that have not seen 
very much. Are the bank deposits being left there, or in fact 
are they going somewhere else? In other words, is there likely 
to be a base of local capital coming from these situations as 
there is likely to be--some integration in terms of school 
finance or hospital finance, if wealth comes from new energy 
resources.
    I say this as somebody who is trying to probe in my own 
State, to sort of trace where the flow goes. It is all so new, 
and it is very different. Some accounts say, after all, not 
many jobs are created by an ethanol plant, maybe 35, 40, 50. So 
not a huge amount. And yet a lot of money is involved, some to 
corn farmers, for example. But I am curious whether any of your 
institutes are tracing this giving us some idea of what the 
potential is quite apart from the actual, which is quite 
dramatic, because it informs a lot of issues, it seems to me, 
in terms of the political realities of what we are talking 
about today.
    In other words, this is a discovery, on the part of most of 
America of rural America, of new wealth, new prospects, new 
reasons why people stay, why they prosper. Until then, this is 
a subject around this table, and about ended there--plus our 
witness, but now it is more interesting.
    Can any of you inform me of where I can find out more 
information that you have produced?
    Ms. Holz-Clause. Senator Lugar, you certainly have kind of 
got my passion here. And outlined, as you talk about, farms of 
the future, to be holistic so they are integrated systems and 
that we are using all of these aspects.
    Through our Center for Agriculture and Rural Development at 
Iowa State University we are tracking just exactly what you are 
talking about. I do not have those figures in front of me, but 
we will certainly get those to your staffers.
    As you said, those 35 jobs of ethanol production then 
reverberate with a multiplier probably about 110 other jobs. 
And we are also tracking the difference between the farmer-
produced ethanol plants, which use indigenous investment versus 
outside investment, and the impact that is having on demand. I 
am sorry I do not have that for you but I will get that for 
you. I believe, also, they are working very closely with their 
colleagues at Perdue on that project.
    So thanks for asking it. It is really a vision that we have 
to have, looking at that from a holistic perspective. I will 
challenge all of you, as you are looking through the new Farm 
Bill, though, to also think about the impact that this new bio-
economy is going to have on the infrastructure: the roads, the 
railroads, and those types of things, which are going to be so 
crucial for our changing bio-economy.
    Senator Lugar. Yes.
    Mr. Hassebrook. Senator, I do not have the data, but I 
would make a couple of notes that are very relevant to the 
issue that you raised.
    One is that, one of the good things about ethanol plants is 
the quality of jobs. When we looked at them in Nebraska, the 
bottom paying job tended to be about $13 an hour, which is a 
pretty good job in rural Nebraska, and that is a positive.
    On the issue of ownership--wealth creation does tend to 
follow ownership. When Congress helped get the ethanol industry 
started, it provided tax incentives for all producers. With oil 
prices much higher now and profit margins much better, I think 
it may be time to consider whether those incentives ought to be 
targeted to projects that are locally owned and keep wealth in 
the community, as well as projects that are producing feedstock 
in a manner that is environmentally responsible.
    Mr. Fluharty. Senator, we were doing economic impact 
analysis 10 years ago with your office on ethanol. At that 
time, it was six to eight jobs. At the scale now, it is 25 to 
30. But the reality is, what do we do with innovation to build 
that into a regional asset base?
    Wind energy is going to be in some places, cellulosic 
ethanol in another. The true, deep question is, how do local 
leaders, when an LLC is brought to them, know whether or not 
that is a wise regional investment? That is where our Research 
Title and Land Grant universities have to come in, with public 
goods.
    These are going to be regional and cross-sectoral 
challenges, and the asset dynamics will be different in ever 
region. That is why a systemic commitment to regional 
entrepreneurship seems to me to be critical and can link to our 
research universities.
    I do not believe the answers to those questions are there 
for local governments, regional governments, and State leaders, 
and they are all asking this. We just came away from NCSL's 
Agriculture Committee Chair's meeting. Every Ag chair in every 
State in local legislatures is saying, where are we with this? 
