[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2012
_______________________________________________________________________
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
________
SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG
ADMINISTRATION, AND RELATED AGENCIES
JACK KINGSTON, Georgia, Chairman
TOM LATHAM, Iowa SAM FARR, California
JO ANN EMERSON, Missouri ROSA L. DeLAURO, Connecticut
ROBERT B. ADERHOLT, Alabama SANFORD D. BISHOP, Jr., Georgia
CYNTHIA M. LUMMIS, Wyoming MARCY KAPTUR, Ohio
ALAN NUNNELEE, Mississippi
TOM GRAVES, Georgia
NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full
Committee, and Mr. Dicks, as Ranking Minority Member of the Full
Committee, are authorized to sit as Members of all Subcommittees.
Martin Delgado, Tom O'Brien, Betsy Bina, and Andrew Cooper,
Staff Assistants
________
PART 6
USDA RURAL DEVELOPMENT
________
Printed for the use of the Committee on Appropriations
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2012
_______________________________________________________________________
HEARINGS
BEFORE A
SUBCOMMITTEE OF THE
COMMITTEE ON APPROPRIATIONS
HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
________
SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG
ADMINISTRATION, AND RELATED AGENCIES
JACK KINGSTON, Georgia, Chairman
TOM LATHAM, Iowa SAM FARR, California
JO ANN EMERSON, Missouri ROSA L. DeLAURO, Connecticut
ROBERT B. ADERHOLT, Alabama SANFORD D. BISHOP, Jr., Georgia
CYNTHIA M. LUMMIS, Wyoming MARCY KAPTUR, Ohio
ALAN NUNNELEE, Mississippi
TOM GRAVES, Georgia
NOTE: Under Committee Rules, Mr. Rogers, as Chairman of the Full
Committee, and Mr. Dicks, as Ranking Minority Member of the Full
Committee, are authorized to sit as Members of all Subcommittees.
Martin Delgado, Tom O'Brien, Betsy Bina, and Andrew Cooper,
Staff Assistants
________
PART 6
USDA RURAL DEVELOPMENT
________
U.S. GOVERNMENT PRINTING OFFICE
66-679 WASHINGTON : 2011
COMMITTEE ON APPROPRIATIONS
HAROLD ROGERS, Kentucky, Chairman
C. W. BILL YOUNG, Florida \1\ NORMAN D. DICKS, Washington
JERRY LEWIS, California \1\ MARCY KAPTUR, Ohio
FRANK R. WOLF, Virginia PETER J. VISCLOSKY, Indiana
JACK KINGSTON, Georgia NITA M. LOWEY, New York
RODNEY P. FRELINGHUYSEN, New Jersey JOSE E. SERRANO, New York
TOM LATHAM, Iowa ROSA L. DeLAURO, Connecticut
ROBERT B. ADERHOLT, Alabama JAMES P. MORAN, Virginia
JO ANN EMERSON, Missouri JOHN W. OLVER, Massachusetts
KAY GRANGER, Texas ED PASTOR, Arizona
MICHAEL K. SIMPSON, Idaho DAVID E. PRICE, North Carolina
JOHN ABNEY CULBERSON, Texas MAURICE D. HINCHEY, New York
ANDER CRENSHAW, Florida LUCILLE ROYBAL-ALLARD, California
DENNY REHBERG, Montana SAM FARR, California
JOHN R. CARTER, Texas JESSE L. JACKSON, Jr., Illinois
RODNEY ALEXANDER, Louisiana CHAKA FATTAH, Pennsylvania
KEN CALVERT, California STEVEN R. ROTHMAN, New Jersey
JO BONNER, Alabama SANFORD D. BISHOP, Jr., Georgia
STEVEN C. LaTOURETTE, Ohio BARBARA LEE, California
TOM COLE, Oklahoma ADAM B. SCHIFF, California
JEFF FLAKE, Arizona MICHAEL M. HONDA, California
MARIO DIAZ-BALART, Florida BETTY McCOLLUM, Minnesota
CHARLES W. DENT, Pennsylvania
STEVE AUSTRIA, Ohio
CYNTHIA M. LUMMIS, Wyoming
TOM GRAVES, Georgia
KEVIN YODER, Kansas
STEVE WOMACK, Arkansas
ALAN NUNNELEE, Mississippi
----------
/1/Chairman Emeritus
William B. Inglee, Clerk and Staff Director
(ii)
AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND
RELATED AGENCIES APPROPRIATIONS FOR 2012
Thursday, March 31, 2011.
USDA RURAL DEVELOPMENT
WITNESS
DALLAS TONSAGER, USDA UNDER SECRETARY FOR RURAL DEVELOPMENT
Introduction of Witnesses
Mr. Kingston. The committee will come to order.
The first order of business, I think, is to fine me for
being late. I will put $10 in the coffee pot for Mr. Farr to be
celebrated at the end of the year. Hopefully, there will be
other people late that we can get that money up more.
But let me welcome our witnesses today, and I will let you
guys introduce yourselves. And you can summarize your testimony
because we have had it and reviewed it, but I will yield the
floor to Mr. Farr.
Mr. Farr. Well, thank you, Mr. Chairman.
I think that this hearing is very, very important. We heard
from the Secretary that rural America has essentially been in a
depression for the last decade or so and that I think this is
the agency within USDA that really deals with the
infrastructure and financing of rural America and keeping rural
America sound.
And I have looked forward to this hearing. I am not going
to go into any testimony or statement because of time, and I
also have to excuse myself later on to go to a MilCon hearing,
which is at the same time.
So thank you, Mr. Chairman, and look forward to it.
Mr. Kingston. Thank you.
And Mr. Secretary, I don't know who came up with the bright
idea, but 10:00 a.m. seems to be the universal time for all
committee meetings. So we are all kind of jumping back and
forth.
Mr. Aderholt, did you have any opening statement?
Mr. Aderholt. No, I am good. Thank you.
Mr. Kingston. Mr. Tonsager.
Mr. Tonsager. Yes, good morning. We appreciate this very
much.
Chairman Kingston, Ranking Member Farr, Members of the
subcommittee, it is my privilege today to present the
administration's Rural Development budget priorities.
I am accompanied today by Mr. Jonathan Adelstein, Ms.
Judith Canales, and Ms. Tammye Trevino, Administrators for
Rural Development's Utilities, Business and Cooperatives, and
Housing and Community Facilities Programs. I ask that their
statements be included in the record as well.
Mr. Kingston. Without objection.
Opening Statement
Mr. Tonsager. As stated by the President, we are committed
to out-educating, out-innovating, and out-building our
competitors around the world. Additionally, we recognize that
the future is made brighter by reducing the burden of future
generations created by recurring budget deficits, and we must
rise to that challenge as well.
Rural America is the backbone of our great Nation. It is
our farms and forests; our mountains, deserts, and plains; our
small towns and smaller cities; and agriculture, coupled with
off-farm manufacturing, mining, forestry, tourism, and services
that drive our rural economy. Rural Development is committed to
the future of these rural communities.
Rural America offers many opportunities but is also faced
with numerous challenges, many of which are regional in nature,
with barriers such as lack of broadband capabilities, outward
migration, a great need for increased capital market
investments, and chronic infrastructure issues. Rural America
must focus its resources on opportunities that provide the best
return for its investments.
As compared to their urban counterparts, rural Americans
are more likely to be over the age of 65, earn lower average
incomes, and are more likely to live in poverty. The
President's fiscal year 2012 budget reflects his commitments to
jobs, growth, and opportunity for rural America. With a
proposed budget authority of $2.4 billion and a proposed
program level of $36 billion, the three agencies of the Rural
Development mission area are full participants in that
commitment.
This budget sets clear priorities, and it makes tough
choices. And we recognize that the subcommittee is a full
partner in that effort. In view of the budget realities, I take
particular pride in pointing out that four of our largest
programs operate on a fee basis with no appropriated budget
authority.
The electric and telecommunication programs are two of the
greatest public-private partnerships in American history and
enhanced the quality of life and brought economic opportunity
to rural communities. Through prudent management, they have
long operated at a negative subsidy rate.
In the past year, the Community Facilities Direct Loan
Program and the Single Family Housing Loan Guarantee Program
have also become negative subsidy rate programs. Last year,
Congress enacted legislation putting the Single Family Housing
Loan Guarantee Program on a fee basis, consistent with the
President's 2011 budget proposal.
The Community Facilities Direct Loan Program is proposed
for fiscal year 2012 at $1 billion, approximately three times
its historic program level. This is the result of the negative
subsidy rate, which reflects the current low interest rate
environment and the good performance of our community partners.
Rural Development continues to be an outstanding resource
for taxpayers. This reflects the leveraging we generate through
our loan and grant efforts. Most of our awards are loans and
loan guarantees. With a portfolio totaling more than $148
billion, over 98 percent of our clients are not delinquent on
their loans. This is particularly impressive, considering that
most of our programs are targeted to very low, low, and
moderate income families.
Rural Development has more than 40 programs designed to
foster growth, incubate and grow businesses, and add new
taxpayers to the payrolls. Our utility programs provide the
essential infrastructure that is the foundation for growth. Our
business programs finance entrepreneurs in traditional
manufacturing and services. Our housing and community
facilities programs directly create jobs in new construction
and building rehabilitation while enhancing the quality of life
in rural communities.
We also help finance innovation, particularly in green
energy. Our Nation continues to transition to a new, greener,
and domestically produced energy system. Rural Development will
have a growing role to play.
Rural Development's proposed budget supports the
President's call for responsible economies by accepting
difficult choices. We are refocusing, realigning, retargeting
our efforts, saving money for taxpayers, while supporting rural
residents and communities and building their future. We are
working to incentivize investments and find other partners to
leverage assets and build a stronger rural America.
It is our privilege to work with the subcommittee to help
build a better future for rural America and the Nation, and we
are committed to the future of rural communities, and we know
that you share in that commitment as well.
