[Senate Hearing 113-557]
[From the U.S. Government Publishing Office]






                                                        S. Hrg. 113-557

                 THE IMPORTANCE OF REGIONAL STRATEGIES
                     IN RURAL ECONOMIC DEVELOPMENT

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

                             JOINT HEARING

                               before the

                       COMMITTEE ON AGRICULTURE,
                        NUTRITION, AND FORESTRY

                          UNITED STATES SENATE

                                and the

                         SUBCOMMITTEE ON JOBS,
                         RURAL ECONOMIC GROWTH
                         AND ENERGY INNOVATION



                    ONE HUNDRED THIRTEENTH CONGRESS

                             SECOND SESSION


                               __________

                              MAY 1, 2014

                               __________

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

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]



  Available via the World Wide Web: http://www.agriculture.senate.gov
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                          Washington, DC 20402-0001













            COMMITTEE ON AGRICULTURE, NUTRITION AND FORESTRY



                 DEBBIE STABENOW, Michigan, Chairwoman

PATRICK J. LEAHY, Vermont            THAD COCHRAN, Mississippi
TOM HARKIN, Iowa                     MITCH McCONNELL, Kentucky
SHERROD BROWN, OHIO                  PAT ROBERTS, Kansas
AMY KLOBUCHAR, MINNESOTA             SAXBY CHAMBLISS, Georgia
MICHAEL BENNET, COLORADO             JOHN BOOZMAN, Arkansas
KIRSTEN GILLIBRAND, NEW YORK         JOHN HOEVEN, North Dakota
JOE DONNELLY, INDIANA                MIKE JOHANNS, Nebraska
HEIDI HEITKAMP, NORTH DAKOTA         CHARLES E. GRASSLEY, Iowa
ROBERT P. CASEY, Jr., PENNSYLVANIA   JOHN THUNE, South Dakota
JOHN WALSH, MONTANA

   SUBCOMMITTEE ON JOBS, RURAL ECONOMIC GROWTH AND ENERGY INNOVATION

                     SHERROD BROWN, Ohio, Chairman

TOM HARKIN, Iowa                     JOHN THUNE, South Dakota
KENT CONRAD, North Dakota            RICHARD G. LUGAR, Indiana
MAX BAUCUS, Montana                  SAXBY CHAMBLISS, Georgia
E. BENJAMIN NELSON, Nebraska         CHARLES GRASSLEY, Iowa
ROBERT CASEY, Jr., Pennsylvania      JOHN HOEVEN, North Dakota
AMY KLOBUCHAR, Minnesota

             Christopher J. Adamo, Majority Staff Director

              Jonathan J. Cordone, Majority Chief Counsel

                    Jessica L. Williams, Chief Clerk

              Thomas Allen Hawks, Minority Staff Director

       Anne C. Hazlett, Minority Chief Counsel and Senior Advisor

                                  (ii)

















  
                            C O N T E N T S

                              ----------                              
                                                                   Page

Joint Hearing(s):

The Importance of Regional Strategies in Rural Economic 
  Development....................................................     1

                              ----------                              

                         Thursday, May 1, 2014
                    STATEMENTS PRESENTED BY SENATORS

Heitkamp, Hon. Heidi, U.S. Senator from the State of North Dakota     1
Johanns, Hon. Mike, U.S. Senator from the State of Nebraska......     3

                                Panel I

O'Brien, Doug, Deputy Under Secretary for Rural Development, 
  United States Department of Agriculture, Washington, DC........     6

                                Panel II

Keeley, Dawn, Executive Director, Red River Regional Council, 
  Grafton, North Dakota..........................................    17
Person, Gary, City Manager, City of Sidney, Sidney, Nebraska.....    19
Tilsen, Mark, Chief Executive Officer, Native American Natural 
  Foods, Kyle, South Dakota......................................    21
Fluharty, Chuck, President and Chief Executive Officer, Rural 
  Policy Research Institute, University of Missouri, Columbia, 
  Missouri.......................................................    24
                              ----------                              

                                APPENDIX

Prepared Statements:
    Fluharty, Chuck..............................................    38
    Keeley, Dawn.................................................    44
    O'Brien, Doug................................................    57
    Person, Gary.................................................    62
    Tilsen, Mark.................................................    70
Question and Answer:
Fluharty, Chuck:
    Written response to questions from Hon. Debbie Stabenow......    84
Keeley, Dawn:
    Written response to questions from Hon. Debbie Stabenow......    90
O'Brien, Doug:
    Written response to questions from Hon. Debbie Stabenow......    92
Person, Gary:
    Written response to questions from Hon. Debbie Stabenow......    94
Tilsen, Mark:
    Written response to questions from Hon. Debbie Stabenow......    97


 
                 THE IMPORTANCE OF REGIONAL STRATEGIES
                     IN RURAL ECONOMIC DEVELOPMENT

                              ----------                              


                         Thursday, May 1, 2014

 United States Senate, Subcommittee on Jobs, Rural 
             Economic Growth and Energy Innovation,
          Committee on Agriculture, Nutrition and Forestry,
                                                     Washington, DC
    The Subcommittee met, pursuant to notice, at 10:01 a.m., in 
room 328A, Russell Senate Office Building, Hon. Heidi Heitkamp, 
Chairwoman of the Subcommittee, presiding.
    Present: Senators Heitkamp, Brown, Donnelly, Casey, 
Johanns, and Thune.

 STATEMENT OF HON. HEIDI HEITKAMP, U.S. SENATOR FROM THE STATE 
                        OF NORTH DAKOTA

    Senator Heitkamp. Good morning, and welcome to the first 
hearing of the Subcommittee on Jobs, Rural Economic Growth and 
Energy Innovation in the 113th Congress.
    I would like to just take a quick moment to give my best 
wishes and prayers and the support of our Committee members 
and, really, I am sure the entire Senate to Senator John 
Boozman, who is recovering from emergency open heart surgery. I 
look forward to seeing him very soon across the table in the Ag 
Committee.
    We are here to talk about the importance of regional 
strategies in rural economic development--what has worked to 
boost economic development in rural communities and what can be 
done in rural areas to achieve long-term, sustainable economic 
growth. It is a topic that presents great opportunity for North 
Dakota and many other States represented here on the panel.
    ``Regional strategies'' may sound vague, but the main point 
is that they target resources to where they have the most 
impact locally.
    That could mean using resources to modernize a hospital as 
part of a population retention strategy so it can support more 
people in a community and state-of-the-art services.
    It could mean working with multiple counties and State 
officials to install high-speed Internet services to support a 
plan aimed at attracting new businesses.
    Or it could mean supporting local nonprofits and businesses 
by encouraging them to promote job training initiatives that 
meet the needs of prominent industries in a particular region.
    You know, I am a product of a small town in North Dakota. 
In fact, I love to tell the story that I grew up in a town of 
90 people, and my family was one-tenth of the population.
    [Laughter.]
    Senator Heitkamp. We certainly understood that the role of 
those small towns is to support the dominant industry, which is 
agriculture. But we also know that if we are going to continue 
to grow and really use every available land resource in our 
country, we need to diversify rural America.
    I think because of my upbringing, I am acutely aware of the 
economic and growth challenges many rural communities face, low 
populations, low tax bases, long distances between communities, 
and rural towns tend to rely more on agricultural production as 
a main driver of their economic activity, subjecting them to 
price swings of global markets and exposure to the weather 
risks inherent in farming.
    In order for small communities, like my home town, to 
continue to survive, it is important that they become connected 
to the global marketplace and that we continue to build and 
support our towns. This requires investments in infrastructure 
such as high-speed Internet and transportation. Equally 
important, growing small town economies requires careful 
planning that capitalizes on regional strengths.
    The United States Senate Agriculture Committee recognized 
the importance of these regional strategies by including in the 
2014 farm bill new, targeted Federal investments for USDA 
projects that support long-term regional strategies. Senator 
Brown, who told me he was coming, in particular, I think, 
deserves recognition for his leadership in championing the 
regional language in the farm bill. Through this new approach, 
the Committee--he was not even here to hear me brag about him.
    [Laughter.]
    Senator Heitkamp. Through this new approach, the Committee 
hopes rural communities target investment to boost economic 
development by harnessing their strengths.
    We need to reinforce the importance of recent economic 
strides in rural communities and encourage others to do the 
same. Even though North Dakota has been and continues to be an 
agriculture State, many of our farmers--in fact, most of the 
farmers that I know--still get much of their income from off-
farm sources. Making investments based on regions' strengths 
helps everyone.
    In North Dakota, we have great examples of regional 
economic success, whether it is the Jamestown Hospital buildout 
or whether it is the Dakota College at Bottineau getting help 
to help mid-sized producers sell locally grown vegetables. 
There is so much that communities can do working together.
    I have to tell you I am particularly excited to hear from 
Dawn Keeley from Grafton, North Dakota, one of our witnesses 
today. She has more than 24 years of experience--she does not 
even look 24, but she has more than 24 years of experience in 
economic development in our State and was recently named the 
Executive Director of the Red River Regional Council.
    All of us today support our rural communities and want them 
to grow responsibly. Today we have a chance to hear of 
excellent examples of how we can do that, learn from the 
examples across our State, and continue to support rural 
America.
    I now will turn it over to Senator Johanns, our Ranking 
Member on this Committee, for his opening comments.