It is a huge challenge and the answers are not there yet, but 
it is a unique opportunity. It will be a regional opportunity, 
I would argue.
    Senator Casey. Thank you, Mr. Chairman.
    Chairman Harkin. Very probing. Thank you, Senator Lugar.
    Senator Lincoln.
    Senator Lincoln. Thank you, Mr. Chairman. I certainly 
appreciate your dedication to this issue. And I want to say to 
our panel, thank you so much, not just for the information you 
bring to the Committee, but more important, your passion.
    I am a product of rural America and very passionate about 
it. Mr. Kelley, my great-grandfather was actually a deputy 
sheriff in Yazoo City and his name was Kelley.
    But I think for so many of us that have grown up in Rural 
America we realize the positive aspects for the future of this 
country, and what it means to reinforce rural America. I know, 
just in raising my children, I have recognized so much of what 
I have gained growing up in a small community, and now trying 
to recreate that in different environments is enormously 
difficult. And so it is important that we sustain them in a way 
that we can keep them going.
    Just a couple of comments, and hopefully you will add more. 
I know a lot of what I wanted to talk about and ask about you 
have touched on a good bit. And I know, Mr. Fluharty, and 
certainly anybody else, CRS indicates that there are more than 
88 programs that are administered by 16 Federal agencies that 
target rural economic development.
    You mentioned the multiple different definitions of Rural 
America and how different regions definitely have their 
differences. And I guess some often argue that we focus too 
much here in Congress trying, and sometimes failing, 
unfortunately, to fund smaller, targeted programs, when perhaps 
we should consolidated, dedicate a larger share of those 
Federal dollars in a more streamlined and flexible set of 
resources.
    Of course, we talk about CBDG. That is the most flexible 
money out there, quite frankly. And we fight every year in 
Congress to reinstate those dollars and to make sure they are 
there and reinforce how important they are because of that 
flexibility.
    Just a little bit more on, and you have already touched a 
good bit, but the patchwork of programs as an obstacle to 
establishing consistent funding streams for regional rural 
development, or is it just that they are underfunded? And 
incentives for regional approaches, are they more important?
    I know we have created several commissions. The Delta 
Regional Authority, which I am so grateful to Senator Cochran 
for his hard work and consistent dedication to that over the 
years, because it would not have happened if I had not have 
hung in there and said this is something that is really 
necessary and needs to happen. But maybe you will touch on 
that, if you do not mind.
    But then the Value Added Producer Grant Program, we are 
very grateful to you all for expanding on that, Ms. Holz-
Clause. How we build on an already successful program. I hope 
that we can certainly talk about that. And I would just go back 
to another thing that you had talked about, and that is, the 
rural areas have so few--really, no research staff. Mr. 
Fluharty, you have touched on that a lot, grant writers.
    We have had to, in our Congressional Office, actually set 
up a special projects team that is devoted to helping our rural 
communities look at where they go for different things and 
actually provide them assistance. We are not allowed to write 
the grants for them, but send them in the directions where they 
can go to find that assistance, and it is difficult.
    I know also, from my State office, what they tell me is 
that incomplete applications are really some of the biggest 
reasons why we have not been as successful as we should be with 
the Value Added Producer Grant Program.
    So you might touch on whether or not we should be devoting 
more resource to the Agricultural Marketing Resource Centers, 
which have been under-utilized, underfunded, unfortunately, and 
allow them to provide more virtual technical assistance, or do 
we look toward local universities and nonprofits to provide 
technical assistance? Is that a more thorough way of developing 
that kind of assistance that our rural communities need, or do 
we do both? Much of that we have already talked about, but 
hopefully there is some more we can expand on.
    Mr. Sertich. Mr. Chairman, Senator Lincoln, I would like 
not to answer specifically each of your questions, but to talk 
about the flexibility and the streamlining that is so 
important.
    And you have 957 rural-serving community colleges across 
this country who are already actively engaged in economic 
development initiatives. When I talk with my colleagues, 
college presidents, around my State and around the country, our 
jobs in rural communities and at rural colleges is very 
different than those in the metropolitan areas.