And Mr. Chairman, I am ready for questions.
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Mr. Kingston. Thank you, Mr. Under Secretary.
BROADBAND PROGRAM
Let me ask you this, and I have had some concerns about the
broadband program. The Inspector General's office issued a
report in 2005 and then a follow-up report in 2009 about
concerns with the program. And so, I wanted to ask you what was
the status of your reaction to the IG report, also particularly
as respects to the interim final rule released March 14th and
those concerns? Where are you on those, and what changes have
you made?
Mr. Tonsager. Well, I will respond, and I would like to
also ask Administrator Adelstein to respond as well.
We watch closely. The standing broadband program is
primarily a loan program. Its uses, earlier on, were primarily
near urban areas. So it wasn't really penetrating into a rural
market.
The Recovery Act provided loan and grant combinations
through the Broadband Investment Program--BIP--that was
authorized to us. We attempted to learn from both of those. We
have not been using the standing program. We went through this
year and a half with the Recovery Act money, and we implemented
and went out with the broadband program.
Administrator Adelstein has worked to reform the existing
program with the proposed changes. And if it is all right, I
will ask Jonathan to speak to it as well.
Mr. Kingston. Yes.
Mr. Adelstein. Thank you, Mr. Chairman.
Thank you, Mr. Under Secretary.
The Inspector General--IG--report was of concern to us. We,
as a matter of fact, suspended the broadband program during the
pendency of the Recovery Act because we wanted to, before we
moved forward with any loans in this administration, address
each and every one of the concerns in the IG report. And in
fact, we have done so.
As of March 24th, the IG indicated that, as a result of the
publication of the regulation, that entire investigation has
been closed to the satisfaction of the USDA IG. So we have
addressed each and every concern that they raised, both through
the way the program is being run and the way it was run
previously. So we are starting with a clean slate essentially
from the Inspector General.
We are just opening up a new window for funding for the
program as of this month under new rules. Previous rules that
were being operated under were based on legislation from
Congress in 2002, which did permit, in fact, required the
agency to provide loans to places that might not have been as
rural as the administrators might have liked in the previous
administration. But nevertheless, they were obligated under the
law to do so.
The Congress, in its wisdom, in 2008 changed the law. We
have implemented those changes, along with others, to encourage
all of those loans to go to the most rural parts of the
country, to prioritize areas that have no service or areas that
largely lack service so that we can address all of the concerns
of the IG, and the IG said we have done so.
Mr. Kingston. How much of that money then is spent in those
underserviced areas now? Do you have the breakdown on it?
Mr. Adelstein. Well, right now, we have not, in this
administration, done any loans under that program. So,
previously, I still believe most of the loans did go to rural
areas. There were a handful that were highly publicized that
went to areas that were more suburban because the law permitted
that. The law, in fact, required that.
Right now, we are starting with a clean slate. So we don't
have under our current regulation any loans out, just because
we opened up the window this month.
Mr. Kingston. You have probably seen this national
broadband map that shows in the blue the areas that are
serviced. And of course, that is most of the country. And then
you have probably seen the breakdown of the States that go
along with it.
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New Jersey, 100 percent. New York, 99.8 percent. Texas,
99.6 percent. Georgia, 99.4 percent. In fact, the lowest one is
American Samoa at 19 percent, followed by Puerto Rico, 66
percent. And then on continental United States, West Virginia
at about 86 percent. And so, I have to question, you know,
right now, is this really where we need to be spending our
money? Particularly since the FCC just announced last month a
$1 billion program for broadband.
And it is one of these sexy things that is kind of like art
education. You can always go out and talk about art education,
and it is great. I mean, it is a lot more exciting than talking
about math and science. But do we really need to continue this?
Mr. Adelstein. There is no other Federal program that
provides financing assistance to rural communities to provide
broadband for those percentages you talked about that aren't
covered today. As a matter of fact, the map gives us a kind of
a road map of where we want to focus our resources and where we
would like to close those gaps.
We have talked to our State directors about working in
their States with the Governor and others to try to fill those
holes. They need financing assistance in order to do it. And
the reason is, that it is a more difficult business case to
make in rural areas. There are fewer customers per mile. It is
more expensive to serve, and there is less revenue to provide
for that.
So getting a loan program and something we are going to get
paid back on--we are very proud of our record of being repaid--
allows them to get better terms and lower interest rates than
would otherwise be available in the private market. So we think
it is a really important program to complete this process of
getting broadband out to those parts of the country that are
identified on the map as not having broadband today.
Mr. Kingston. You know what my concern is--and I actually
have run out of time. So I will continue this with you next
round, and I appreciate it.
Mr. Farr.
Mr. Farr. Thank you very much, Mr. Chairman.
RURAL HOUSING SERVICE
I would like to talk a moment about rural housing. About
300 families in my district have become homeowners in the last
20 years, thanks to USDA's Section 502 direct loan mortgage
program, the Section 523 and that program that is in Section
523 that is the self-help program. We have worked with some of
the housing authorities, the non-profit housing authorities.
Twenty-five people and their families are now working on
constructing their own homes with self-help loans. In fact, the
Mayors of the City of Hollister, which is the county seat of
San Benito County in California, grew up, one of them in the
self-help house, and the other told me that he built his house
with the USDA's self-help program.
The question is why is the budget going to eliminate these
successful programs as of March 4th, when we have a backlog in
California for Section 502 loans, for self-help housing
totaling over $17 million. And as I understand, that $17
million to be borrowed and repaid to low and very-low income
families.
It has been a job creator because of the materials that go
into those houses and so on. And it seems that there is a
drastic cut in this program, and I want to know why.
Mr. Tonsager. As you will note from my testimony, we
propose a $2.4 billion budget authority and a $36 billion
program level. A lot of what we do is lending.
Mr. Farr. But you only requested $211 million for fiscal
year 2012----
Mr. Tonsager. For program----
Mr. Farr [continuing]. For Section 502 direct mortgage loan
program?
Mr. Tonsager. That is correct.
Mr. Farr. That is a cut from what it previously was?
Mr. Tonsager. Yes. It is substantial.
Mr. Farr. With the demand out there, why cut the program?
Mr. Tonsager. The administration made the decision to
aggressively seek to assist with reduction in the Federal
deficit. What we are asking for is about 18 percent less budget
authority than we have had previously.
Mr. Farr. But why? I mean, as I understand it, you can say,
well, they can go to the market. But you don't--with your
program, you have essentially your interest rates are below
market rate, and you are getting the poorest people or the
lowest-income people in the country to get housing. That is a
pretty nifty thing.
Why would we want to cut that market, which you also
pointed out or Mr. Adelstein pointed out that the private
sector won't go there in their lending?
Mr. Tonsager. The challenge for us has been, as we have
looked at the need to reduce the deficit, we had to go to the
programs that have the greatest budget authority cost. In this
case, it was our Multi-Family Housing Program, and it was the
Single Family Housing Direct Loan Program.
Mr. Farr. That have the greatest, what, budget cost?
Mr. Tonsager. Budget authority cost. Our 502 guarantee
program, which we proposed an increase for, has no budget
authority cost.
Mr. Farr. But that 502 or that authority doesn't allow you
to have low-interest market rates, does it?
Mr. Tonsager. That is correct. We will be actually offering
more housing ownership opportunities than we ever have before
with this budget using the guarantee program.
Mr. Farr. But not necessarily to the same class of people?
Mr. Tonsager. Exactly. That is correct.
Mr. Farr. I mean, this is the issue. Why do we go after--I
can't believe this administration would rob from Peter to pay
Paul and take the most vulnerable people in rural areas. I
mean, the Secretary has talked about trying to stabilize and
have a rural strategy, a rural economic revitalization. Access
to capital is essential to do that. Why wouldn't you want to
keep people down on the farm rather than drive them away?
Mr. Tonsager. I think we have had to make difficult choices
in the proposed budget. We wanted to make sure we could address
homeownership opportunities. Our plan is to use the 502
guarantee program to go as far down as we can into the low-
income category. We maintained a component of the 502 direct
category and also to address very-low income needs. There is an
incremental loss of the ability to serve that particular
category.
Mr. Farr. Will you be able to serve the self-help loans or
that backlog in California?
Mr. Tonsager. We have proposed elimination of the self-help
program, which is, again, a major important program. But again,
it is a budget authority cost that we have had to examine more
closely.
Mr. Farr. Okay. That is all gobbledygook talk. What about
helping those people that are waiting on that list? Can your
other program serve them?
Mr. Tonsager. We can use the 502 direct program to the
degree we have budget authority.
Mr. Farr. And they can afford it?
Mr. Tonsager. We will be able to focus on the 30 percent
measurement for income and try to help those below the 30
percent, those who have a cost greater than 30 percent of their
income. So that is generally the break point.
Mr. Kingston. The gentleman's time has expired.
Mr. Aderholt.
Mr. Aderholt. Thank you all for being here this morning.
FARM LABOR HOUSING
I wanted to ask a question. I know that Mr. Farr had asked
about the housing issue of Rural Development. It is my
understanding that Rural Development administers the Farm Labor
Housing Program, and this is where housing facilities for
migrant farm workers are constructed for those workers to stay
in a modest rental rate while they do farm work in an area
before migrating to another area to do more agricultural labor.
I believe that is Sections 14 and 16.
I know that U.S. citizens and permanent residents are the
only people eligible for the housing. My question is, are these
residents screened through like an eVerify system?
Mr. Tonsager. If it is all right, I would like to ask
Administrator Trevino, who runs the programs, to give you the
details.
Mr. Aderholt. Sure. That would be great.
Mr. Tonsager. Tammye.
Ms. Trevino. Congressman, thank you for the question.
Currently, we do not have access to the Electronic Income
Verification--EIV. We are asking for that authority from
Congress. It is a proposal that is coming through from the next
generation of a rental housing working group that has been
formed by the White House, and it is one of the things that we
have asked for.