STATEMENT OF HON. MIKE JOHANNS, U.S. SENATOR FROM THE STATE OF 
                            NEBRASKA

    Senator Johanns. Well, thank you, Madam Chair, for calling 
this hearing. We are talking about a very important topic today 
not only to our two States but really across the country.
    In Nebraska, all but a handful of our counties are rural, 
with the nearest metro area oftentimes far away. When I was 
Governor of our State, I visited all of those counties. I have 
done that again as a United States Senator. I have witnessed 
firsthand some real trials, and I have witnessed firsthand some 
triumphs.
    Today we are going to get a chance to hear about Sidney, 
Nebraska. It is in Cheyenne County, and it is a real rural 
development success story. Gary Person and his community have 
made tremendous strides in the Nebraska Panhandle, and I could 
not be more excited that Gary is here with us today to talk 
about his community.
    As Secretary of Agriculture, I administered USDA Rural 
Development programs and saw firsthand the challenge of rural 
development on a national level. It is just simply a very 
difficult task. Despite decades of work on rural development, 
we have still seen steady population decline in rural 
communities across the country. There is no one factor that 
explains this trend, but most would agree that thriving rural 
areas are in the best interest of this country, especially in 
States like ours.
    That is why I have made rural development a priority 
throughout my years of public service. Our communities in 
Nebraska have so much to offer, small to large, and they 
contribute greatly to the vibrancy of our great State. It is 
hard work attracting or growing businesses and jobs anywhere, 
but that is especially true in our small towns.
    It is especially difficult when investors look at you 
differently because you are from a small community. All too 
often these communities are written off because the 
conventional wisdom says that small towns inevitably are losing 
population as people migrate to the city and, therefore, there 
is only one path forward for them. I could not disagree more.
    The roots of successful development are there in rural 
communities in Nebraska and across this country. Hard work and 
determination are a part of it. Rural America is known for 
these values for a reason, and they are needed to create 
successful entrepreneurs.
    Many rural areas also have an abundance of natural 
resources. We cannot forget that most rural areas do and will 
always depend on agriculture as their economic foundation, 
appropriately so. Livestock production especially is often 
forgotten in rural development, and sometimes it is even 
discouraged, even by the rural communities.
    In Nebraska, our rural economy has grown as we have 
increased the number of cattle on feed and ethanol plants. 
Strong prices across Ag products have helped drive new 
investments in rural communities. But we all agree that alone 
has not stopped the out-migration from rural areas.
    So it is clear we need some new approaches. We are here 
today to talk about one such approach. Regional strategies are 
efforts by groups of communities to promote their region and 
its relative strengths. Working together, it is a common value 
we share.
    Too often small towns think that they have to work 
individually all alone to attract investment and growth. By 
acting regionally, though, there are opportunities that may do 
more to promote growth in flourishing communities than limiting 
investments to the borders of one single town.
    We are doing this in Nebraska. Regional economic 
development groups are working with one another and the State 
of Nebraska to maximize opportunities. As Governor, I had the 
pleasure of working with these groups. Now the farm bill we 
passed earlier this year recognizes this shift by setting aside 
10 percent of funds from rural community facilities, utilities, 
and businesses, and cooperative development categories. These 
funds are targeted specifically toward multi-jurisdictional 
projects. It is an effort to offer incentives to communities to 
work together to find solutions, infrastructure needs, and 
other economic issues.
    In some areas, towns and counties work better than others. 
That is reality. But maybe this targeted funding will give some 
fence sitters the push they need to get past those old 
rivalries and work together within the region.
    Still, some rural communities are not content to wait for 
USDA funds to face the challenges. They have recognized that 
while funding is a part of the solution, there are issues that 
also impact their future. While it is generally not in the 
jurisdiction of this Committee, it would help these towns if 
the Federal Government would lighten the regulatory burden. 
Instead, we have seen an onslaught of regulations over the last 
5 years that add expense to creating jobs and doing more with 
our infrastructure dollars. Rural towns and regions often lack 
the resources to comply.
    I think all members of this Committee would agree that 
agencies should give special attention to impacts on rural 
areas when considering new regulations. They just oftentimes do 
not have the resources to deal with that.
    So once again, I thank you, Chair Heitkamp, for this 
hearing, and I thank the panelists for being here. I look 
forward to the testimonies.
    Senator Heitkamp. I think it is clear that this Committee 
has been so blessed to not only have a great Senator from a 
State that we swap back and forth on who is going to be top in 
wheat and top in a number of our commodities, but he has 
brought the wisdom of someone who has sat in the chair of the 
Secretary of Agriculture. I know that I have learned a great 
deal and always appreciate your comments. Thank you, Senator.
    Before we introduce our next panel, I believe Senator 
Thune, who has joined us, would love to introduce his guest and 
constituent, Mark Tilsen, CEO of Native American Natural Foods. 
He is on the second panel, but we wanted to make sure that you 
had a chance to introduce him.
    Senator Thune. Well, thank you, Madam Chair, and thank you, 
Ranking Member Johanns. I appreciate very much your holding 
this hearing today and providing this Subcommittee with an 
opportunity to hear from leaders in rural America who have 
established excellent examples of how rural development really 
should progress. I am pleased that we have with us here today 
Mr. Mark Tilsen, who is an accomplished businessman and 
respected member of the South Dakota business community and an 
enrolled member of the Oglala Sioux Tribe. He is the current 
president of Native American Natural Foods, which has developed 
and markets the Tanka Bar, a line of buffalo-and cranberry-
based, high-protein, low-carb snacks sold on more than 375 
Indian reservations and carried in over 6,000 retail locations 
in all 50 States.
    Mr. Tilsen is a partner at Lakota Express, Inc., which is a 
direct marketing and customer care management company. In 
addition to his current work with these organizations, Mr. 
Tilsen has co-founded a number of community organizations and 
businesses throughout the region and has led several tribal 
economic development efforts.
    I look forward to Mr. Tilsen offering his firsthand 
knowledge and experience to the Ag Committee as we consider how 
to advance economic development strategies in small communities 
and work with USDA to successfully implement farm bill rural 
development programs.
    Mr. Tilsen is a valued member of the South Dakota business 
community, and his demonstrated leadership in the economic 
development world can help the Committee identify areas where 
we can better provide support to stimulate economic growth in 
rural areas and Indian reservations. I want to thank Mark for 
being here today and very much helping inform our thinking and 
help shape an agenda that would be good for rural America and 
good for our tribes.
    So thanks for taking time from your busy schedule, and 
thank you, Madam Chairwoman, for inviting Mr. Tilsen and you, 
Senator Johanns, as well for holding this hearing and what I 
hope will be a very productive meeting.
    I want to point out, this is just for those of you--a 
little marketing here. This is what Tanka looks like, and very 
high protein and low fat and healthy. So be sure you look for 
this when you get out there.
    Thank you.
    Senator Heitkamp. Senator Thune, if you could guarantee 
that everyone would be as fit as you if they ate Tanka Bars----
    [Laughter.]
    Senator Heitkamp. You could not keep up with the demand, I 
am pretty sure.
    We have excellent panelists, and in the interest of time, I 
am going to ask that members' opening statements be submitted 
for the record. We will recognize Senators based on the order 
of appearance, and I am going to go ahead and introduce our 
first panel.
    I am pleased to introduce Deputy Under Secretary Doug 
O'Brien. Mr. O'Brien serves as Deputy Under Secretary for Rural 
Development at USDA where he is responsible for overseeing 
policy implementation for the rural development mission area. 
Prior to his appointment, Mr. O'Brien served as senior adviser 
to Secretary Tom Vilsack and Chief of Staff to Deputy Secretary 
Kathleen Merrigan. Before joining USDA, Mr. O'Brien served as 
assistant director of the Ohio Department of Agriculture and 
also served as senior adviser to Iowa Governor Chet Culver; as 
interim director for the National Agricultural Law Center in 
Fayetteville, Arkansas; and as a senior staff attorney at Drake 
Agricultural Law Center in Des Moines, Iowa. He is a former 
counsel for the U.S. Senate Agriculture Committee where he 
worked on the 2002 farm bill, and he was raised on a 
diversified farm in Iowa, so he knows of where he comes.
    Welcome Mr. O'Brien. If you could keep your comments to 5 
minutes, and then we will go into questions.

  STATEMENT OF DOUG O'BRIEN, DEPUTY UNDER SECRETARY FOR RURAL 
 DEVELOPMENT, U.S. DEPARTMENT OF AGRICULTURE, WASHINGTON, D.C.