    And so I think it would be helpful if we are looking at a 
rural strategic investment program that we position those 
institutions, not as yet another layer, but a place where we 
can do the convening, provide the technical assistance, do the 
research, write the grants, and most important, be responsible 
for the planning that needs to happen as regions self-define.
    Senator Lincoln. We have a great consortium of community 
colleges come together, six of them, that have been very 
effective in the grants they have received from the Department 
of Labor because they have worked collaboratively.
    Ms. Holz-Clause. Another area, Senator Lincoln, which you 
have touched upon, but which we could use a lot greater 
resource, would be the land grant systems. Almost every county 
has a county extension office. And again, I am going to support 
and encourage you to provide more funding to that, because 
those are resources that are already in existent--generally 
trained people very well. But not every county is able to be 
staffed at the level they need to provide that.
    So they could assist folks with the development of Value 
Added Producer Grants. So naturally I am going to suggest that 
you provide more funding to the Agricultural Marketing Resource 
Center, but also to look at providing, as I said, perhaps more 
assistance through the small business development centers, 
oftentimes, can help businesses with that, too.
    So out of rural America, as you know, it has just been 
underfunding of the types of infrastructure and resources that 
we need that can help producers----
    Senator Lincoln. You do not think those two are redundant. 
You think they both need----
    Ms. Holz-Clause. They actually can compliment each other. I 
was going to say, in our counties, those groups work together 
very well, because, again, they both have resources that they 
are able to bring to that.
    Mr. Kelley. Senator Lincoln, I will claim kin to you, by 
the way. With honor, I might add.
    I think when you look at the name, the Rural Development 
Administration, you have got to understand that rural 
development in rural America is a long-term process. It is not 
short-term. It is not quick fix. When we thought that things 
did not work maybe in the old 111, Senator Cochran knows that 
we have been working Well Springs 6 years, 6 years on that 
partnership.
    It takes time, and it takes continuing solid funding to 
build these partnerships to hit that success. It also takes 
financial assistance. As rural America's strong program, CDBG, 
is great, but it is a hit-and-miss program where you can go 
after some money this year and you may get it and you may not, 
because you have to get 51 percent below the mod or you cannot 
address it.
    We have no way in rural America to address long-term 
infrastructure needs. And business and industry expect local 
governments, through their partnership with their Federal 
partners in Washington, DC to provide the necessary 
infrastructure for economic development in rural America.
    Senator Lincoln. I cannot thank you enough for accentuating 
patience in this and the time that it takes to get there.
    Thank you, Mr. Chairman.
    Chairman Harkin. Thank you, Senator.
    Senator Cochran.
    Senator Cochran. Thank you very much, Mr. Chairman.
    I am glad to be here today to welcome my good friend, Randy 
Kelley, as a witness to our Committee.
    I was just thinking back in time, the Rural Development act 
was enacted back in 1970 or 1971. It was right about then 
because I was drafting a statement for my candidacy for 1972, 
and I was trying to think up things to say to show my potential 
constituents what my priorities would be if I were elected to 
Congress.
    And one of the statements I included in that announcement 
was that I would work for the full funding of the Rural 
Development Act. Now, I did not know what that meant, in terms 
of
    [Laughter.]
    Senator Cochran. In terms of dollars and sense. I was aware 
of what the Rural Development Act was. It authorized the 
Federal Government for the first time in many areas of 
infrastructure development to take a more active and direct 
role. It had been up to State and local governments prior to 
that, basically, to provide water and sewer systems, and 
infrastructure enhancements that Mr. Kelley addressed.
    And we have made a lot of progress over the years, not just 
because I got elected in 1972. But then all of a sudden I wake 
up 1 day, Mr. Chairman, and you and I are sitting on the 
Appropriations Committee, and we have been active in the 
Subcommittee on Agriculture Department Appropriations, chairing 
in some cases, being ranking in some cases, and we have seen a 
lot of really. But I would invite the attention of the 
Committee to Randy Kelley's statement.