That, because it is owned by I believe the Social Security
Administration or one of those agencies, we do not have access
to it. We have to have statutory authority in order to do it.
Mr. Aderholt. Do you have any timeline as to when this
might occur?
Ms. Trevino. I was just asked to prioritize that yesterday,
and so we are asking for that and some Community Reinvestment
Act--CRA--reform and some energy.
Mr. Aderholt. In the meantime until that does get
implemented, how are ways that you can implement or what are
things you can do to implement protocol to make sure that it is
not used for those that are here illegally?
Ms. Trevino. We have the guidelines, and they are shared
with every owner of one of our properties. And if we find that
they are not following the guidelines, then we take compliance
action.
Now we have created a new program that is going to be Web
based, and it is based on civil rights complaints that we have
gotten. So it is a civil rights training. And it clearly
identifies under what conditions you can refuse to rent to
certain individuals. So that is something that we haven't
tested yet. It is going into the test phase now. So we realize
that there are some limitations that we have had in being able
to verify incomes, and so we are trying to take as many
corrective actions as we can.
Mr. Aderholt. What is the bidding process for these
projects?
Ms. Trevino. Through a Notice of Funds Availability--NOFA.
In terms of who applies for Section 515 and 514? Yes.
Mr. Aderholt. If someone wants to construct one of these
projects, what is the----
Ms. Trevino. Yes. We have a competition. We announce a
NOFA, and we take applications. And then they are ranked and
scored.
Mr. Aderholt. Is that open to all contractors?
Ms. Trevino. Yes. It is open to anyone who is an eligible
applicant.
Mr. Aderholt. Okay. Is the same true for contracts to
manage the properties?
Ms. Trevino. No, sir. The owners, the developers of those
projects choose their servicing agents, the asset management
company.
Mr. Aderholt. Whoever won the bid on the contract?
Ms. Trevino. Right. And then we normally--there are certain
agencies that provide that service, and most of them go with
one of those that has a lot of experience that is already doing
it. If there is anyone new, we just monitor them a little
closer to make sure they know what they are doing.
Mr. Aderholt. Okay. And again, Mr. Farr had alluded to this
fact that rural areas tend to lag behind the rest of the
country in economic recovery. And I guess what particularly my
question is, do you see that being the case currently, as
opposed to, like, say historically that has been the case, but
are we seeing that during this time of economic downturn and
having a very fragile economy? Are we seeing that as of today
that rural areas are hit the hardest?
Ms. Trevino. Yes, sir.
WATER AND WASTE CIRCUIT RIDER
Mr. Aderholt. Okay. I want to, if I can, just quickly get
in one question, to ask about the Circuit Rider Program and the
rural water loans and grants. And just, Mr. Adelstein, I don't
know if you would be best to answer that. And just doesn't USDA
have a program to assist local utilities with source water
protection plans? Is that the case?
Mr. Adelstein. Yes, we do.
Mr. Aderholt. And just briefly, how does that work?
Mr. Adelstein. Well, the Circuit Rider Program is an
essential way that we help our small rural water systems that
may not have the expertise themselves in every aspect of their
system to do it themselves. So we provide in the budget request
$14 million this year for the Circuit Rider Program that we
give out in a grant to a private organization to basically
train and help in the field, small rural water systems to have
the expertise and specialty knowledge that they need and to get
them trained.
Because for these small communities, they just don't have
the budgets themselves, and they don't always have the
expertise. So we are able to provide that centrally through the
Federal Government and getting it out in the field through the
private sector, non-profit organizations that provides that
assistance.
Mr. Aderholt. Okay. Thank you.
Mr. Kingston. Ms. DeLauro.
Ms. DeLauro. Thank you very much, Mr. Chairman.
And thank you all very much.
SECTION 502 SINGLE FAMILY HOUSING
I just want to follow up on my colleague Mr. Farr's
questions. Just--I think he may have gotten the numbers mixed
up--to correct the record, the 502 direct loan program, that
was funded at $1.1 billion. The administration has requested
$211 million. So we are looking at it is about a 79 to 80
percent cut in that program.
And as you pointed out, mutual and self-help housing
program, those have been eliminated in this budget. That was at
$41 million. Question is how will USDA continue to offer
affordable housing to low-income families in rural areas if
these two programs are cut severely or eliminated?
Mr. Tonsager. We will use our resources the best way
possible with the 502 guarantee program.
I would like to ask Administrator Trevino to respond, if
that is all right?
Ms. Trevino. Congresswoman, thank you for your question.
It has been a challenge determining what was going to be
cut and what wasn't. And one of the things that I was tasked
with was to try to figure out which programs were more cost
effective. We have done a study on the direct program, and we
have seen that it is more intensive in terms of resources and
in terms of time.
We have currently, in the last year or so, tried to take
steps to make this more cost effective and make that program
more efficient. I cannot show that efficiency right now. It
would take me probably another year to implement the regulation
that we currently have going through, another year after that
to show results.
So if we want to show what is most cost effective, that is
not one of them. I think that it has the potential to get
there, but I can't show that cost efficiency now.
Ms. DeLauro. Well, but in terms of need, because this is
your ERS report----
Ms. Trevino. Right.
Ms. DeLauro [continuing]. Has stated that the home
ownership guarantee is the worst targeted of all Rural
Development guarantee programs, does not adequately serve
rural, less populated communities with more economic stress.
Do you have data at your department that indicates
otherwise from ERS's report?
Ms. Trevino. What I can tell you is that last year in the
502 guarantee program, about 30 percent of the 133,000 loans
that we made went to low-income individuals.
Ms. DeLauro. Well, then let me just--what would be
interesting information, I think, is what are the eligibility
requirement for single family direct program? How does that
compare to the guarantee? What is the average annual income for
each?
Ms. Trevino. Okay. The guarantee----
Ms. DeLauro. Because that is a way in which we can discern
what is happening to lower-income people.
Ms. Trevino. I understand.
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Ms. DeLauro. I am going to throw this on the table for an
answer. What was the backlog for Section 502 loans at the end
of fiscal year 2010? Of that number, what percentage came from
very low and low-income families?
Ms. Trevino. We did not have a backlog last year in the 502
program. Is that what you asked for?
Ms. DeLauro. Yes.
Ms. Trevino. ARRA--the American Recovery and Reinvestment
Act--kicked in last year also. So we were able to meet demand.
Ms. DeLauro. Okay. But you had the ARRA piece. ARRA is----
Ms. Trevino. No longer. I understand. Right.
Ms. DeLauro. It is gone. Right. So that would----
Ms. Trevino. And we understand that there is a portion of
that segment of the population that is probably not going to
get served.
Ms. DeLauro. Mm-hmm. Mm-hmm.
Ms. Trevino. Again, the choices that we make----
Ms. DeLauro. Well, what would be very interesting is, and I
have just said, the various eligibility requirements, the
income levels because you said you provided assistance. But
again, I wanted to know what is the--with regard to the average
income for each of these categories, and what you did with ARRA
with the 502 program, what then was the what percentage came
from very low income families? I would like to have that
information.
Ms. Trevino. Okay. That is a very good question. Average
incomes in the guarantee program are about $44,000. And in the
direct program, they are about $28,000.
Ms. DeLauro. Okay. So we have got a significant difference
here, and what happens to those $28,000 income level families
in the absence of this, of self-help, and this effort, which I
think is a big concern.
I am going to ask you, don't be offended by this. But if we
are going to go the guarantee route, why don't we just take all
of these and put them under HUD?
Ms. Trevino. I don't believe that any of the rural--a major
portion of the rural population would not be served if they
were under the Housing and Urban Develpment--HUD. We have
created that niche in rural America. We know what they are
looking for. We know how to target them and how to help them.
Ms. DeLauro. I appreciate that, and I appreciate the work
there. But it would appear from the numbers that we are talking
about that we are not, in fact, going to be able to service
that population that we have in the past, that niche area, and
particularly with this kind of program for low income.
My time has run out. So I thank the chairman.
Mr. Kingston. Mrs. Lummis.
Mrs. Lummis. Thank you, Mr. Chairman.
BROADBAND AND TELECOM SERVICE
I am going to focus on this first round of questions on the
RUS program. So I want to start with telecom.
I just got back from Saudi Arabia, and I was amazed to find
that in even the empty quarter, what they call it, in the most
remote areas of Saudi Arabia, they actually have better telecom
services than they do in the State of Wyoming. And I have found
that to be true, whether I was in Saudi Arabia or elsewhere in
the Middle East or in Eastern Europe. It is just amazing how
far behind we are in Wyoming.
And so, I want to talk about our U.S. programs here first.
What is the current level of demand among telecommunications
providers for RUS loans and grants?
Mr. Tonsager. I will ask Administrator Adelstein to
respond, please.
Mr. Adelstein. We anticipate this year having, if we had a
$690 million budget, which the President requested, we already
have over $600 million in loans in-house, and we anticipate
getting well over $1 billion because the year is--we are only
in part of the year of fiscal year 2011.
So we are oversubscribed most likely for the telecom loan
program. The broadband loan program, as I indicated earlier, we
just opened up the window, and we do anticipate major demand
for that. We had $28 billion in applications for the ARRA,
Recovery Act broadband program, and we were only able to fund
$3.5 billion of those. So there is something of a $23.5 billion
backlog in terms of demand for broadband loans.
Now not all of those are going to be eligible for our
program, but you can see there is a huge unmet need out there.
And I am from neighboring South Dakota, as is our Under
Secretary, and I spend a lot of time in Wyoming. And I think
that I know exactly what you are talking about. I mean, you
can't get cell service. Broadband is limited in rural parts of
the State.
Mrs. Lummis. Yes.
Mr. Adelstein. I think the small rural providers do a great
job under very difficult circumstances, and there has been some
scrappy ones in Laramie, for example, that provide wireless
service. But it is very tough going out there because the
business case is harder to make.