    Mr O'Brien. Absolutely. Thank you. Chairwoman Heitkamp, 
Ranking Member Johanns, Senator Thune, it is a pleasure to join 
you today to discuss rural development's use of regional 
strategies in economic development.
    Strong rural communities are the key to a stronger America. 
To build stronger economies, it is vital that rural places 
create regional strategies to remain competitive.
    Rural America sees historic opportunities because of its 
unique assets, but it also faces historic challenges. The 
potential in rural America is vast. The bioeconomy, renewable 
energy, rural manufacturing, local and regional food systems, 
and, of course, production agriculture provide new markets and 
expand the potential for economic growth to spur the Nation's 
economy. Yet USDA data indicates that the recent economic 
recession has resulted in the highest rural poverty rates in 
rural America since the mid-1980s. The USDA's report, ``Rural 
America at a Glance,'' points to stalled job growth in non-
metro counties, an increase in poverty--particularly among 
children--and a declining population. This combination of 
challenges and opportunities demands innovative approaches from 
the Federal Government such as support for regional strategies.
    While USDA has worked to support regional rural strategies 
in recent years, we are excited that Congress provided for a 
regional authority in the 2014 farm bill. This authority 
establishes a priority to fund projects that are part of long-
term community and economic growth strategies in rural places. 
Implementation of this new authority will help us continue to 
better leverage resources and coordinate programs so that USDA 
can more effectively support rural places that work 
collaboratively.
    This is the right approach. Extensive studies from entities 
such as the Organization for Economic Cooperation and 
Development show investments aligned to regional strategies can 
yield better results. Their recommendations to policymakers 
include: investment in less economically developed regions; a 
use of pro-growth strategies based on regional assets; the 
implementation of education and training for low-skilled 
workers; coordination of infrastructure investment with other 
development strategies; and a focus on institutions that 
facilitate collaboration and communication.
    One key way that rural development has been able to better 
support regional strategies is with its involvement with the 
White House Rural Council. This collaboration helped develop 
things such as the Rural Jobs and Innovation Accelerator 
Challenge, which leverages existing financial resources and 
technical assistance from various Federal agencies to 
strengthen regional industry and accelerate economic growth.
    For example, in Louisiana, the I-20 Corridor Regional 
Accelerator will integrate the community capacity building of 
Winrock's Capacity Assistance for the Regional Economy program 
with business and economic development led by Louisiana Tech 
University.
    In another example, Rural Development's Stronger Economies 
Together program, launched with land grant university partners 
and the regional rural development centers, enables rural 
communities and counties to work together to implement multi-
county economic blueprints to build on a region's current and 
emerging strengths.
    North Carolina's Sandhills Stronger Economies Together 
planning effort will support agriculture business in the region 
through training and marketing, business planning, alternative 
business structures, succession planning, and the creation of a 
food hub.
    Rural Development's history of funding infrastructure has 
also produced an array of benefits for rural regions. Since 
1938, Douglas Electric Cooperative has delivered electricity to 
customers in southwest Oregon. Concerns over lost economic 
development led the utility to establish Douglas Fast Net and 
provide broadband to the region. The result is better education 
and training, a stronger economy, and a 21st century business 
environment.
    Leveraging Federal resources to strengthen regional 
economic development efforts is an agency best practice, and in 
a recent effort, the Federal Government's Promise Zones 
Initiative coordinated partnerships for investments in high-
poverty urban and rural and tribal communities to create jobs 
and increase economic activity. For instance, Kentucky's 
Promise Zone road map will reduce contamination in major 
watersheds, help portions of the region maintain access to 
quality health care, and expand a food program to low-income 
residents and multifamily housing complexes to boost economies 
in this eight-county region.
    Initiatives such as these are integral to developing an 
array of innovative tools to help all regions grow. USDA and 
Rural Development will continue to build on these successes and 
help rural communities grow sustainable economies.
    I appreciate the opportunity to testify today before 
members of the Subcommittee. Thank you for your support of 
Rural Development programs, and I am happy to answer your 
questions at this time.
    [The prepared statement of Mr. O'Brien can be found on page 
57 in the appendix.]
    Senator Heitkamp. Thank you so much, Mr. O'Brien.
    I am going to start out just kind of with a broad question, 
which is: How developed is the capacity for regional strategic 
planning in rural America today?
    Mr O'Brien. Well, that is a great question, Madam Chair, 
and I think that the answer has to be it really does vary over 
geography. In my experience, there is not one particular thing 
that suggests that a place will have more capacity to do 
regional development. We see regional development in areas of 
greater need. For instance, in the Promise Zone and the region 
of southeastern Kentucky that Mr. Fluharty will talk about 
later, as well as advanced regional economic development 
efforts in North Dakota or Nebraska, some places with greater 
resources, some without.
    There are, I think, people in nearly every place across the 
United States who now know about this best economic development 
practice. Part of the reason we are so excited about the 
regional provision in the new farm bill, as Senator Johanns 
talked about is--I think it really will make a difference in 
terms of some of those community leaders, county commissioners, 
mayors, even the private business sector, who have thought 
about going through some of this extra effort.
    It is not easy work, regional economic development. It 
means collaboration. It means time away from some of the other 
priorities that these different entities have. But we know the 
results are real. The extra motivation provided by the priority 
and the set-aside, I really do think, will make a big 
difference in the long run.
    Senator Heitkamp. Because I have to tell you, I have seen 
that culture change in North Dakota, even where you see the 
largest cities doing outreach, realizing that if we can get a 
biodiesel plant in Velva, that benefits Minot, and so Minot is 
supporting that kind of effort.
    I wanted to turn to the farm bill just quickly. In the farm 
bill, obviously, we included the first of its kind set-aside 
for projects like this. Can you explain how USDA plans to 
implement our regional language, whether applications in the 
current fiscal year will benefit? Are you going to have to do 
rulemaking? If so, where are you at with that?
    Mr O'Brien. Yes, thank you for that question. You know, 
Secretary Vilsack----
    Senator Heitkamp. I should ask you a question you do not 
want me to thank you for.
    [Laughter.]
    Mr O'Brien. Oh, okay. I always thank you. I thank you just 
for being----
    Senator Heitkamp. I always feel like I am not doing my job 
if people like my questions. That is the prosecutor in me.
    [Laughter.]
    Mr O'Brien. It is okay. I appreciate the opportunity to 
talk about the implementation of the regional provision in the 
2014 farm bill. Secretary Vilsack, when he came in the 
department understood the value of regional approaches as a 
former small town mayor, State Senator, and, of course, 
Governor. So he is very much supportive of implementing the 
section as quickly as possible.
    We have spent a good bit of time in the last 2 months 
across the Department on all of our farm bill implementation. 
We have seen good success through disaster assistance and in 
rural development. We have already been able to obligate the 
dollars for the water programs.
    We will need to promulgate a rule to fully implement 
Section 6025. We have begun that process already. We will not 
be able to fully implement until the 2015 fiscal year. But 
during 2014, because you and Congress were so clear in the 
intent, we are examining our programs, particularly those 
identified in the farm bill, and looking at our current 
authority and our current discretion, whether it is points with 
the State director or the administrator, and implementing the 
intent to the greatest degree possible with the authority we 
currently have under regulation.
    Senator Heitkamp. Well, I have additional questions, but I 
am going to turn to Ranking Member Johanns for additional 
questions he has. Then if Senator Thune still has some time, we 
will go to him. And, Senator Brown, welcome.
    Senator Johanns. Madam Chair, thank you.
    If I might just offer a thought to follow up on the Chair's 
questions, because I believe this is really, really important 
to keep in mind as this is being implemented, it would be 
terribly unfortunate if 5 years from now, when we are looking 
at the next farm bill, if we looked back and saw that this 
regional concept resulted in the region developing a situation 
where 90 percent of the economic benefits from this program 
went to the biggest town in the region, if you know what I am 
saying, and the other 10 percent was sprinkled around in the 
other small towns, say to us. We do not see that we got a 
benefit out of this, and we do not think it did much 
regionally. I think that is what we are trying to get at, is 
this notion that truly everybody has got to be in this together 
in the region. That is what we are driving at. The key issue 
will be how you implement this.
    How are you going to deal with that phenomenon? How are you 
going to make sure that the small town, maybe the town of 900 
or 90 or whatever, is actually paid attention to when there is 
maybe an area in that region where you have a larger community 
that is doing a lot of right things right now today? How do you 
deal with that?
    Mr O'Brien. Well, that is an excellent question, and 
certainly a concern of ours and many of the stakeholders. I 
think one thing to note is that even with the 10-percent set-
aside, even when we apply the new preference, the other 
requirements and preferences within law still apply.
    So for instance, in our water and wastewater program, there 
are particularly preferences for towns of under 2,500, under 
5,000, then, of course, under 10,000. Those will still apply in 
the metric.
    We also have in many of our programs, including at least 
most of the four programs delineated in the regional provision, 
preference for areas of greater need. Those will still apply.
    So in terms of a watershed movement of dollars into the 
bigger places, into the places of maybe greater resources, I 
think current law already protects that, and we will certainly 
implement.
    To your point, I have seen both in this country and I have 
had the opportunity to work with OECD on regional rural 
strategies. I have seen a number of approaches where smaller 
places, I certainly do have a voice. I think more and more, 
whether you are talking about small towns of 7,000 being the 
county seat that is sort of the powerhouse, or a micropolitan 
of 70,000 that is kind of the powerhouse, I think a lot of the 
economic development practitioners realize that it is not in 
the interest of that bigger town to kind of dominate that 
regional conversation. There are assets, there are people in 
those smaller towns where that workforce will be needed for the 
region. There are natural assets whether it is based on 
