[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.
    [The information follows:]
    


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
    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.
    [The information follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    
    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.
    [The information follows:]

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    
    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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