And I do believe they need these Rural Utilities Service--
RUS--programs to be able to make it work, to be able to compete
globally. As you indicated, other countries are investing on a
national level, and they are competing with us, and those jobs
are being outsourced out of the United States through broadband
networks. They could just as easily be in-sourced into rural
America with good broadband networks that we help to finance.
Mrs. Lummis. You know, I am hearing another--when I inquire
about this, I am hearing another reason, and so I will ask this
question. Have you witnessed a pullback from private sector
lenders in this area?
Mr. Adelstein. Absolutely.
Mrs. Lummis. Okay.
Mr. Adelstein. There is no question. We have talked to
them. They said some of the major private lenders are shutting
down, given the uncertainty.
BROADBAND PROGRAM AND REGULATORY ACTIONS
Mrs. Lummis. Yes, and the uncertainty that I am hearing
about is regulatory uncertainty. And because it is making
lenders squeamish about backing these projects. So let me ask a
little bit about how closely you work with the Federal
Communications Commission--FCC--regarding the effects changes
to the Universal Service Fund would impose on RUS borrowers or
vice versa?
Mr. Adelstein. Well, I am a former commissioner of the FCC.
So I am very familiar with that.
Mrs. Lummis. Oh, good.
Mr. Adelstein. We are working with them on all the data
they request. We are the leading expert in the Federal
Government on rural telecommunications finance, which is what
they are dealing with here. And the chairman, Julius
Genachowski, has indicated he wants a data-driven process, and
they have requested from us data about our borrowers and their
financial situation so that they can take that into account in
making regulatory changes.
Mrs. Lummis. And I may want to follow up with you
specifically on this because it just continues to be a huge
problem in my State.
So thank you very much.
ELECTRIC PROGRAM FUNDING
Now I am going to switch to RUS as it relates to
generation. Will baseload coal generation be excluded from RUS
loans in the fiscal year 2012 budget?
Mr. Adelstein. Yes, they are excluded.
Mrs. Lummis. And that is because?
Mr. Adelstein. Well, due to risk associated with baseload
construction in financing, we determined that there should be a
separate subsidy rate for those investments. RUS has worked
with Office of Management and Budget--OMB--under the previous
administration to develop an agreed-upon subsidy rate. That is
several years old now.
So that prevention of RUS engaging in coal-based generation
pre-dates this administration. So we don't have it in the
budget as a result of that.
Mrs. Lummis. Okay. My time is about up, Mr. Chairman. I
have other questions, but I will wait until the next round.
DUPLICATIVE PROGRAMS
Mr. Kingston. Well, we will start the next round now. And I
want to start out with you, Mr. Adelstein. I still don't
understand why you need to have $1 billion in the FCC and then
have all the money in RUS now.
Originally, when the administration and the stimulus
program was putting about $3 billion in each pot, I felt like,
look, you already have RUS. Why do you want to start new
programs anyhow? RUS should be handling it. But now you have
two. I just don't understand why--your missions are so close,
why in the heck do the taxpayers have to pay for two sets of
administrators and employees?
And frankly, I know you can justify it because--excuse me,
you can justify it in Washington terms. Because we have 44
Federal job training programs, 66 early childhood development
programs, and each person can say why their program is so
unique. You know, on the jobs program, I always say, hey, if
one of them works, you don't need the other 43. This one is a
duplication.
Ms. DeLauro. Food safety.
Mr. Kingston. And yes, as my friend would say, I think the
Government Accountability Office--GAO--report said there were
15 food agencies on food safety. So I have got to tell you. I
don't get it, and I am going to work very hard to get answers
to this. But I will let you start at it.
Mr. Adelstein. Let me give you my best shot.
Mr. Kingston. Because I can tell you, right now, I can't
zero out FCC, but I think we can do it here. And I am real,
real close to proposing that.
Mr. Adelstein. Well, let me explain as a----
Mr. Kingston. And I am doing it out of frustration. I would
rather have RUS do it, but I can tell you, I am just against
duplications in Government. We always get these GAO reports,
and everybody says, ``Oh, God, that is bad.'' And we pound the
ground. But you know, 6 months later, Democrats or Republicans,
nothing ever happens.
Mr. Adelstein. Well, these programs, I would say, are not
duplicative in any way, shape, or form. I mean, the Government
Accountability Office--GAO--looked at duplication across the
Federal Government and did not indicate these programs were
duplicative. And it is because they are, frankly, not. I mean,
we are providing financial assistance, loans that are going to
be repaid to the Federal Government to the extent that we can
make sure that they are well underwritten, to help private
businesses to build out.
The program at the FCC is not taxpayer financed. It is an
exchange from a fee that is paid by rate payers that is then
redistributed across the industry to those high-cost providers,
Universal Service, which is a continuation of what AT&T did
back in the '30s. And it is a longstanding way of doing things
that was formalized in the '96 Communications Act.
But it is very different. Those are basically assistance to
help those companies be able to provide comparable service at
comparable rates, but it does not provide a dime for capital
infrastructure loans. No assistance for that.
It does provide assistance to the revenue that enables a
small rural company to pay back the loans. And that is, I
think, what Congresswoman Lummis was referring to, that there
is an issue there about how those two interplay. But the fact
is that if you are a small rural company and you want to
provide broadband to a place it doesn't exist, it is very hard
to get capital in the private sector, as the Congresswoman from
Wyoming indicated. It is almost impossible now. They are
virtually shut down.
We are the last game in town to provide financing.
BROADBAND ROAD MAP
Mr. Kingston. But you know, getting back to this map, and
Mrs. Lummis, you didn't see it earlier when I held it up. But I
will--let's see. That is what the market penetration is right
now.
The lowest State in the country is 86 percent. For every
dollar we spend, 40 cents is borrowed right now. Do we really
need to continue this at all? And frankly, if somebody goes out
to Colorado a lot, I go with my family, I mean, you can't get--
you know you can't get cell phone service in the mountains
because they block it.
I am sure that one day the technology will change, just
like it did on the tunnel going over the Capitol. But you know,
it is not life and death. And this Washington kind of elitist
attitude, ``Oh, these poor rural people. We have to bring them
broadband, and then they will have jobs, and then they will
have telemedicine.'' And then everybody will be happy and
utopia.
And I represent a rural area, not as rural and not as vast
as your territory. But I have just got to question this map and
our----
Mr. Farr. The map lies.
Mr. Kingston [continuing]. I don't know why the map lies,
but these numbers don't. In fact, let's see what Wyoming is.
Let's see if I can find it on here.
Montana is 99.98 percent. Okay. Somebody help me with
Wyoming here. It has got to be higher than that. Okay. Okay,
Wyoming is 97.5 percent.
I just don't get it, I have got to tell you. I mean, the
dang country is going broke, and we all know that. And is this
what we really have got to be spending money on right now?
My time is up. So Mr. Farr.
RURAL AMERICA SITUATION
Mr. Farr. I think this is a great discussion. But let's put
this into perspective. I mean, I look at this map, and I look
at my area. I mean, California is a huge State, and most of the
people live in big urban areas, the L.A. and San Francisco
market. But you get out into rural California, and it is as
rural as any place in the Nation.
For example, where I live, we don't even have any access to
utilities. You are off the grid. You want power? You have got
to generate. You want water? You have got to go get it. You
want sewer? You have got to build your own septic.
Nobody is going to come into places like that, and I think
if you look at the history of the USDA, they were the first
Federal agency that was out there doing rural America, doing
economic development. Look at the titles of these
Administrators--housing service, business service, utilities
service. They went to places where nobody ever went before, and
in many cases, I think if you are going to try to push them
into HUD, in all respects, HUD was essentially an urban--to
serve urban needs, not to serve rural needs because rural needs
are being served out there by these services.
I mean, why do you even have to have rural utilities? You
would think that phone services would get there. They are not
going to go there. There is no money to be made. So you have
had to subsidize this, and I think what is lacking here, and I
think you are on the right--we are all kind of searching for
this, is that why don't we try to have a better policy?
And I think this is where the shortcoming--the Secretary
was here talking about how rural America has been dying for a
long time. Everybody is leaving it. Kids are leaving because
they can't get access to broadband. The schools are not as
great as they are in some of the big urban areas. They get a
good education. They don't want to go back to that area.
These places are falling apart. Nobody is investing in it.
We need a rural strategy if we want to keep--and to Mr.
Aderholt's point, I mean, if you want to do this documented
labor, I mean, this is why the California delegation is pretty
much interested in these ag jobs. Seventy percent of the people
harvesting everything you eat every day are undocumented.
So if you are going to have this, and that is why we need
to solve this immigration problem, there is nobody else to take
those jobs. Senator Feinstein tested this and went out and put
signs all over that these jobs were available. And they are
paying $12 an hour. They are paying better than Wal-Mart and
Starbucks. And they get benefits.
You know, nobody would take the jobs. They are too damned
hard. It is difficult to go out on rainy days and harvest
crops. So we need a better strategy, and I think the problem is
that we need to work on new collaboratives with State and local
government and really have a rural strategy.
So the thing that I am concerned about is that these are
the people that are the first responders to the poverty needs
in rural America. Poverty needs are the ones, those are the
people that are staying there. They are not going to encourage
their kids to stay there and grow up in poverty. But unless we
make these areas a little more attractive.
And I wish we would have rural tourism. We ought to have
that in here. That has got to be a market strategy. Everybody
loves the outdoors. You can't get into the outdoors without
going to rural America.
HOUSING REPAIR LOANS AND GRANTS
So there are some things lacking that we need to build on.
But I want to ask in this moment left that you have Section
504, which is essentially again trying the idea of why should
people stay in rural America? This is the repair loans to the
low-income homeowners in America to eliminate safety hazards
and eliminate other kinds of issues, you know, modernize your
house.