    I had forgotten his name was Vernon. I was thinking, well, 
I know Randy Kelley, but I do not know about Vernon Kelley.
    [Laughter.]
    Senator Cochran. But he has had a lot of experience in 
rural planning and development. He has been involved in Three 
Rivers planning and development district a long time. It was 
incorporated in 1971. His statement refreshes my memory.
    So contemporaneously with the Rural Development Act, we had 
local district-wide organizations being organized to try to 
help ensure that our priorities were identified and the Federal 
funds, when they did become available, were channeled to the 
most productive uses. And I think this is a testimony to the 
success of those programs. We have got to continue to make them 
better and find ways to enhance them, but I think getting back 
to the basics is also important. And that means we should fully 
fund the Rural Development Act and make sure that we provide 
the resources, and that is basically what goes through all 
these statements.
    We have good organizations. Talented people are involved, 
and we need to be sure they have the resources and can share 
those in the communities where the needs are the greatest.
    We have some great success stories in the Tupelo region of 
Mississippi, and we are going to have some more as time goes 
on. And it is because of hard work by people like Randy Kelley. 
So I am glad to be here today and welcome him and thank him for 
his contribution to the hearing.
    And I guess my question is, what else can we do, after the 
appropriations process--and I think what we can do show some 
restraint and let there be more flexibility at the local level. 
Would you agree with that? Is that something we should strive 
for and not tie the hands with too many regulations and 
restrictions so that we are not trying to fit round pegs in 
square holes?
    Mr. Kelley. Senator, we would like to thank you for your 
service for over 30 years, not only to the State of 
Mississippi, but to rural America, in general. It has been 
quite an honor and a privilege, and you have done an 
outstanding job since 1971.
    We agree. One of the first things is, just find it. You all 
have had some of the right ideas, and a lot of them, not just a 
few. You have been on the right track, but you have had 
difficulty funding them and, as a result, rural America has had 
to bear the burden of the cost in loans.
    In loans, it is people in Pontotoc County, Arkansas, and in 
Forest City, Arkansas, and in South Dakota, and Iowa, that 
these small infrastructure projects that they need, they do not 
have the tax base. It is more costly to provide infrastructure 
in rural America. Three Rivers operates an internet system, the 
only wholesale DSL BellSouth distributor in the State other 
than BellSouth. We did that because our local governments did 
not have high speed interned.
    Do you know that we cannot do that in north Mississippi 
more than three miles from the central office? In Boone you 
have dial-up. Three miles.
    Infrastructure is costly in the long-term, and rural 
America needs the continued support that your great leadership 
has provided, but they need some assistance in full funding, 
and recognize that it is not fair for metropolitan areas to get 
grants and us to always have loans. Thank you.
    Mr. Fluharty. Mr. Chairman, if I could follow and thank you 
for your service, and also thank Randy, and raise the 
structural issue Senator Lincoln raised.
    Because of HUD, urban regions have huge abilities with very 
flexible funds to have significant capital to let local people 
make decisions about asset-based development. We do not have 
that in Rural America. If we did that, everything else would 
follow.
    Senator Cochran. Mr. Chairman, I know my time is expired, 
and you have
    Chairman Harkin. You have been waiting a long time, so go 
ahead.
    Senator Cochran. I have built up equity over time.
    [Laughter.]
    Senator Cochran. Well, I think we ought to take to heart 
what we just heard and look for specific language that we could 
use in improving the requirements and the demands that are made 
by the Rural Development Act on local administrative agencies 
like those represented here by this panel.
    And I appreciate Mr. Fluharty's comments, and Randy's, and 
I have learned a great bit from this panel. This is an 
excellent panel, Mr. Chairman. Thank you very much for coming 
and organizing this hearing.
    Chairman Harkin. Great panel. It is wonderful to hear all 
these ideas and listen to Senators talk. I had forgotten about 
that Rural Development Act, and that came about that time. I 
just asked my staff, I said, how far underfunded are we? And 
they said, a lot.