agriculture or forestry or otherwise.
    So, I think that we will certainly encourage that in terms 
of just our community economic development practitioner, but it 
is a concern that we will continue to keep in mind, and I 
appreciate that comment.
    Senator Johanns. I mentioned in my opening comments the 
whole issue of regulation and the challenges that presents to 
communities. Mr. Person is here today. We have worked on these 
issues together when I was Governor and since I have been in 
the United States Senate. Sometimes the regulatory requirements 
to build that road or to do whatever are just so incredibly 
onerous for a small town. They see their very precious 
resources being burned up.
    How do we deal with that? How can USDA in your judgment, 
maybe with a boost from a regional standpoint, help our small 
communities deal with that issue and get on top of that issue?
    Mr O'Brien. I think actually the encouragement and the 
proliferation of regional approaches will help address that 
real concern of the need to have the capacity to address 
application requirements and regulatory requirements.
    As a member of an agency that has application requirements, 
we have a responsibility--and, in fact, we appreciated the 
encouragement and the direction in the farm bill--to streamline 
our regulations and our application systems, and we are working 
through that and appreciate it, because we had planned to do 
that anyway.
    On the other side of the table, the applicants, the 
communities, by encouraging them to work together, they can get 
to a scale so that they can make sure that they have the right 
type of engineer or architect or planner that can really make 
the difference to make sure that the project, whether it is a 
hospital in Jamestown or a four-county regional water system in 
Arkansas, to make sure that it is truly done right and that it 
can sustain and serve the people of those communities.
    Senator Johanns. Thank you, Madam Chair.
    Senator Heitkamp. Senator Brown.
    Senator Brown. Thank you, Madam Chair, and I appreciate 
your work on this issue, the work that--some of this work 
started from a Committee hearing we held a couple of years ago 
here--Mr. Fluharty was there, another Ohioan was there, and Mr. 
O'Brien is kind of an honorary Ohioan with the work he has done 
there, thank you for that--and developed into an amendment that 
helped us do more forward thinking regional strategies, and I 
am grateful to Chairwoman Heitkamp for helping to move that 
forward. We have seen that have an impact in my State, in 
Athens, in Wilmington, and in Somerset and in Chester Hill, and 
thank you for that.
    My questions are on a couple of issues I want to pursue, 
Mr. O'Brien. Most of rural Ohio, and especially rural 
Appalachian Ohio, are people not engaged in agriculture, 
obviously. How does rural development reach them to sort of 
figure out how to do these sort of regional programs? How do 
you find them? How do you communicate with them? How do you 
reach them? One of the most challenging places in America, I 
remember at a veterans hearing sometime ago, we were talking 
about the challenge that veterans, when they come back to 
Appalachia, are the sort of least likely to want to check into 
a local veterans service organization or office or the VSOs to 
even look at what benefits they might be eligible for. So how 
do you reach especially in Appalachian Ohio, or Appalachia--any 
one of these States in that kind of rural America?
    Mr O'Brien. Well, thank you for that question, Senator. As 
you know, I am familiar with that footprint, both in my former 
job with the Ohio Department of Agriculture and now in my work 
at Rural Development. I think Appalachian Ohio is an excellent 
example of how Rural Development needs to tailor its approach 
to the reality of the place. Athens, at University Town, 
actually has quite a bit of capacity and is really leading a 
rural angel investor type of effort as well as small business 
incubation group.
    Our job in a place like Athens and the surrounding 20, 30, 
40 miles is to plug in support, because there are some folks 
there, who know how to get to us. They know how to get to the 
small business development centers outside of their region, and 
it is maybe like a lot of other more remote or lower-resource 
areas rural areas across the country. I think we have more of a 
responsibility to help lead and provide capacity to those 
places to make sure that they can access Rural Development as 
well as Farm Service Agency, Natural Resource Conservation, and 
other USDA programs.
    The way that we have done it in Ohio and other places is to 
identify key local partners. In Ohio, it is the Appalachian 
Regional Foundation we have worked with, providing more than 
one grant to make sure that they are helping small communities 
build wealth in those places. Rural Development is also in the 
process of looking at other strategies to help build community 
economic development. In the 2015 budget, in the President's 
budget for rural development, we propose to create a very small 
group, perhaps 50 people, to look at building a pilot of a 
mobile 21st century workforce that can help areas, particularly 
areas of greater need to have the capacity to build sustainable 
plans and to access resources, not Federal or State, but 
private resources.
    Senator Brown. You have noticed from your time in our State 
and you have seen this all over the country, when an industrial 
plant closes in a small town, and there are many of them I 
think throughout Indiana, Ohio, all over, that may pay $12 to 
$15 an hour--they are not the $20 or $25 an hour union jobs, 
but they are decent wages. So often a husband and wife work at 
the same place, a small plant. If a plant like that closes, as 
we have seen throughout my State and much of the Midwest and 
other places, the whole family income--the whole family is 
turned upside down because the whole family income is lost. We 
had some provisions in the farm bill on bio-based 
manufacturing. What do we do there? How do we plug that in, 
what that does for rural America, obviously, with bio-based 
manufacturing and what it can do to build a manufacturing base 
in small town Midwest?
    Mr O'Brien. In particularly, the opportunity around bio-
based manufacturing puts rural places at a competitive 
advantage in this new and emerging subsector in the industrial 
sector. The stuff that we grow, that our farmers grow, or that 
is grown in our forests in the United States, could be made 
into high-value products, whether it be plastics or resins or 
asphalt.
    What we can do at Rural Development is leverage the 
expertise and the knowledge that we have about rural America. 
We have over 400 offices throughout the United States. We have 
over 3,800 people that work in the field that know more than 
any other member of the Federal family about the opportunities 
and the needs of those rural places. These days a lot of those 
opportunities, are bio-based.
    We think our responsibility is to support those local 
businesses and those local regional strategies that are created 
from the grass roots and support them through our financing.
    Also, I think USDA Rural Development has the opportunity to 
bring in other Federal partners, such as the Small Business 
Administration, or the Economic Development Administration, 
who, while have all intention to work in rural, simply do not 
have the footprint that we do. We do that through the White 
House Rural Council. We do that through our connections through 
our State offices.
    Senator Brown. Thank you, Madam Chair.
    Senator Heitkamp. Thank you.
    Senator Donnelly?
    Senator Donnelly. Thank you, Madam Chair.
    Mr. O'Brien, thank you for being here. In regards to the 
USDA's outreach and assistance, I was wondering if you could 
talk a little bit about the resources you have available to 
help rural communities close the skills gap so that businesses 
can find enough trained people to locate their facilities in 
these communities.
    Mr O'Brien. Senator, thank you for that question. The 
workforce development issues are some of the most critical in 
rural places. A report that I cited in my testimony actually 
cites workforce development investments many times in rural 
places are those that will get the greatest return as long as 
that investment is tied to a larger, more comprehensive 
regional economic development strategy.
    Within our programs at USDA Rural Development, one 
particular program, the business grant program, known before 
the 2014 farm bills the rural business entrepreneur grant 
program, as well as two other grant programs that we have, can 
provide resources to intermediaries that have as part of their 
strategy to do workforce development.
    Within the Federal family, I have learned over time that 
certainly the Department of Labor really has the real resources 
for workforce development. Also, part of what we have done at 
Rural Development in the last 4 or 5 years is work much more 
closely with community colleges. I have found that in many 
places community colleges, may be the only anchor institution 
in a rural region that have the capacity to plan and to work 
with all the different types of entities that are key for a 
successful strategy. Obviously, their bread and butter is 
workforce development.
    I was in western Tennessee about 3 weeks ago, in Dyersburg 
Tennessee, and saw a fantastic partnership between the 
community college there and ten small manufacturers with very 
tailored classes in workforce development to support the jobs 
to keep the people who want to stay in that rural place. We do 
have some resources and we draw on other Federal resources to 
support that kind of effort.
    Senator Donnelly. The follow-up, the other key to a lot of 
this economic development then becomes, okay, we need to have 
the skills, we need to have the skilled people. Then you look 
and you go, Do we have the infrastructure to be competitive?
    Mr O'Brien. Right.
    Senator Donnelly. I was wondering, in regards to the USDA, 
what are you doing in terms of some of our rural communities to 
help them put together a comprehensive infrastructure plan so 
that, okay, a business is willing to take a look, we may have 
enough skilled people here, but access to market and other 
infrastructure for the community?
    Mr O'Brien. That infrastructure plan is key to a small town 
such as Boley, Oklahoma, where I was last week. It's a small 
town of 1,100, a very low resource place with deep 
infrastructure needs. We have been able to help them invest in 
their water and wastewater infrastructure, but they had not 
updated their plans I think for at least a decade, if not 
decades for infrastructure. They had the exact same question 
you posed.
    We have some resources at USDA Rural Development, but I do 
need to be candid that over the last 4 or 5 years, our grant 
dollars have diminished, as have a lot of grant dollars across 
the Federal Government.
    I certainly have seen small towns and regions that have 
been able to put together and leverage dollars, whether that is 
with their regional planning organization, a COG or an ADD, or 
whatever it is in that place, with the county and with others 
to craft those strategies.
    I think the new farm bill provision provides that incentive 
to make sure that towns make those plans so the taxpayer 
dollars that you provide USDA can go farther and make the 
biggest impact in rural places.
    Senator Donnelly. One of the things I worry about is losing 
our young people in a lot of our rural communities, and it is 
jobs, it is quality of life, it is the chance to have them 
trained with appropriate skills, to have the infrastructure in 
the town or community to encourage good jobs to come. But 
losing the young people, it almost creates a spiral that 
starts. After skills and after infrastructure, what are the 
other things that you look at and say here are the kind of 
elements that are critical to keeping people at home and having 
them build their future right here?