So your budget doesn't propose any funding for repair
loans, and I understand you cut that almost by two-thirds for
repair grants?
Mr. Tonsager. Yes. That is----
Mr. Farr. Nobody is remodeling their house in rural
America, or no low-income people can afford them, or what?
Mr. Tonsager. No. The challenges remain, and there are
enormous challenges in rural America on all fronts. We strongly
advocate for a full tool set, and if moments allow, I would
really like to make the case overall for the agency about what
we do.
The funding for the Section 504 grants, again, it is a
subsidy cost issue. Ninety-eight percent of our borrowers are
successful. We know that it takes grants to serve categories of
people who don't have much money. But because of the challenges
presented to us about the deficit, the struggle we have in
trying to help reduce the deficit, we are forced to make very
difficult choices on programs we really care about.
Mr. Farr. But it seems like those choices are really to
hurt the most vulnerable, which is the reason that----
Mr. Tonsager. As I mentioned----
Mr. Farr. Congresswoman DeLauro is head of the committee
that has HUD under it. I mean, and her question about why not
move this all to HUD, your response was, well, HUD doesn't
serve rural America. Now you are cutting off access to the very
most vulnerable who we are trying to help stay and develop some
economic strategies for rural America.
Mr. Tonsager. It is correct. It is as challenging a thing
as I have ever been faced with to have to deal with the choices
we have to make regarding the budget authority we have. We have
proposed an 18 percent decrease in our budget. It is a painful
cut. It hurts real people.
The great bulk of our programs are loans at approximately
the rate the Government borrows money, and those cost no budget
authority to the Federal Government. So the only places I have
left are those places that have budget authority costs that I
have to pick from. And there is really multi-family housing----
Mr. Farr. Well, let me just end. Time is up. But I would
hope you take back to the Secretary--he came before this
committee. He is a former Mayor of a small town, Governor of a
small State. He came here talking about having a rural strategy
for America, looking at all the grants by all the departments.
We have yet to see that strategy.
I don't know what is different now than it was before he
took office. But we need a much more comprehensive approach of
how we are going to save rural America, and it ain't coming
from these cuts.
Mr. Kingston. Mr. Aderholt.
FARM LABOR HOUSING
Mr. Aderholt. Let me just follow up with Ms. Trevino about
the housing, the issue that we talked about with the Section
514 and 516. And I am not sure I made myself clear when I asked
the question, but when you were talking about--when you gave
your answer, were you talking about income verification or
citizenship verification?
Ms. Trevino. Oh, I was talking about income verification.
Mr. Aderholt. Okay. What about citizenship verification?
Ms. Trevino. We also have regulations that we follow. We
use the same rules that HUD uses in terms of verifying
eligibility, both for income and citizenship.
Mr. Aderholt. Okay. And then, and what would be the
situation there? Would you still have to have authorization to
use eVerify if it is for citizenship verification?
Ms. Trevino. No, sir.
Mr. Aderholt. So you can do that?
Ms. Trevino. We could, yes.
Mr. Aderholt. And is that being implemented?
Ms. Trevino. Yes, sir. We follow the rule that HUD uses,
and that is what we had proposed several years back.
Mr. Aderholt. So the residents are being screened in that
regard?
Ms. Trevino. Yes, sir.
Mr. Aderholt. Okay. All right. Thank you.
Thanks, Mr. Chairman.
Mr. Kingston. Ms. DeLauro.
Ms. DeLauro. Thank you.
I have got a couple questions here. I am going to just try
to get them all done in my allotted time here.
RENTAL ASSISTANCE
Ms. Trevino, do you do rental assistance?
Ms. Trevino. Yes, ma'am.
Ms. DeLauro. Okay. If you can get back to me on the H.R. 1
cuts to rental assistance, what I would like to know there,
unless you have it off the top of your head, if the cuts in
H.R. 1 are enacted, what would be the impact of the 212,000
units that are up for renewal in 2011? Would this mean that
half the families in those units would not be given relief?
So I would like an answer on that, if you can?
Ms. Trevino. Yes, ma'am. In our 2012 budget, we are
actually proposing a bigger decrease than H.R. 1. But we have a
strategy for how we are going to get there. If we have to
implement that now, we probably would not be prepared to do so,
and we might find ourselves short of renewing some of those
contracts.
Ms. DeLauro. Right. Because the funding level in 2008 fully
covered all 104,000 housing units that were up for renewal.
There are an estimated 212,000 up for renewal now. So what you
are saying is that given--and these are low, very low income
tenants for USDA--that you are not going to be able to do the
renewal of all of those 212,000?
Ms. Trevino. In the 2012 budget, we will not renew all
212,000.
Ms. DeLauro. Okay. Is that a further cut from H.R. 1?
Ms. Trevino. Yes, ma'am.
Ms. DeLauro. H.R. 1 cuts below what you are doing?
Ms. Trevino. Yes, ma'am.
Ms. DeLauro. Okay. So that means that you are not going to
do it there, and then H.R. 1 would bring us below that number
in terms of the 212,000?
Ms. Trevino. H.R. 1 will bring us below the 212,000.
Ms. DeLauro. Right. And in addition to which what your 2012
budget will do. So we are going to be much below the 212,000?
Okay. If you can tell us what that would be, that would be
helpful.
Ms. Trevino. Okay.
[The information follows:]
Rural Development believes that the budget request for
rental assistance is sufficient to renew 204,503 rental
assistance contracts.
Rural Development is exercising asset management and loan
servicing authorities on the portfolio of properties that are
currently in default for monetary and non-monetary reasons. By
using existing authorities for servicing non-monetary defaults,
Rural Development expects that at least 300 of these defaulted
properties will move out of the Section 514 and Section 515
portfolios, allowing retirement of the 8,200 rental assistance
contracts associated with them.
In addition, changes will be made to the timing of the
renewal of contracts in the last quarter of the fiscal year.
Historically, rental assistance contracts are renewed and funds
obligated 60 to 90 days prior to the exhaustion of funds in the
current contract. However, in the last quarter of fiscal year
2012, about 4,000 contracts will not be renewed as far in
advance of the exhaustion of funds in the existing contract.
Ms. DeLauro. I am just going to throw this question out, if
you can get back to us on this? On the self-help housing
grants, other options for self-help housing other than USDA if
the program is eliminated there.
You have provided coverage in these areas, and it has been
very effective. I think that is what several of us are trying
to say here. But we see you going out of this business, and
that is really very, very troublesome to me and I think to
others here.
BROADBAND COVERAGE
I want to just see if I can address a broadband issue. I
think it is important to note that the United States is 14th in
the world in broadband. So that tells you how advanced we are.
I don't have the list of countries of who is 1st through 13th,
but I think it would be interesting to look at that to see who
is outpacing us in broadband.
And again, a nation which has taken roads and
communications and electricity across the country, making
serious public investment in these kinds of efforts in order to
provide for economic development, which is what this does.
Provides for economic development and jobs for people in the
United States and in rural America.
I might add just a comment on the FCC. The FCC has said
that it has some funding for broadband from the Universal
Service Fund, but the commission itself has said that the USF
``fails to effectively and efficiently target support for
broadband in rural areas.''
Now you can ask the questions why about that, but clearly,
the work of RUS is critical in this area in terms of
telecommunications and in broadband. Can you outline some of
the conditions that USDA focuses on in reviewing applications
for rural broadband loans and grants? How difficult is it to
determine and define what are unserved and underserved areas?
Can you provide us with some examples of success stories
involving the use of rural broadband loans and grants?
You zero this out in 2012 with a justification that there
is going to be adequate funds to carry us over prior years. Can
you explain why there is so much carryover? Is it because there
are applications still pending and so that the funds have yet
to be distributed? If your office was subjected to significant
cuts, would that impact your ability to review applications and
distribute funds to improve rural broadband service?
Can you explain the difference between the loans provided
in the Rural Electrification and Telecommunications Program
account and those provided in the Distance Learning
Telemedicine and Broadband Program account?
Mr. Adelstein. Certainly I will----
[The information follows:]
We will work with our Technical and Management Assistance
providers and Self-Help grantees to help identify other sources
of assistance or to provide assistance in transitioning out of
the program.
Mr. Kingston. You have 5 seconds. [Laughter.]
Mr. Adelstein. I could do that for the record. I could give
a brief----
Ms. DeLauro. We beg the chair's indulgence here. It is an
area that the chair is very, very much interested in.
Mr. Kingston. Yes, I wanted to add on one more because I
want to make sure that the gentlewoman knows, and I am sure you
do, that the Universal Service Fund--USF--is moving away from
telephones and getting into broadband, which is one of the
things that bothers me in terms of the duplication.
Ms. DeLauro. But apparently, it is a controversial
proposal. I understand what you are saying, but it is a----
Mr. Kingston. Yes.
Ms. DeLauro. I am just telling what the FCC says it can do
and not do.
Mr. Kingston. Listen, my choice would be to zap the FCC
program and put it under RUS. So----
Ms. DeLauro. I'm a strong believer in what RUS does in this
area versus the Commerce Department.
Mr. Kingston. Yes, and we are both to get on that. I also
want to point out the Universal Fund paid as much as $20,000 a
year to connect one single rural household to telephone
service, $20,000 a year. I am not sure how many jobs we got out
of that, but they must have been great ones.
Ms. DeLauro. That is why we have to go with RUS in answer
to the question.
Mr. Adelstein. Well, the National Broadband Plan of the FCC
did indicate they saw an important role for the RUS, and the
issue, as a former member of staff there, would be if you were
to move, for example, USF from there to here. It is not an
appropriated account. It actually is funds that are collected
by Universal Service Administrative Corporation through the
bills of rate payers and then basically redistributed to ensure
that everybody has assistance.
Mr. Kingston. I think you are right. It is redistribution.
It is a tax. That is what it is because it is not a voluntary
payment, that it is an assessment and it is passed on to each
and every one of us.