    [Laughter.]
    Chairman Harkin. I am trying to get a handle on that.
    I turn to Senator Grassley, my colleague from Iowa.
    Senator Grassley. Thank you, Mr. Chairman. And you have, 
obviously, as just said, a very good panel, and you have good 
people I have worked with for a long period of time, Ms. Holz-
Clause and Mr. Hassebrook. Maybe some of the rest of you I have 
worked with, but I remember them better, obviously, because she 
is from Iowa, and he is from just a little bit outside of Iowa.
    First of all, I was going to bring up something that has 
been brought up by several members. So I am going to bring up 
the Value Added Program, but this is a program that I worked on 
in the 2000 Crop Insurance Bill, and then working with Senator 
Harkin, he and I worked to reauthorize that program and expand 
it. And now the Administration has cut that back, and I was 
going to ask, and you have already commented on it, but I 
wanted to bring up the impact of that program, and more 
importantly, the impact of the changes to the President's 
budget in it. Although I suppose that presidents before have 
suggested not spending as much money as we wanted to spend, but 
obviously it is going to harm the program. And I think since 
you have spoken to that I will move on to another question that 
I was going to ask about the payment limitations in the 
President's proposals or any proposals. And I have been working 
with Mr. Hassebrook on this for years, and will be working 
again this year on that issue.
    For instance, what about if you just take the President's 
approach of anybody with adjusted income over $200,000? Any of 
you that would like to comment on whether proposal would help, 
hurt, or have no impact on rural communities by cutting off 
payments to those above the AGI $200,000?
    Mr. Hassebrook. Well, I think the most effective approach 
is to do what you, Senator Grassley, proposed, and that is 
simply tightening the existing payment limitation rules.
    You and I first got to know each other way back in the 
1980's, working on Federal tax reform when we were dealing with 
tax sheltering opportunities and the damage that did to 
agriculture. The problem with the $200,000 AGI test is that it 
creates a powerful incentive for people to, basically, expand 
their operations so that they get more depreciation, more 
deductions, more interest write-offs, what have you, to keep 
their income down below $200,000.
    So putting that $200,000 income limit in the Farm Bill 
would actually have, I think, the unintended consequence of 
providing an even greater stimulus for very big farms to grow, 
in the event their income is above $200,000----
    Senator Grassley. So it would have the opposite effect of 
what we were hoping to do of not paying big farmers to get 
bigger?
    Mr. Hassebrook. Exactly, because they will have to get 
bigger to keep their income down for tax purposes.
    Senator Grassley. So you say that it would be negative, 
that approach. What about any payment limitation? Negative, 
positive, or neutral as far as rural development is concerned?
    Mr. Hassebrook. I think it is very positive for three 
reasons. One is that keeping farms out there is a part of rural 
development, and until we have a payment limitation, the farm 
programs do at least as much to help big farms bid land away 
from beginning farmers and smaller farmers as they do to keep 
them out there.
    And the second is, as long as we spend money on hundreds of 
thousands of dollars of payments subsidizing big farms to drive 
their neighbors out of business, we are not going to have the 
money to invest in our future in rural development.
    Senator Grassley. I would invite anybody else to comment.
    Ms. Holz-Clause. Mr. Hassebrook made a very good point that 
we have to create an opportunity for beginning farmers. And I 
think there have been some State programs that have attempted 
to do that, but there has not been, that I am aware of, a large 
Federal initiative that creates that environment.
    Part of that too is allowing the opportunity, myself, as a 
family farm, how do we transition this to the next generation? 
Quite frankly, we do not know how to do that yet, because there 
are so many tax disincentives for that to occur for us, too. I 
am not a creative tax person, so I do not know how to do that, 
but we have to create opportunities for beginning farmers, for 
young farmers, for transitions of family farms. So that is a 
huge challenge for you and a huge opportunity, because if we do 
not, quite honestly, what if the average age of the American 
farmer--age 57, already. When I started quoted that statistic 
30 years ago, it was 46.