    Mr O'Brien. Well, I think the most important element these 
days is making sure that high-speed broadband is available in 
rural places. The National Telecom Association has a great 
report on how the majority of people who grew up in a rural 
place and this is not going to be a surprise to any of you, but 
they want to stay in that rural place if they can. They asked 
about different types of amenities, and right at the top of the 
list was they simply need to have access to high-speed 
broadband.
    USDA has important programs that have enabled us to push 
broadband out in areas, particularly with some of the Recovery 
Act funding, but there is still work to do, and we work closely 
with our sister agencies to do that.
    I think another thing that people do not talk about as 
much--and a lot of this can be highlighted in some of the 
regional strategies--is realizing the cultural and the 
recreation assets in rural places. Young people more and more 
actually value the opportunity to ski or snowmobile or hike or 
fish or hunt. More and more people in urban areas with 
discretionary income are spending dollars on activities like 
that.
    One of the basic tenets of a lot of the regional strategies 
is look at the assets you have, focusing on those recreational 
and natural assets, lifting them up with some relatively low 
investments--it might be in a bike trail, it might be in a 
music festival. But it is that extra little bit that will make 
that mid-level manager for a manufacturer consider living 
there. I hear a lot about that can be the hardest part for a 
small manufacturer with 20 or 30 jobs, and they are trying to 
find that person who is kind of that mid-manager to run the 
place. They have a hard time getting that family to come to 
that rural place and stay in that rural place.
    There are great things happening in rural America. We know 
there is a great quality of life and it is lifting it up, and 
there may be a few key investments to make it an even better 
place.
    Senator Donnelly. Thank you so much.
    Thank you, Madam Chair.
    Senator Heitkamp. Thank you.
    Senator Casey, any questions?
    Senator Casey. Madam Chair, thank you very much.
    I was telling the Chairwoman recently I have been wanting 
to actually be at a hearing where she was chairing, and this is 
wonderful to see you in that position. I do not have a camera--
--
    Senator Heitkamp. It is a long story, everyone.
    [Laughter.]
    Senator Casey. I do have a phone that has a camera, but I 
will not take a picture. But this is a great----
    Senator Donnelly. I would also like to add how impressed we 
are by your nameplate, Madam Chairwoman.
    Senator Casey. That is right.
    Senator Heitkamp. See what I have to put up with? I just 
want to point that out.
    Senator Casey. But thanks for having this hearing. I know I 
was late and missed a lot of the hearing, so I will be 
respectful of both time and substance.
    But I wanted to ask one question with regard to--and I know 
that these are kind of fundamental questions for dealing with 
constituents and their questions that they have, but kind of 
the terms of art here, the multi-jurisdictional strategic 
community plan, how do you--when a constituent says to me, 
``What does that mean? How does USDA determine what constitutes 
that?'' How do you answer that? Maybe the same question as it 
relates to the economic development plan.
    Mr O'Brien. First, I should state something I had an 
opportunity to state earlier, that in implementing this 
section, Section 6025, we have determined that we will need to 
promulgate a rule, so the two questions--the way we answer 
those will be in the regulation. I think I can provide some 
initial reaction.
    On the multi-jurisdictional strategy the choice is there. I 
think the basic choices will be whether we look at that as a 
number of towns that perhaps are within a county of course, as 
in Pennsylvania, towns, townships--or is it multi-county.
    At least two of our initiatives at USDA are focusing on 
regional where we have looked for multi-county to try and make 
sure that we get that type of footprint. But, actually one of 
the good questions is, does it necessarily need to be multi-
county? As you move west, counties get really big, and we 
certainly have heard from people that sometimes that is not 
appropriate, and we have made some exceptions.
    So we will make that determination. It is an important 
question, and we will certainly look forward to working with 
this Committee to make sure that we get it right.
    As to the second question on economic development strategy, 
I think that and, we again will have to do that in regulation, 
there is a spectrum of the sophistication of these strategies, 
everything from a very well done community economic development 
strategy that EDA puts out as a framework to a smaller group of 
folks that collaborate together to look around a particular 
opportunity.
    My first take is that we go towards the less formal. Also 
in the statute, it does indicate that there are a couple other 
really important points--that there be broad-based 
collaboration. I think that is a real key. You need to have the 
public sector, the private sector, and in a best-case scenario, 
the nonprofit sector at the table. You need to have the 
leaders, whether it is the different towns or the different 
communities at the table as it is created.
    I think if you have that, if the people are honestly 
looking at the assets there, which is also in the statute, and 
they have metrics for success, then I think you have a recipe 
for a good economic development strategy that is based on the 
vision of the people in that place.
    Senator Casey. Well, I will tell you--and I will wrap up, 
but, first of all, I want to thank you for your public service 
and your work on these particular matters. But when I consider 
what we face in Pennsylvania--the Chairwoman knows something 
about our State--we are not usually considered a big rural 
State. But because we have such a big population, we have got 
literally millions of people that live in rural areas and a lot 
of counties that are full of a lot of small towns, and a lot of 
them in rural America. It is interesting. When I look at the 
economic trauma that people have lived through, some of the 
highest unemployment numbers in the last couple of years have 
been some of my home area of northeastern Pennsylvania, where 
we have fairly big cities; Philadelphia has been high; but 
other than those metropolitan areas, the highest unemployment 
has been in small towns and a lot of rural areas, whole 
counties devastated, some rescued in a sense by natural gas, 
but some one or two counties away that have not seen that.
    So all of these strategies that lead to better results by 
way of rural development, economic development, regional 
approaches are going to be vitally important to help people dig 
out of that difficult circumstance.
    Because I want to make sure the Chairwoman does not get mad 
at me, I have 13 second left, and I am going to cede that time 
to someone else.
    [Laughter.]
    Senator Casey. Thank you, Madam Chair.
    Senator Heitkamp. Thank you, Senator Casey.
    Senator Brown was not here earlier to hear my praise for 
setting this in motion. I think you can see from the questions 
this is just the beginning of our discussion with USDA on 
regional development. There is a lot of concern and a lot of 
interest in how this program gets implemented, and I want to 
thank you, Mr. O'Brien, for being a national leader, and I want 
to thank you for your service. You have a lot on your shoulders 
when you look at the challenges ahead for rural America.
    Mr O'Brien. Thank you for having me.
    Senator Heitkamp. Thank you.
    We are going to go ahead and call up the next panel. I want 
to warn everyone. I understand that we are going to receive a--
we are going to have to vote at 11:15, and so we are kind of 
working through those issues. We are hoping we can get through 
opening statements before we run off and vote, and then come 
back and probably do some questions and answers. So we will go 
ahead and call up the next panel.
    [Pause.]
    Senator Heitkamp. Welcome, everyone, and thanks for joining 
us today. I think we are all looking forward to your testimony.
    Again, just as a reminder, your testimony should not be any 
longer than 5 minutes so that we have more time for questions 
and answers.
    I am going to start with one of my introductions, and then 
we will be switching back and forth, Ranking Member Johanns and 
myself.
    I want to tell you how pleased I am to see Dawn Keeley, 
executive director of the Red River Regional Council in 
Grafton, North Dakota, which is a town north of Grand Forks. 
Dawn has over 23 years of community and economic development 
experience, serving as the executive director of the Red River 
Regional Council, a multi-county regional council located in 
northeastern North Dakota, assisting local government in 
economic and community development, disaster recovery, housing 
development, and rehabilitation and strategic planning.
    She has been heavily involved in all aspects of rural 
development in her community and in her region. She and her 
husband, John, and their beautiful children have a farm north 
of Grafton that I have been fortunate enough to be a guest at. 
You certainly are among the best of rural development leaders 
all across the country, and I thank you so much for attending.
    Secretary--why do I always call you ``Secretary''?
    Senator Johanns will introduce Mr. Person.
    Senator Johanns. Gary Person is from Sidney, Nebraska, is 
city manager, has been in that capacity for years. He grew up 
on a small farm and a ranch on the Wyoming-Nebraska border, 
graduated from the University of Nebraska at Kearney, in 
western Nebraska. Gary manages a $31 million annual budget, 81 
full-time and 30 part-time employees, and oversees and manages 
13 city departments.
    I could tell you from personal experience Gary has provided 
inspired leadership and energetic ideas to transform a 
community--a community that is a real success story really 
throughout the Midwest. His unwavering belief in the goodness 
and strength of rural America, specifically rural Nebraska, 
helped lay the groundwork for what has become a booming economy 
in that part of the State.
    Gary, I look forward to hearing your thoughts. I thank you 
for being here today, and to all of our other panelists, let me 
say also welcome.
    Senator Heitkamp. Our third panelist, Mr. Tilsen, has been 
very ably introduced by our Senator from South Dakota, but I 
want to welcome him personally. He is the president of Native 
American Natural Foods. He has more than 25 years of experience 
in nonprofit fundraising, marketing, community development, and 
18 years in special event marketing and production, obviously 
received a tremendous number of awards, but I want to 
personally tell you I took your bars on a long hike in Peru and 
shared them with a lot of people who thought they were pretty 
darn good. I think that your efforts and your products are well 
known all across--within that outdoors community, and 
congratulations on the many awards your products have received.
    Our final panelist is Chuck Fluharty. He is the founder and 
president of Rural Policy Research Institute. He is widely 
recognized as an expert on regional strategies in rural 
economic development and has been involved in numerous regional 
planning efforts throughout our country. It is the only 
national policy institute in the United States of America 
solely dedicated to assisting rural impacts and looking at 
public policy and rural communities. This comprehensive 
approach to rural policy analysis involves faculty from 
founding member institutes at Iowa State, the University of 
Missouri, the University of Nebraska as well as researchers, 
policy analysts, practitioners from other universities, 
research institutions, governments, and non-governmental 
organizations.
    Dawn, we will begin with you. Do you want to begin your 
testimony now?