Mr. Adelstein. It is. But it strengthens the overall
system. The idea is that every additional connection to the
system makes it better for everybody, and it would be an issue
with, of course, the domestic discretionary budget to try to
move those funds.
But this is a very different program, and if----
BROADBAND PROGRAMS
Ms. DeLauro. That is why I want to know about this program
and the workings of this program that we are dealing with. That
is where my questions were focused.
Mr. Adelstein. Yes. This program, the reason, in fact, it
wasn't really zeroed out by the President's budget. The idea
was we had carryover because there was no demand for the
program during the period of the Recovery Act. During the
pendency of that, people weren't interested in the loan
program. We administer that.
In the meantime, we also wanted to ensure that we took all
of the IG considerations into account before we restarted the
program under this administration and also learned the lessons
of the Recovery Act. So the new regulation focuses resources
towards rural areas. It gives the highest priorities to areas
that have no broadband service to date, and areas that have
less than 25 percent coverage are next in order of priority. So
we do try to move the funds in that direction.
Ms. DeLauro. Do you not have any people requesting those
funds? I mean, if Wyoming has problems, other places have
problems, there are rural parts of various States that have
problems with broadband attraction, do we sit there and just
look at this money and just say, well, it is here. Nobody has
come knocking at our door for it.
But we know, by virtue of what is happening nationwide,
that there are underserved areas and are unserved areas. Help
me.
Mr. Adelstein. Yes, in terms of the map----
Ms. DeLauro. Help me.
Mr. Adelstein. Tomorrow I am going to be testifying with
the Administrator of Financial Telecommunications and
Information Administration--NTIA--at Commerce, and he produced
the map. They did the math that 5 to 10 percent of the United
States lacks access to adequate broadband service.
Ms. DeLauro. Do you have the rules out for how people can
apply for this yet?
Mr. Adelstein. We do. We published them this month.
Ms. DeLauro. This month?
Mr. Kingston. If the gentlewoman will yield?
Ms. DeLauro. Okay. Just one second, Mr. Chairman. Okay. So
that may be the reason. I am just trying to assist you here to
say if you just got the rule out, that that means people didn't
know how to make application for this or what the criteria was.
Is that correct?
Mr. Adelstein. That is correct.
Mr. Kingston. But what in the heck is that all about? Two
years ago, that should have been done. I mean, ``Oh, oh, well,
now we figured out.'' How many billions have been spent between
you and the FCC in the new program? Because it was a $7 billion
push. How many jobs were created from this wonderful slug of
money from the stimulus program? I mean, how effective is this?
Mr. Adelstein. Well, we expect that USDA alone----
[The information follows:]
As of December 31, 2010, Broadband Initiative Program (BIP)
awardees had created 1,600 jobs. This figure does not include
job creation numbers for NTIA's BTOP program; it is a figure
for BIP alone (i.e., the USDA program). The next reporting
period ended March 31, 2011 and updated data for the first
quarter of this calendar year is not yet available. This
information is tracked and reported publicly on Recovery.gov.
More than 25,000 jobs are projected to result ultimately as the
buildout continues.
Mr. Kingston. Now how many jobs were created? Because we
are all talking, oh, this creates jobs. So how many were there?
Mr. Adelstein. Well, the estimate is that there would be--
--
Mr. Kingston. Well, how many were there? I don't mean the
estimate. Because 2 years ago, I promise you, we heard this
exact, same testimony, and I was in the minority. And I have
passionately sat where Ms. DeLauro sat.
Ms. DeLauro. But Mr. Chairman? But Mr. Chairman, if there
are no regulations----
Mr. Kingston. And I passionately----
Ms. DeLauro. But if there are no rules and no regulations--
--
Mr. Kingston. Then why did we start the dog-gone thing?
Ms. DeLauro [continuing]. That people can apply for, and
quite frankly, it doesn't happen overnight.
Mr. Kingston. Well----
Ms. DeLauro. But if you deal with telemedicine, you deal
with the----
Mr. Kingston. It would just be so comforting to know that
for the $7 billion, we got something besides subsidies to
telecom companies that were doing this stuff anyhow slowly.
Ms. DeLauro. It would be very interesting to see what we
get in return for $40 billion in tax subsidies that we provide
to the oil and gas industry, which is truly on its feet.
Mr. Kingston. If the gentlewoman chooses to pursue that----
Ms. DeLauro. Rural America is not on its feet.
Mr. Kingston [continuing]. We will look at that amendment.
But this is, I can't tell you how frustrating it is. Even for
Ms. DeLauro and me to be, you know, discussing the fact that
you ought to be able to say for $7 billion, we got blank.
Instead of, well, $7 billion, we now found out what we were
doing wrong. We have--oh, revelation--we are going to go to
underserved areas right now.
Heck, it never was intended to go to New York City, and
that is where they were. And the gentlewoman knows 30 miles
outside of Houston, Texas, they were getting these loans?
Mr. Adelstein. That was under the previous program, not
under the----
Ms. DeLauro. It was under the previous program, Mr.
Chairman. They have tried to change this program----
Mr. Kingston. We are feeling----
Ms. DeLauro [continuing]. To make it effective, and so it
is meeting the need nationwide.
Mr. Kingston. I know. Everything is George Bush's fault.
But----
Ms. DeLauro. No. Well, most of the issues are, frankly.
[Laughter.]
Ms. DeLauro. I mean, let's put the cards on the table.
Mr. Kingston. And who was the Speaker in 2007?
Ms. DeLauro. And the deficit is, as well. This is
ridiculous.
Mr. Kingston. Can the gentlewoman tell me who the Speaker
of the House was in 2007?
Ms. DeLauro. Yes, well, let me just tell you.
Mr. Kingston. I will just say, at some point, you have got
to go ahead and say, okay, we own the program. And the program
has not done what it is supposed to do. And, but if you could--
the gentlewoman has the stats. If you could say these stats are
so crazy. Here, let me bring them up again.
Ms. DeLauro. Well, then everybody in the country is hooked
up. They ought to go out of business here. That is it. That is
everybody----
Mr. Kingston. To my good friend from Connecticut, West
Virginia, 86 percent penetration. I mean, what is so
outrageous? Louisiana, 95 percent. Alaska, second to last, 90
percent penetration. In a country that owes $14 trillion in
debt.
Ms. DeLauro. My God.
Mr. Kingston. We owe this money to great friends of ours
like China. For every dollar we spend----
Ms. DeLauro. Yes, but you ask China what they are doing
about broadband----
Mr. Kingston. For every dollar we spend----
Ms. DeLauro. You ask China what they are doing about
broadband, I would like to see those 13 countries that are
ahead of the United States.
Mr. Kingston. I know. I know there are certain people who
like to----
Ms. DeLauro. The 13 countries ahead of the United States,
we are 14th in broadband in the world.
Mr. Kingston. Well, perhaps the President may want to go to
the U.N. and get some more instructions on how to handle it. I
don't know. That seems how we do our foreign policy.
Mrs. Lummis, you have been so generous. And Ms. DeLauro and
I are just having our daily discussion. And you have been very
nice and patient and quiet. So I feel like we need to yield.
What do you think, Rosa, maybe 20 minutes to Mrs. Lummis?
Ms. DeLauro. As much time as the gentlelady needs.
[Laughter.]
Mr. Kingston. See? Here we are--always in perfect harmony.
Mrs. Lummis.
Mrs. Lummis. Thank you, Mr. Chairman. It was great theater.
REGIONAL INNOVATION
I have a question about a statement in your testimony, Mr.
Under Secretary. You have mentioned that the USDA is refocusing
certain programs to encourage regional strategic planning to
stretch limited resources. And could you tell me what programs
you are pursuing with this regional approach?
Mr. Tonsager. Secretary Vilsack has been intent on trying
to work with regions of the country that have commonalities. We
have used the Rural Community Development Initiative--RCDI--
funding as well as the Rural Business Opportunity Grant--RBOG--
program to provide very modest grants to those regions that
have come together.
I think there is approximately 22 regions altogether, and I
think we have funded something like 7 or 8 of those, in that
range through those grant programs.
Mrs. Lummis. And they are grants to do what?
Mr. Tonsager. It is grants for communities to come together
and try and identify joint needs. So, as you know, having lived
in rural America, many communities compete with each other. And
so, you end up with communities that each want to have a
hospital, each want to have some kind of public facility.
And what we are attempting to do is ask the communities to
identify their commonalities, to work together to try and
anticipate their needs, to look at their strengths and try and
build on those strengths.
Mrs. Lummis. Why is that a Federal function? Why is that
not a State function?
Mr. Tonsager. The function is for the Federal Government.
We have done regional approaches before. We had empowerment
zones, enterprise communities previously. Those had substantial
funds. It is our belief that it is a Federal function because
there is a demand for it, frankly. People inside the----
Mrs. Lummis. But couldn't that be shifted? I mean, if this
stuff were done like the CDBG program? If it were just like
block granted to States?
Mr. Tonsager. We are probably talking in the neighborhood
of $4 million or $5 million, I suppose, overall, $6.6 million
that we have used. So it is an initiative because the
Secretary, the President, and others have sought to do these
regional initiatives, and we have taken it on as a challenge to
do that.
You could look at grants, but it is a very modest amount of
money, in relative terms. And we don't anticipate going to much
larger amounts.
FARM BILL ENERGY PROGRAMS
Mrs. Lummis. Okay. Now a question about biomass, biofuel
programs. Could the entities eligible for the biofuel and
biomass farm bill programs be eligible to compete under the
Rural Energy for America Program? I know there has been mention
that the Rural Energy for America Program is the most
successful and competitive program.
So, here again, pursuing the discussion of the gentleman
and the gentlelady about consolidating programs and trying to
wring efficiencies out of this Federal budget, is this one that
could be combined with other things?