    So we have to be much more creative and innovative for 
beginning farmers and creating new opportunities for farmers. 
Quite honestly, a lot of these payment limitations has done 
just exactly what you have said. It has allowed the larger the 
farmer--and kept the young farmers from trying to get back into 
farming.
    Mr. Fluharty. Just quickly, Senator, as a farmer, and a 
rural development policy soul, I believe the critical issue is 
to ensure we recognize that for all of our farmers, about 90 
percent of their family household income, comes off of the 
farm. In the largest two categories of farms, that number is 28 
percent.
    The reality is, this Committee must retain the link between 
rural development and agriculture, whether it is in 
distribution or renewable energies, or it is landscape and 
local food systems. Mr. Chairman, I would argue this is the 
chance to fully fund what we started in 1970 and recognize its 
criticality to agriculture.
    Globally, when we work with OECD nations, every nation is 
linking agriculture now to rural development. And I would just 
urge this Committee to take up that charge and not cede that 
rural development future to any other Committee of this 
Congress.
    I think this issue is a challenge. The deeper issue is 
ensuring sufficient funding to keep those rural economies 
strong, because they are central to our farmer's future with 
their families.
    Senator Grassley. Thank you, Mr. Chairman.
    Senator Cochran. [Presiding.] Thank you, Senator Grassley.
    Senator Lincoln, if you have any other questions, you have 
the floor, if you would like it.
    Senator Lincoln. Great. I would just like to, quickly--when 
you talk about the proposal that is out, particularly on 
payment limitation, the AGI of $200,000 there does incorporate 
both farm income and non-farm income, so you present a problem 
in terms of, I think, there, making sure that you are keeping 
the resources in rural America that need to stay there, because 
if you are going to limit the amount that agriculture producers 
can access in terms of safety net programs by incorporating in 
that number that non-farm income, I think you present a real 
problem of creating or undoing the foundation that is necessary 
in rural America. So I would certainly say that is an issue for 
me, without a doubt.
    The other is the regional aspect, and we have talked an 
awful lot about regional aspects. For us, those issues are very 
different. Many of our young farmers are large farmers because 
they have to be. I know that my contemporaries, the few that 
are left in farming, have to farm at an economy of scale that 
allows them to be productive as well as competitive in the 
global marketplace. And that means a larger farm, and 
therefore, with the capital investment that they have to make, 
a much more costly farm in many instances.
    I think those are important things to add to that 
discussion, and I will continue to add them, but there are 
definitely compromises that can be made and ways that we can 
use those tools to enhance rural development. And to, again, 
encourage small farmers. I am not against that at all, that is 
for sure. I just want to make sure they can be competitive, 
because, for what we grow, it is very difficult.
    The last thing I just wanted to add was a question. When we 
talked about the Value Added Producer Grant Program, it is 
huge, and it is very important, and I think it is a great tool. 
We have watched how we have been able to bring together some of 
our smaller minority farmers in a cooperative to be able to 
access different types of marketplaces, particularly in terms 
of food processing and moving in that next step, and adding the 
value added--keeping some of those facilities in our country. 
And also providing them U.S. produce as opposed to the imports 
that they have been bringing in to use in that processing.
    It has been difficult. We have had to provide the one-stop 
shopping in our congressional office to see all the different 
places where these minority farmers and small farmers can 
access those programs. But in thinking about that, and looking 
at how much more I would hope the Agricultural Marketing 
Resource Center could do, do you think it would be more helpful 
for each State to get a value added allocation, since there is 
so much competition in that sense?
    And again, I know I am a huge, huge, supporter of our 
county extension service. I keep telling my colleagues that, 
for after school programs, there are some tremendous that 
already exist if we just fund them, 4-H comes to mind. But 
nonetheless, should we look at an allocation per State, in 
terms of that? Would that be helpful, do you think?
    Mr. Hassebrook. I do not like that approach very well, 
because I have seen some programs that get allocated by State. 