    STATEMENT OF DAWN KEELEY, EXECUTIVE DIRECTOR, RED RIVER 
            REGIONAL COUNCIL, GRAFTON, NORTH DAKOTA

    Ms. Keeley. Thank you very much.
    Senator Heitkamp. Press the button.
    Ms. Keeley. Chairwoman Heidi Heitkamp, Ranking Member 
Johanns, and members of the Subcommittee, I very much 
appreciate the opportunity to be here today and discuss the 
importance of regional development strategies. As Senator 
Heitkamp said, I am the executive director of the Red River 
Regional Council. I have been part of this organization since 
about 1993. I took a 5-year hiatus and went to work for a 
private engineering firm, and in that experience I was highly 
involved in the oil patch in North Dakota and dealing with 
regional strategies in western North Dakota to address rapid 
growth issues, which is the flip side of much of what we have 
historically dealt with.
    We serve to unite and collaborate with all of the cities in 
our region, and I am currently under the development of our 
Regional Economic Development Strategy, so I have been holding 
those meetings locally in the last few weeks and months and to 
try to figure out what our regional strategy is and updating 
that. I have gotten very impressive engagement and involvement 
in those discussions.
    The things I really want to talk about today, I want to 
bring up three key points that I think are very important as it 
relates to regional strategies and what will make that happen 
well in our--as a practitioner and amongst my colleagues here.
    The first one is leverage. I like to say that ``leverage'' 
is our middle name in rural America. We have to leverage on 
every front on all days--leverage in our volunteer base, 
leverage with our communities and our partners. I jest that our 
private and public sector partners are our Capital SWAT Team, 
capital with an ``A.''
    When I have a really great project that I need to bring 
forward, I call in the SWAT Team, and they show up, and we get 
the job done. I have been very impressed by that. I think we 
have a very can-do spirit amongst our economic development 
personnel and leaders in North Dakota, our State and Federal 
leaders.
    So our tagline is ``Moving Ideas to Actions,'' so I am all 
about action. I want to get things done. That requires 
leveraging and having strong partnerships with all the parties 
involved.
    The regional council is one of those local partners that 
the Under Secretary referenced as well. We manage multiple 
Federal grants. We currently have at least seven contracts in 
place with different Federal agencies, either directly or 
indirectly.
    Maintaining the program funding for some of these Federal 
relationships is very important to our agency. Without that 
funding--we have a small staff of six people, and without these 
key funding elements, we would not even be able to maintain our 
staff.
    The second key foundation is really the ability to 
integrate programs. We talk about leverage. We need to also be 
able to integrate programs. Amongst our staff, we have staff 
that have to have expertise in multiple areas and are funded in 
multiple ways. So we are always integrating our programs and 
trying to be innovative in our approaches on how we can even 
explain to our State and Federal partners how we can make this 
all work better together.
    One of the difficult parts of some of the leverage and 
program integration that we do is the requirement of the 
Federal approved indirect cost plan, and for a small agency 
such as ours to develop the cost plan and regularly update it 
on an annual basis, it does become an issue. So there are 
occasions where many of the Federal programs require one-to-one 
match, which can be a struggle to meet the match requirements. 
But we also then--if we do not have that federally approved in 
direct rate, then we are further subsidizing those programs 
with about another 20 to 25 percent of our humble office 
setting requirements.
    So the SBA does have a policy where they have an indirect 
rate that they have provided through the agency, so we can 
recommend that be considered for most of the Federal programs 
on the smaller award.
    The last piece is really about strong, vibrant rural 
communities, and I see I am running low on time, so I will try 
to hit some hot spots here. But the agriculture is very 
important in rural North Dakota. It is 25 percent of our 
employment base as well as 25 percent of our economic base.
    Since 1940, 30 of our 53 rural communities have had 70 
years of declined population. So I would like to say I really 
have given this a lot of thought, and I really think that the 
efficiencies gained in the farm economy have also led to the 
demise of our small rural communities. So while the farm has 
grown, the communities have shrunk. I am looking at my children 
and wondering how I am going to be able to keep my children 
interested in staying in this rural community.
    Also, the ability of tech--farms have become very high 
tech. These high-tech farms cannot be supported by low-tech, 
low-amenity communities. In our regional planning efforts 
today, we are losing 30 percent of that age group. We have 
lost---between the ages of 0 to 44, we have lost 30 percent in 
the last decade alone. So we have some real struggles and 
challenges.
    I would like to put a plug real quick that today we are 
inspiring youth entrepreneurship, and as I speak, there are 600 
kids gathered in the school district in Grafton talking about 
youth entrepreneurship all day long. So this is hopefully one 
of our first building blocks to move forward and inspiring our 
youth to use their technology skills to build these 
communities.
    Thank you.
    [The prepared statement of Ms. Keeley can be found on page 
44 in the appendix.]
    Senator Heitkamp. Thanks, Dawn.
    Mr. Person?

    STATEMENT OF GARY PERSON, CITY MANAGER, CITY OF SIDNEY, 
                   NEBRASKA, CHEYENNE COUNTY

    Mr. Person. Thank you, Chairwoman Heitkamp, Ranking Member 
and our favorite son from Nebraska, Senator Johanns, and other 
members of the Committee. It is an honor to be here.
    Though I come before you with the title of city manager, I 
am still about as grassroots country boy as it gets. I have 
spent my adult life trying to find the keys to sustainability 
and meeting the challenges a rural community faces in America's 
heartland.
    I am the first generation on both sides of my family that 
no longer is involved in farming or ranching. The farming and 
ranching way of life we grew up with has practically 
disappeared from today's landscape, but the preservation of 
rural lifestyles and values is still critically important for 
America's future well-being.
    In Nebraska, 80 of our 93 counties are considered non-
metro. It amazes me in those 80 rural counties there was more 
population in the 1890 census than in the 2010 census, and only 
six have shown population growth since 1950.
    Rural communities all across America have struggled to 
survive as their way of life has changed just as dramatically. 
Drive down any of their main streets. Your eyes will tell you 
everything. Take a leisurely drive on a country road, and 
abandoned farmsteads far outnumber those inhabited. The average 
age of the population has nearly reached senior citizen status. 
Most rural communities will not and simply cannot survive if 
they have not diversified the agriculture revenue stream that 
is their primary economy.
    Today I share a story about one community that found new 
ways of sustainability, economic diversification, and 
completely reinvented itself over the past 40 years. It is not 
a suburb that pretends it is a small community, as it is 100 
miles from any population base and 350 miles from the State 
capital.
    Our community was thriving in the 1940s and 1950s, but its 
primary payrolls were dominated by the Federal Government and 
Mother Nature. You simply cannot control either one as a small 
rural community.
    By 1970, most of those jobs disappeared, and farming and 
ranching was about to head into the 1980s crisis mode. The 
population declined 45 consecutive years, the economy tanked, 
and the public infrastructure started to erode away.
    In the most recent 25 years, four times we have taken 
economic development initiatives to a vote of the people, and 
each time the citizens overwhelmingly voted to rebuild their 
own future, not depend on someone else to do it for them.
    We educated ourselves on Federal and State revitalization 
programs that would give us a hand up, not a handout. We did it 
with homegrown entrepreneurs like the Cabela's family with its 
national outfitter reputation and our own knack for recruiting 
other employers across the country looking to expand into a 
rural lifestyle.
    Even into the 1990s, agriculture has always been the 
largest industry earner in our local economy. Today it ranks as 
our 7th leading industry earner.
    We have tripled that local economy and valuation base over 
the last 20 years. We have more jobs per capita than almost any 
community in America. Every one of our employers needs more 
workers. We have another $300 million of new projects on the 
ground and moving forward this spring. Our most significant 
challenge is building affordable workforce housing.
    Today's new generation is not pulled by the rural emotional 
heartstrings like those of us who grew up in rural America. 
They will, however, come back for good jobs, quality of life, 
and a safe place to raise their families. Our employers have 
proven it.
    I am sharing several statistics provided by the Public 
Affairs Research Center from the University of Nebraska, Omaha, 
illustrating the rural outmigration of our State where 75 
percent of our 93 counties lost population again just this past 
decade. I have also provided key excerpts from our 2012 city 
comprehensive plan on how we have bucked that trend and 
diversified our economy.
    Some of the suggestions I mention in the written testimony 
I realize you have no control over in this Subcommittee, but I 
sense what you are all about is the general awareness and 
future well-being of rural America. There are ways you can 
influence those outcomes in arenas beyond this Committee with a 
shift in policy and elimination of bureaucracy.
    One of the key advantages rural America had a generation 
ago was its low cost of utilities and housing. The same is not 
true today. Our small community has had to endure $20 million 
of mandated public infrastructure projects primarily brought on 
by the increased environmental regulations dealing with water, 
wastewater, landfill, electrical generation sources, emission 
standards, and others. Combined with new banking regulations, 
it will put many small communities out of business and lock the 
door for any hope of a future rural renaissance.
    Regional emphasis is critically important, but it is going 
to take incentivizing communities and counties to work together 
to have the impact we must have to achieve consolidation, break 
down longstanding barriers, and begin to work on regional 
strategies. USDA programs are critically important to help us 
balance this ever growing regulatory world with low-interest, 
long-term financing and guaranteed loans for projects in the 
public and private sectors. We also need more flexibility 
within those programs on income standards.
    I believe, like you do, that rural America still matters. 
We just need to have Americans rediscover this opportunity and 
way of life once again.
    Thank you for your dedicated service to our country.
    [The prepared statement of Mr. Person can be found on page 
62 in the appendix.]
    Senator Heitkamp. Thank you, Mr. Person.
    Mr. Tilsen?