Mr. Tonsager. Each of the programs has a different focus. I
think we would certainly be open to a discussion about what the
opportunities might be. For example, the loan guarantee program
can go up to $250 million with a 60 percent loan guarantee.
That is focused on very large projects.
The Rural Energy to America Program--REAP--tends to be on
smaller projects, individual projects with people. It might be
a methane digester. It might be an energy efficiency project.
So we could certainly have a conversation about what we would
like to meet the opportunities associated with all of those
folks. So we would probably argue for fairly broad authorities
if we were to combine them.
Mrs. Lummis. Okay. Thank you, Mr. Chairman.
I also want to thank the gentleman and the gentlelady for
the discussion about the difficulties and the frustrations that
we face with regard to the effectiveness of programs, the cost
of programs, the job-creating ability of programs. It is
enlightening. It is more than good theater. It is enlightening.
So thank you very much. I yield back.
Mr. Kingston. We have affectionate disagreement on a
regular basis. Do you need to go?
Ms. DeLauro. I do. Can I just ask my last questions, and
then I will get out of your hair?
Mr. Bishop. Go right ahead.
Ms. DeLauro. I will submit for the record, Mr. Adelstein,
the questions I asked about broadband. It is an area very, very
much of interest to me. I really do believe it is a driver of
our economic future here.
SINGLE FAMILY HOUSING GUARANTEE PROGRAM
Ms. DeLauro. So I want to just pursue again the
unsubsidized guarantee loan program, if I can? It was 2010 we
made approximately 10,000 loans to low-income rural families
under that program. The budget contends that the guarantee loan
program can pick up the slack. Is it true? Can the guarantee
program pick up the slack?
Ms. Trevino. It is going to pick up the slack on many of
those, not all of them, and that is why we have proposed to
leave some funding in the 502 direct for those very, very low
that would not have access to private capital or the guarantee
program.
Ms. DeLauro. Are these families living in higher-income,
larger communities, as the ERS asserts?
Ms. Trevino. In the direct----
Ms. DeLauro. Forty-eight thousand dollar level, the
guarantee?
Ms. Trevino. Yes, ma'am.
Ms. DeLauro. If you can, what other USDA housing assistance
would be available to these low-income rural families?
Ms. Trevino. In order to purchase a home, other than the
502 direct?
Ms. DeLauro. Yes.
Ms. Trevino. The portion that we have right now allocated
in the budget and the 502 direct and guaranteed programs. That
would be all the ones that we offer for single family
homeownership. We do have multi-family housing programs,
though, that many of those qualify for.
Ms. DeLauro. But in terms of the guarantee loan program
that we are talking about here, you are not going to be able to
hit these--these people are not going to be eligible? There is
no way to cover, available to these low-income rural families?
The multi-family is what is available to them? Is that what you
are saying to me?
Ms. Trevino. Yes, ma'am.
Ms. DeLauro. Okay. I am told here that it would cost us $38
million more to keep the program level flat. Is that accurate?
For the Single Family Direct Housing Loan Program, another $38
million? Can you check on that for me?
Ms. Trevino. I can check on that, yes.
Ms. DeLauro. Will you? Because I know everybody is going to
say it is $38 million, $38 million, but----
Ms. Trevino. Based on the subsidy rate for today?
Ms. DeLauro. Yes.
Ms. Trevino. Or 2012?
Ms. DeLauro. Yes.
Ms. Trevino. For today, okay.
Ms. DeLauro. By law, 40 percent of the funding for direct
loans goes to very low income families, incomes at or below 50
percent of median. And you know this. Only 3 percent of the
guaranteed funds go to these low-income families, as I
understand it.
I don't know what evidence you have that the guarantee
program can't devote a greater share to the very low-income
families. Will those families be in smaller communities? What
happens when interest rates go up?
Can you provide us with the recent trends in rates for the
guarantee loans, the rate at the current time and projections
for the coming fiscal year?
Ms. Trevino. I can get those for you, yes.
[The information follows:]
Lenders and borrowers agree to the interest rate for
guaranteed loans. Interest rates over the past 12 months have
ranged between 4.5 and 5.5 percent. We expect interest rates to
remain at the higher end of the range over the next few months.
Ms. DeLauro. Okay. Okay, you understand and the chair knows
this, as does my colleague Mr. Farr, who is the ranking member,
I spend a lot of time on this committee putting back funds to
rural America that have been cut. Because, in fact, it is true,
rural America suffers severely. And what we need to be about is
trying to use the resources that we have in order to be able
through your good offices to be able to provide them with this.
And if we are going to now take a look at the focus,
continued focus on urban America, and I am from Connecticut. So
that what is going to happen then with regard to our rural
communities without some of these efforts?
So I will continue to work here with this committee, et
cetera, to see what we can do about restoring this. Yes?
Ms. Trevino. To answer your question earlier, it would take
about $40 million to do $1 billion, and that is about what we
did last year.
[The information follows:]
The program would need $53.023 million in budget authority
to support $1.121 billion in program level. This budget
authority would maintain the same program level as the program
level available in the FY 2010 enacted budget.
Mr. Kingston. And I think another issue that kicks in is on
restructuring of Fannie and Freddie. That will have a ripple
effect on the mortgage business because I believe--and Rosa, I
don't know exactly what the stat is--but between FHA, Fannie,
and Freddie, of $14 trillion in mortgages out there, that about
90 percent of it is from those three pots. And if you
restructure those----
Ms. Trevino. Yes, sir. About 80 percent of our guarantee go
into either a Ginnie or a Fannie/Freddie into the secondary
market.
Mr. Kingston. Yes.
Ms. DeLauro. I think we just have to address on this
committee, Mr. Chairman, how we can address this issue.
Mr. Kingston. Yes.
Ms. DeLauro. Because it is at the core of the economic
mission here.
Thank you very much, Mr. Chairman.
I thank you, too, Mr. Bishop.
Mr. Kingston. Thank you.
And I have one more question, but Mr. Bishop, do you want
to----
Mr. Bishop. Thank you very much.
Let me apologize for not being here for much of the
hearing. I have been trying to monitor via email. I had a
responsibility as ranking member of another subcommittee that
was meeting, and I had to be there.
RURAL AMERICA
But I am very much interested in the discussions that have
taken place and continuing those regarding rural housing, rural
health, broadband, and of course, rural utilities related to
water and sewer projects. But I agree with Ms. DeLauro that we
have a very, very, very strong mission and concern with regard
to rural America.
We have had economic challenges over the past few years,
but when America has a cold, rural America has pneumonia. And
it is really Rural Development at USDA that has the
responsibility of kind of getting us healthy.
And it has been a long time since rural America has enjoyed
good health. So I am very, very interested in your mission and
how we can help you. And given the budget difficulties that we
are facing, I want to make sure that within our capacity that
we do everything possible to help you to carry out your
mission.
RURAL MICROENTREPRENEUR ASSISTANCE PROGRAM
My specific question has to do with the Rural
Microentrepreneur Assistance Program. It was a major new
initiative that was created in the 2008 farm bill, providing
funding to community-based organizations to make small loans
and technical assistance to microentrepreneurs.
Can you explain the actual application procedure for the
program? In particular, what the credit requirements are for
the assistance, and what percentage of approved projects have
been submitted by minority applicants--Hispanic, Indian--and
whether or not you maintain statistics on applicants who don't
get the assistance?
This is extremely important because I am aware that the
programs cost much less than the traditional loan programs, but
many of them have been very, very, very effective in creating
jobs and stimulating economies. In urban areas, for example, I
have a couple of areas in Albany, Georgia, for example, where
they have worked quite well.
So if you could address that, I would appreciate it. And
any comments that you might have on how we could expand and
improve access to the program so that more rural residents in
particular, and particularly more minority residents can have
access to it?
Small and disadvantaged farmers is a target of the
department, and we are pleased with that. But small and
disadvantaged entrepreneurs in rural areas ought to also be a
target, and I would like to hear your comments on that and tell
us how we could help you to enhance that mission that was set
forth in the 2008 farm bill and perhaps enhance it as we go
forward to 2012?
Mr. Tonsager. Thank you, Congressman.
[The information follows:]
The Rural Microenterprise Assistance Program (RMAP) was
implemented in FY 2010. The first round of loan and grant
awards were made in September 2010. The loan documents between
the Agency and the Microdevelopment Organizations (MDO) were
executed during the period of October-December 2010. MDOs are
just starting to use their loan funds to make micro loans. MDOs
are required to submit program activity reports quarterly which
will include racial and ethnicity information of their
microborrowers. MDOs' quarterly reports are not required to
report information on applicants not approved for loans. The
Agency will conduct a Civil Rights Compliance Review of each
MDO every three years which will include the statistic of
applications received but denied a loan. One of the priorities
of the RMAP program will be to focus in underserved areas and
the Agency will have better data through this fiscal year.
Regarding the underwriting requirements, microborrowers
will be suject to a ``credit elsewhere'' test so that the MDO
will make loans only to those microborrowers that cannot obtain
business funding of a maximum of $50,000 or less at affordable
rates and on acceptable terms from other sources. Eligible
microloan purposes are spelled out in the regulations. The MDO
will establish their credit standards and their loan policies
which are provided to the Agency. The MDO must provide evidence
to show they have demonstrated experience and the capacity to
manage the microloan revolving loan fund.
I just want to offer a thought, and I am going to ask
Administrator Canales to speak to it.
The exciting thing about working in rural America is the
thousands and thousands of communities, peoples, groups,
organization, local coops, rural electric systems that really,
really work at this and really, really care about it. And what
we do with our mission is try and align ourselves as closely
with that group of people as we possibly can and give them all
the tools we can possibly give them to aggressively go out
there and help rural America.
And there is just an enormous number of people with a lot
of skill sets. This particular program is tremendously
advantageous to those kinds of folks who really want to go out,
do a small business, create some jobs, and be part of the
solution that we really need to get to.