As long as--they just have to sign the dotted line to get the 
money. They oftentimes do not really use it for--they use it 
closely enough to the intended purpose to get by and that is 
about it.
    Maybe a better solution, the one that we proposed, is that 
up to five or 10 percent of the money be allocated to grants 
particularly targeting low participation States and areas that 
have not had a lot of participants. That would be specifically 
used to do outreach on the program and to help producers put 
together proposals. So that, in every State, particularly those 
States where you have not had high participation, you have 
somebody out there sort of promoting the program and helping to 
put together proposals. I think that solves the problem.
    Senator Lincoln. It is a great opportunity to partner with 
the colleges and universities there that can help do those 
grant programs and provide that kind of assistance.
    Ms. Holz-Clause. In fact, I know right now that rural 
development is taking two or three staff people and having them 
go to those States right now where there has been low 
participation just to work with farmers and inform the. And 
service providers are also a very important conduit to the 
farmers. And so we are working with the cooperative development 
centers, the extension offices, Departments of Agriculture, and 
again, to try and get more good projects coming from those 
areas, as well.
    I would agree that there should probably be a percentage 
that is targeted toward minority and low participation States.
    Senator Lincoln. That would be great.
    Mr. Sertich. Senator, also, at the heart of what my story 
is here today, is to really take the private business and 
industry, to take governments, and to take higher education, 
and put them together in a meaningful way.
    And so what you are proposing when you ask the question, 
how can we do this best? Is to be sure all three parties are at 
the table. And I do not think any one of them necessarily has 
to be designated as the lead. Let's let these self-defining 
partnerships around initiatives, and Minnesota is a good 
example, with a lot of renewable energy and other value adds, 
they are going to beg workforce issues. And who better than a 
community college to be at that table to produce the skilled 
training that will ensure that those enterprises can become or 
remain globally competitive.
    Senator Lincoln. Well, thanks, Mr. Chairman, it is a 
passion, and we are grateful to all of you for your input and 
look forward to continuing to work with you.
    Thank you.
    Senator Cochran. Thank you very much, Senator.
    Senator Grassley, do you have any other questions or 
comments that you would like to make?
    Senator Grassley. Only to comment on something that Mary 
led up to, and was going to be my last question, and she said 
we do not have a Federal program, or we do not have tax laws 
that make it easy to pass on land from one generation to the 
other. Iowa has this program, and several other States do, of 
tax exempt use of Federal bonds that let States give lower 
interest loans to young farmers. It helps a few people get 
started farming. Is there any advantage to something like that 
on the Federal level?
    Mr. Hassebrook. I think so. You know, the reason that works 
in Iowa is because those bonds are federally tax exempt, and 
that provides enough of an incentive for people to lend to 
beginning farmers.
    I think one of the best things the Federal Government can 
do--well, in the last Farm Bill, you said that it is OK--
Congress said it was OK for the USDA to guarantee land contract 
sales by private landowners to beginning farmers.
    If we can make a change in tax policy that would do away 
with the prohibition on USDA guaranteeing one of these loans 
made with tax exempt bonds to a beginning farmer, then you 
could go to a landowner who is trying to sell their land and 
say, look, if you sell this to a beginning farmer and you 
finance it yourself through a land contract, you are guaranteed 
repayment, and all of your interest is tax free, that would 
provide a powerful incentive for those landowners to sell to 
beginners. Now, the key there is to change the Federal tax 
policy.
    Senator Grassley. I believe that is it, Mr. Chairman.
    Senator Cochran. Thank you very much, Senator.
    Thank you all who participated in the panel this morning. I 
think this is an excellent selection of witnesses, and I 
congratulate Chairman Harkin on organizing this Committee.
    The hearing record will remain open for five business days 
to receive statements and additional questions from the members 
of the Committee, and submitted testimony that we may receive.
    Thanks again for your participation. We appreciate it very 
much. The hearing is adjourned.
    [Whereupon, at 11:38 a.m., the Committee was adjourned.]
      
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                            A P P E N D I X

                           February 13, 2007



      
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