  STATEMENT OF MARK TILSEN, PRESIDENT AND CO-FOUNDER, NATIVE 
           AMERICAN NATURAL FOODS, KYLE, SOUTH DAKOTA

    Mr. Tilsen. I would like to thank Senator Thune for that 
rather gracious introduction. I only want to make one 
correction. I am not a tribal member. I am a new guy there. All 
my kids and grandchildren are tribal members, but I have only 
been there for 40 years.
    I would also like to thank Chairwoman Heitkamp and other 
distinguished members of the Committee.
    I am here today as the co-founder and president of Native 
American Natural Foods. I have worked on and around the Pine 
Ridge Reservation for about 30 years. Pine Ridge is well known 
as one of the poorest places in America where the unemployment 
rate has never been lower than 65 percent.
    This 30-plus years of work has given me a firsthand 
knowledge of the impact of our Federal Government's economic 
development programs in Indian country that I will try to share 
with you today.
    As the father of three children who are members of the 
tribe and six grandchildren, it is their future that motivates 
me and whose interests I represent here today.
    I am also a social entrepreneur who believes that at this 
critical time in history, we must and can build sustainable, 
just economies that preserve our air, water, and land. I know 
that each and every business decision we make has to focus on 
what is best for the greater good, for your grandchildren, 
yours and mine alike. As social entrepreneurs, we look at 
business as a tool to address social needs. We operate on more 
than just the financial bottom line, and we listen to the 
market for opportunity to create change.
    This is why my business partner, Karlene Hunter, and I 
launched Native American Natural Foods. We created a national 
brand in the middle of a food desert in one of the most 
geographically, economically isolated places in America--on the 
Pine Ridge Indian Reservation. We did this with purpose and 
intention. We understood the social problems, the poverty, and 
the barriers to business success. We live with them every day.
    So we choose to focus on the positive assets in our 
community. We wanted to see if we could build a brand that 
could one day become strong enough to break the isolation of 
the reservation and to have a positive impact on the health of 
the people, the land, and the buffalo.
    This led us to an idea: Could we take the Lakota people's 
ancestral knowledge of the perfect portable energy food and 
create a new brand that shared the positive history of healthy 
food, stewardship of the land, air, water, and respect for the 
buffalo as the givers of life and turn it into a high-value 
natural brand?
    Then we took the entrepreneurial step of putting everything 
at risk and created the Tanka Bar. Today I am proud to share 
with you that the Tanka Bar is sold on over 375 Indian 
reservations, over 6,000 retailers, including Whole Foods, 
Costco, Natural Grocers, national parks, and many, many more.
    We have created a learning company that is focused on 
quality natural products, best-in-class customer service, 
empowering our employees to become owners.
    We are an innovator of a new category in this emerging 
category of meat bar snacks. We created the category over 7 
years ago. The Tanka Bar is the first protein bar with real 
meat in it, the first meat snack with real fruit, and the only 
100 percent buffalo and fruit bar. We are also the only 
certified Native American natural product that is distributed 
nationally. As you said, we have won many national awards.
    We are mission-driven company. We have created nine full-
time jobs on the reservation. When we started, none of our 
employees had ever worked in the natural food industry. But 
given the opportunity, tied with the training and tools to 
succeed, our employees are now on track to become managers and 
soon owners of the company.
    We have created a profitable business model, but we have 
only begun to have our desired impact on the community. Our 
next step is we need to refinance for growth, expand our 
product offering, increase our investments in marketing, invest 
in management-level training, and grow the number of Native 
American buffalo. We need to recruit more young people into 
raising buffalo, as it is a fast-growing opportunity.
    In order to address this, we have joined forces with the 
American Indian Land Tenure Foundation to launch the Tanka 
Fund. It is a new national campaign to return buffalo to the 
lives, lands, and economy of Indian people. It is critical that 
we find a way for USDA to play an important role in bringing 
the buffalo back into the economy.
    The challenges of lack of basic infrastructure, shortfalls 
of capital, lack of training resources, inadequate, 
undependable Internet, and access to lands and markets for 
Native American Natural Foods are many. But we are a microcosm 
of the bigger challenges facing Native American communities.
    I want to jump ahead to point out that the Oglala Sioux 
Tribe with the Thunder Valley Community Development Corporation 
has completed a regional plan, and they have created--a 
Regional Plan for Sustainability, and they have created a road 
map to do this. We are one of the few companies that was able 
to participate fully in the creation of this regional plan. But 
then the regional plan is not funded, so it is another example 
of what happens when you have a lot of young people--over 23 
organizations participated in this, but we are not even close 
to recognizing the needs.
    The plan shows every single community on the Pine Ridge 
Indian Reservation is at capacity, and I want to point out that 
we have 11 of the poorest counties in the United States in 
South Dakota, and these are all Native American communities. 
The thing that is different and the challenges we have is the 
population of the Native communities is growing faster than 
anywhere else. It is only the rural communities in our State 
that are growing. But we lack--it is estimated that the Oglala 
Sioux Tribe lacks over 5,000 houses. The current HUD funding 
for houses is not even enough to keep up with the current 
growth of the population. Whether it is current infrastructure, 
housing, expanding infrastructure, there is a severe shortfall 
that this new regional planning initiative is really critical 
for the next step for our business but the bigger community. We 
are not just an isolated business. We cannot succeed and grow 
without the necessary infrastructure.
    Did I just go over my time?
    Senator Heitkamp. But it was going so well, we did not see 
any----
    [Laughter.]
    Mr. Tilsen. I will just keep going then.
    I guess that is my biggest point, is that the average age 
in Indian country is about 25. People are returning to the 
reservation, but we are not investing in the future, the hopes, 
the dreams of these young people. The opportunity is 
tremendous, but the gap between what is available to them and 
what is needed is just enormous.
    As an interested observer of Federal programs, I have seen 
many of these types of projects where you get the community 
excited, there is a lot of research and a lot of planning, but 
then on the Federal level the follow-through is not there, and 
we are hopeful that this new change in the farm bill is going 
to open up the opportunity to help meet that need.
    I also want to point out that one of the biggest changes 
that I think could add to success of entrepreneurial 
development in Indian country is start to back away from grants 
and figure out a way to provide--allow people to earn equity. 
That is what we are doing with our company. If we are going to 
talk about wealth creation, we have to get beyond job creation. 
We have to figure out a way to provide equity. I think equity 
will have a bigger multiplier effect on the local economy. In 
the long term, it will have a better impact on the national 
debt. It is really necessary for the next step, which means we 
are going to have to take more risk. We might have to balance 
that with the accountability, but we do have to figure out a 
way to take more risk.
    I guess my last thing I just want to say is that climate 
change is no longer a debate. The only decision left will be: 
Will you, our elected leaders, have the courage to lead us to a 
new sustainable economy? We realize that the economic forces to 
maintain the status quo may seem stronger than gravity itself, 
but change can happen. The majority of people support it. 
Native communities across South Dakota are unified in their 
opposition to uranium mining in the Black Hills and the XL 
energy fight. But we often ignore Native communities when they 
stand with the water and land. And, in fact, we have punished 
them both economically and politically for their position to 
protect air, water, and land, and I think we now need to take a 
step back and learn from them. That is what we are doing with 
our company, and I would like to urge you as our leaders to do 
the same.
    Thank you.
    [The prepared statement of Mr. Tilsen can be found on page 
70 in the appendix.]
    Senator Heitkamp. Thank you, Mr. Tilsen.
    Mr. Fluharty?

STATEMENT OF CHARLES W. FLUHARTY, PRESIDENT AND CHIEF EXECUTIVE 
  OFFICER, RURAL POLICY RESEARCH INSTITUTE, TRUMAN SCHOOL OF 
      PUBLIC AFFAIRS, UNIVERSITY OF MO, COLUMBIA, MISSOURI