With that, I will ask Judith if she will address the
questions that you have raised.
Ms. Canales. Good morning, Congressman. Thank you so much
for this opportunity to address the panel and also for your
interest in the Rural Microentrepreneur Assistance Program,
which, as you know, was authorized in the 2008 Farm Bill.
Indeed, at this point in time, having completed one round,
two rounds, we have already been able to provide for $37
million worth of revolving loan funds, meaning 63 loans that
have been conducted throughout the United States, as well as,
in addition to that, 73 grants, totaling $9.7 million. And that
is rounds one and two.
We are currently in the phase of reviewing the round three
group. This application is a competitive application. Because
it is a new program, we are very much learning about the
program also. Not to say we don't have experience operating
revolving loan funds, but because it offers a new emphasis and
this new emphasis meaning it is for being able to do micro
lending.
So micro lending in the sense of a business that is 10
employees and below, and also the fact that we are also able to
provide grants to the organizations that are actually
conducting these loan programs, this is something that is new
for us. What occurs very often and usually, is that
organizations basically apply for revolving loan funds and
don't have this kind of access. And so, these are very critical
pieces.
The other aspect to this is that what we are doing very
strongly is to promote what I call geographic diversity,
meaning being able to have these loan programs conducted
throughout the United States. And then throughout the United
States, as you also well know, is the opportunity to be able to
work with the various communities that you have just described.
In the long run, it is all about working with an
intermediary at the local level to bring access to capital to
prospective rural businesses.
Mr. Bishop. Just for the record, and I know my time has
expired, I see. But could I get you to provide me with a list
of the----
Ms. Canales. Awardees?
Mr. Bishop [continuing]. Awardees for the country, and
particularly for Georgia?
Ms. Canales. Yes, sir.
And as a matter of fact, I have met with some organizations
from Georgia, who are highly engaged and are looking at just
different parts of the State because they want to be able to,
which I think this is a very good thing, make sure that no part
of Georgia is uncovered.
[The information follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
So that benefits all of you from Georgia, but that is
something that I have been encouraging all of our State offices
because, as you well know, we operate through a field system
for Rural Development and having State offices. And I have
asked our program directors to look at every--at your State and
find out who is covered. And if we don't have an area that is
covered that is rural, then we need to make sure that there is
an opportunity for those communities to get served.
Mr. Bishop. Because there are lots of communities that need
the assistance but don't have microentrepreneur programs.
Ms. Canales. An intermediary, yes.
Mr. Bishop. And there are some that have the programs, but
probably could benefit from your resources.
Ms. Canales. Absolutely, sir. And I would be happy to get
you the information, and we are conducting training for our
staff on this program because, again, it is a new program as
far as our menu of programs. We have been operating, like I
said, revolving loan funds for several years in other cases,
but the other part to this, too, is that we, of course, will be
conducting a stakeholder meeting of all the awardees to this
point in time so that we can get more feedback as to the
intricacies of the program and how we can improve it.
Mr. Bishop. The City of Albany, Georgia, has a
microentrepreneur program. I don't know if they are
participating with USDA at this point or not. But they have got
several very, very good success stories, which have created
spinoff businesses from the original microentrepreneur who was
first funded.
And apparently, they do a good job with the technical
assistance, and I want to make sure that I connect them with
you if they are not already connected.
Thank you very much, Mr. Chairman. I yield back.
COMMUNITY FACILITIES PROGRAM
Mr. Kingston. Thank you, Mr. Bishop.
Ms. Trevino, I wanted to ask a couple of questions to you
for the record. If you could just get back to us on the
community facility guarantee program versus the direct
community facility loan program. And specifically, on the
community facility guarantee program, how many defaults have
there been? When did they occur? Why did they occur?
And have the rules and standards changed appropriately, and
what steps are you taking to address the operation? I don't
know if you would have those stats.
Ms. Trevino. I cannot give you the numbers of the amounts
that have defaulted, but just to tell you that the default rate
in the guarantee program tends to be more effective than the
direct program because we make fewer loans there. However, the
loans are larger. That is where we fund a lot of the big
hospitals, the $10 million and more projects. So a loss of just
one has a huge impact on the portfolio and, therefore, affects
the----
Mr. Kingston. But you want to eliminate it?
Ms. Trevino. That is the one that we have asked because the
direct program right now is a negative subsidy.
Mr. Kingston. Yes.
Ms. Trevino. And so, we can increase that and try to cover
any of the ones that aren't going to be met under the guarantee
program.
Mr. Kingston. Okay. If you could get back to me on that?
[The information follows:]
The total losses for the Communities Facilities guaranteed
loan program beginning in March, 1997 through February, 2011
are $70,221,093.24.
The four largest losses in the history of the program
occurred between August, 2006 and September, 2009. These
totatled $43,218,176, or 61 percent of the total losses in this
period. Three of these loans were obligated in 2000 and one was
obligated in 2005. Two of the loans, totaling just over $23
million, were made by non-traditional lenders without the
required regulatory oversight. The other two loans, totaling
just over $19 million, were made to commercial lenders. Two of
the loans were for golf courses, and two were for hospitals.
One of the lenders continues to service its debt, and we expect
to collect an additional $3.5 million.
These losses were primarily due to golf courses and
nontraditional lenders/investment bankers. As a result, we have
strengthened our oversight and standards for recreational
facilities and nontraditional lenders wishing to participate in
the program.
Historically, the 55 loans in which the program has
experienced a loss are comprised of 25 health care facilities,
primarily assisted living and nursing homes; 6 recreational
facilities, the two largest losses being golf courses; 6
schools; 5 museums; 5 child care facilities; 4 community
centers; and 4 other assorted facilities.
BLENDED PUMPS AUTHORITY
Mr. Kingston. And Under Secretary, as you know, we had a
vote on the floor about the ethanol blender program, and it was
261 to 158. So it failed on a bipartisan basis. I am not sure
what the Senate is going to do with it, obviously. But there
doesn't seem to be legislative support based on that vote.
But the other concern is that there is not legislative
authority on it. It appears that the USDA is starting a new
program without a farm bill authorization or without amendments
or without legislation, and I wanted you to react to that.
Mr. Tonsager. We are evaluating an opportunity to provide
some assistance for blender pumps in our programs. I can't
speak directly to it because it is in the development phase of
the regulation. So I can't get to the details of that.
We would not pursue it if we did not believe we had
authority to do it. We do believe that. We have gone through
our general counsel's office, evaluated that.
Mr. Kingston. Do you know where they cited that authority?
Mr. Tonsager. I don't. Offhand, I don't have it.
[The information follows:]
Section 9007(a)(2) authorizes the Agency to fund parts of
`renewable energy systems' as well as renewable energy systems
in whole. The Agency's definition of `renewable energy system'
in its current regulation at CFR 4280.103, specifically
includes `delivery' as one aspect of such a system. The Agency
has determined that a flexible fuel pump is a uniquely critical
aspect of a biofuel `renewable energy system' which the Agency
believes covers the conversion of the biomass through the
dispensing of the biofuel to a vehicle. The Agency believes
this interpretation is consistent with the authorizing statute
and its corresponding regulation.
The policy rationale for the Agency to include flexible
fuel pumps in Rural Energy for America Program is to address a
barrier that the Agency has determined impedes the broader use
of biofuels as a liquid transportation fuel in the United
States. For example, one major aspect of this barrier derives
from two scenarios. The first is one of an insufficient
availability of higher ethanol-blend fuels in the market place
that discourages Americans from purchasing flexible fuel
vehicles that can burn such higher ethanol-blend fuels and does
not provide a sufficient level of higher ethanol-blend fuel to
supply the existing flexible fuel vehicle fleet to fully take
advantage of the fleet's ability to consume additional biofuel.
The second is one of an insufficient number of flexible fuel
vehicles on the road to encourage fuel station owners to expend
the capital necessary to install flexible fuel pumps in
response to market forces. By allowing Rural Energy for America
Programs to provide financing through grants and loan
guarantees to encourage the installation if flexible fuel pumps
in rural areas, the Agency believes it can help overcome this
barrier. The Agency acknowledges that there are other similar
biofuel examples, including barriers to biodiesel.
The Agency recognizes that Rural Energy for America Program
is designed to address a variety of renewable energy and energy
efficiency goals. With the inclusion of flexible fuel pumps for
Rural Energy for America Program funding, the Agency will
ensure that it will not ignore the other important goals and
purposes of the program.
Mr. Kingston. I think that would be of interest to us, and
one of the goals that this Congress has set is not to create
new programs unless you eliminate another program and you can
justify the creation of it. It is not--I think conceptually
there is certainly good argument for it, but with budget
constraints and that vote on the floor of the House being
bipartisan and pretty overwhelming against it, it is probably
best to delay that unless we can show hard-core evidence of
results immediately.
Do you think we will be able to or what do you--this
committee would be very interested in that. And do you know how
much that is going to cost per fuel station?
Mr. Tonsager. Again, I am reluctant to speak regarding it
because of the regulatory writing process that we are in right
now.
Mr. Kingston. And how would you handle the charge, say, of
a large chain, you know, somebody who has 200 gas stations
versus a mom-and-pop? How would you choose between the two of
them?
Mr. Tonsager. Again, I am sorry to continue to cite the
program being in the review process. But generally, general
counsel says I should not have a discussion in public when it
is in that particular process.
Mr. Kingston. When does the review process end?
Mr. Tonsager. Quite soon.
Mr. Kingston. All right. Well, Mr. Bishop, if you do not
have any other questions, and we will have maybe some, a few
more for the record. But we certainly appreciate your testimony
today. As usual, Mr. Young goes unscathed. I think there has
got to be a way----
[Laughter.]
Mr. Kingston. I think, Mr. Adelstein, you should give him a
little broadband so he can catch some of this. But we certainly
appreciate your testimonies today and all your answers.
Thanks.
The committee stands adjourned.
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