    Mr. Fluharty. Thank you, Madam Chairman--and 
congratulations to you--Ranking Member Johanns, and members of 
the Subcommittee, Senator Casey, I will try to be quick. I know 
you have the vote coming.
    It is an honor to be here today, particularly with three 
world-class practitioners. If you just listened to these three 
individuals, I think the road map is fairly clear. I would ask 
that my comments be in the record.
    I want to say I am very pleased to be here today to not 
talk about my request that you create a regional strategy in a 
farm bill. Today I want to commend this Committee for your 
vision, for your acknowledgment of the practical realities in 
the countryside, and for creating legislation that I think is 
potentially the most significant entrepreneurial development 
since the RD Title was put in the farm bill. I want to thank 
you for that opportunity you created for our rural young people 
to stay where they live.
    But I also want to urge your vigilance, I want to urge your 
commitment, and I want to urge your oversight. I would like to 
make three points in that regard.
    You have to assure your legislative intent reaches its full 
potential.
    Secondly, the goals that you have created this program for 
have to be followed closely, and we need an evidence base to 
assure, when we come back to the next bill, you have a 
rationale to continue it, deepen it, fund it more deeply. As my 
colleague just said, the need is very, very great, and the 
follow-through federally is a challenge still.
    Finally, we need to make certain this is exploited by the 
Department, and that is critical.
    This will require some things. It is going to demand your 
patience, it is going to demand flexibility, and it is going to 
demand collaboration. This is hard work. Soft infrastructure 
takes time and great people.
    You are going to have to have collaboration with other 
Federal agencies. This administration has done that very well. 
We need to deepen it with State agencies, with cities, with 
counties, with regional governments and organizations, and with 
the private sector, the NGO community, and particularly the 
philanthropic community.
    But I would just ask this opportunity to not be squandered 
by small development, small thinking, small politics, or 
approaches and mythologies that say USDA cannot do this work. 
It may not have done so until now, but I would argue it is up 
to the task.
    The innovations that have been achieved by this Committee 
and the Department across the broader farm bill will all be 
implemented. You intend for that to occur. The spirit should 
also drive this new innovation in rural development. I have no 
doubt at all that it is possible. I would argue the risk 
management tools you have given entrepreneurs in moving from a 
commodity payment to an insurance payment is the exact same 
thing you are doing in regional strategies for the counties, 
regions, and entrepreneurs where these farmers live and work.
    Now, this regional approach is so necessary for three 
reasons. There are longstanding structural deficits. I have 
talked about them to this Committee many times. I want to re-
mention them. They are critical as a rationale for doing this.
    The first is the consistent per capita disadvantage in 
economic and community development in Federal funding, it is 
$300 to $500 per person per year less in rural areas. That is 
tens of billions of dollars. That is largely because we do not 
have a place entitlement in CDBG for rural non-metropolitan 
areas. That means multi-year funding and planning cannot occur.
    Finally--and I need to raise the issue--philanthropy today 
is investing only 1 to 3 percent of its total outlay in rural 
areas. That creates, those three things, the soft 
infrastructure to build an innovation economy in our urban 
areas. These practitioners lack all of that in their work every 
day.
    As you know, I have testified many times about this, and I 
just would like to end with one example of how it does work. In 
my testimony, I chatted about the SOAR Initiative in Kentucky. 
House Appropriations Chair Hal Rogers and Kentucky Governor 
Steve Beshear came to RPRI last fall and said, ``We have to do 
something. We have lost 7,000 mining jobs in eastern Kentucky 
in 3 months. Those are $80,000-a-year jobs. What can we do?''
    We are now 5 months in with an amazing regional development 
plan, 50 counties, cities, development organizations, private 
firms, the faith community, our universities, and just good 
Appalachian folk working on 15 different committees, doing what 
these folks do every day. That is simply possible. It is simply 
going to take, however, a little flexibility in seeking USDA to 
take a greater lead. In different places, it will look 
differently.
    We started the journey to ask this Committee to do this 10 
years ago. We hosted an international conference with the 
Federal Reserve Bank of Kansas City and the OECD. There is 
clear international evidence that this is the way rural 
development is going. I would just urge you to look at the SOAR 
example. It is a similar example of these three great public 
servants, and it is occurring right now with zero Federal help. 
The only way they were able to do that was RPRI is funded by 
your Committee, and they simply said, ``Ask RPRI to come in and 
start.''
    I believe the potential is significant for where you are 
headed, and I commend the Committee at the deepest level for 
moving forward with this. I think it will be a change agent.
    [The prepared statement of Mr. Fluharty can be found on 
page 38 in the appendix.]
    Senator Heitkamp. I want to thank you all for your 
excellent testimony.
    I am going to turn the Committee over to our Ranking 
Member, Senator Johanns. I am going to go vote, and then I will 
be back.
    Senator Johanns. [Presiding.] Thank you, Madam Chair.
    Let me ask a question, and I think this actually is 
probably appropriate for any of the panel members, but I will 
start with Gary, if I could.
    As I would travel our State over the years, there would be 
some communities that just would seem like they had it figured 
out. They would build one success on another success, and all 
of a sudden, a lot of energy was happening there. There would 
be other communities where they just could not get to that 
first success, just for whatever reason.
    I would like to hear your collective opinions on what do 
you think is a difference maker. What is driving that community 
that is successful? What is holding back that community that 
cannot seem to land that first business to create jobs or 
whatever it is? Gary, get us started here.
    Mr. Person. Okay. Well, I think most important it starts 
with the grassroots attitude of a community. You have got to 
believe in yourself. You have got to sell what you are, not 
what you are not. You have to get people working together. We 
did that through some initiatives that we took to the ballot to 
allow people to decide how they wanted to spend the revenue we 
had as a community to try to make economic development work.
    One thing I have learned is do not ever sell the people 
short. They get it. Give them an opportunity. You cannot let 
the naysayers get you down all the time.
    Then there are some even smaller tier communities that they 
have to get over the fact that they might be envious of what 
goes on a few miles down the road, but if that other community 
can provide the jobs and they can still take their paychecks 
back to those communities and keep their houses full and their 
schools viable, then everybody wins. That is the best regional 
approach there is: You have to rally around, and being an old 
farm boy, I call it the ``mother hen theory.'' You know, if the 
mother hen is healthy and vibrant and doing good things, all 
the baby chicks are going to continue to grow up and be good as 
well.
    So I think some of those communities have had to realize 
that maybe their niche is being a bedroom community, but being 
part of that regional coalition, because those communities like 
Sidney need those job holders, too. In our case, 40 percent of 
our workforce commutes from other communities and to our 
economy from as far a distance away as 100 miles in every 
direction.
    Senator Johanns. Dawn, do you have thoughts on that?
    Ms. Keeley. Senator Johanns, I truly believe that the core 
of what makes the difference is just having strong leadership, 
and strong leadership that has an eye towards the future. I 
think just having a positive outlook and encouraging folks and 
supporting folks as they are trying to put ideas forward and 
kind of creating that can-do spirit, I think it can be 
contagious. It just needs to be instilled, and it really takes 
collective encouragement of that spirit.
    Senator Johanns. Mr. Tilsen?
    Mr. Tilsen. I have to concur that we have to invest in the 
collective creativity, especially in Indian country, of the 
young people. I think when we were looking at trying to find a 
distance-neutral economic development opportunity, we studied 
several communities around the country. We looked at how did 
Ben & Jerry's start in Vermont and how did Patagonia start in 
Portland and how did Cabela's start in Sidney, Nebraska. That 
is where we came up with the idea of why couldn't we create a 
national brand even where we were at. We have proven that the 
model works, but we have not got it to scale yet, and that is 
where we really need the help.
    But even just that has really energized a lot of young 
people. I mean, the folks that we have working for us, they 
have never had a job where they get to use their own creativity 
to succeed. We have never run an ad. We have run this whole 
company off of social media; 125,000 people a month communicate 
with our team just through the Internet. We are in a town of 
2,500 people.
    Senator Johanns. Chuck.
    Mr. Fluharty. Just two quick things, Senator. I think we 
need to think about the young men and women that are 15 to 30 
right now. They are very, very different people than we are. We 
think place-making is critical for them. It was mentioned 
several times. They want to stay. They are going to need some 
assets.
    I will just tell a very, very quick story that reinforces 
this. When the Chairman and the Governor came to me, I said, 
``Let us just try to have a regional dialogue.'' As you all 
know, Appalachian Kentucky has been beaten down for a century. 
So we agreed to rent a school gym and just bring people 
together and say what could we do together to collaborate.
    We had 4 weeks. We had to rent the gym at the regional 
university. We had over 2,000 people show up on an icy, rainy 
day in eastern Kentucky. Two thousand people. We should not 
speak down to rural folk. They get this. They want to do it. 
But we have got to focus on that next generation of young 
people who want to stay at home. That is the key.
    Senator Johanns. That is the key. As you know, in this farm 
bill we have adopted this regional approach. What we are trying 
to do and what we are trying to signal is that we believe the 
future for rural America, in part at least, is going to be a 
regional approach, everybody kind of working together within a 
region.
    If you were to sit down with Tom Vilsack or the Secretary 
for Rural Development and say, okay, here are the three things 
that you need to focus on in implementing this program, or two 
things, what would you tell them those are? What should we be 
looking for to make sure that they get it right as they roll 
out this program? And, Dawn, why don't I start at your end of 
the table.
    Ms. Keeley. So I am clear on the question, what do we need 
to do to support rolling out this program?
    Senator Johanns. Yes, yes.
    Ms. Keeley. Okay. I think I need to give it a little more 
thought. I am sorry.
    Senator Johanns. Okay. I will come back around.
    Ms. Keeley. Yes, I would appreciate that.
    Senator Johanns. Gary, you were taking some notes there.
    Mr. Person. Sure, I will jump in. I think there has to be 
some skin in the game, the local communities and counties, that 
these programs have to be designed that unless you are a 
regional player, unless you are part of the team, your 
community and your companies are not eligible to participate.
    I have been part of a regional development group for three 
decades, been a board member, and it is frustration to get--a 
lot of times you will see counties or communities leave the 
fold because they do not think regionalism is important or they 
do not think communication is important.
    You are very familiar with the Panhandle, and you know that 
the base of the population is in Scotts Bluff County. Well, 
Scotts Bluff County pulls out of the regional group. What kind 
of a message does that send to all the other counties in the 
communities in the region?
    Until there is the incentive where the people demand it, 
why aren't you part of this group? Why aren't you part of 
trying to find the solutions and that you have an obligation to 
help all those around you?
    We need to break down those old barriers. I look back to 
the 1890s, the late 1880s, when we probably were at our peak 
population out in that area of the State. We had one county. 
Look at the challenges we had with transportation and 
communication. Today we have got everything you could ask for 
when it comes to both, and we have 11 counties. I mean, we have 
just--it seems like we have to get beyond some of these 
imaginary lines and we have to start thinking about the people 
who have to support that, and that is the taxpayers. We have to 
find ways to consolidate but do it through incentivization 
rather than penalty.
    Senator Johanns. Mr. Tilsen, any thoughts how best to roll 
out this program?
    Mr. Tilsen. Well, in addition to the three things that I 
brought up in terms of infrastructure, housing, water/sewer, 
and climate change mitigation, I think particularly to Indian 
country and to disenfranchised communities our reservation 
probably exports about $300 million into the region, exports, 
because the dollar turns over less than once. The model that 
was created by awarding Thunder Valley Community Development 
Corporation on Pine Ridge as the coordinating company, as the 
coordinating group for the regional plan, for the first time in 
history you had tribal officials, county officials, State 
officials, Federal officials, people from colleges, 
universities, the Oglala Lakota College, small businesses like 
ours, all at the table planning the future of the region. 
Normally the tribe would be left out of that process.
    So I would encourage you to keep empowering the 
reservation-based groups and using leverage to try to create 
these regional plans. This plan that they created has huge 
potential, and so the follow-up funding is important. But on 
the tribal level, I would urge you to continue to empower the 
tribal planners and the tribal community development 
corporations to break that isolation, because in the past it 
has sort of been an exploiter-exploited relationship, and that 
interferes with economic development, and it interferes with 
progress.
    Senator Johanns. Chuck?
    Mr. Fluharty. Senator, this is the most critical question, 
I think, for rural development, and I want to spend a minute 
answering it because we have done this all over the world.
    The first challenge we have is cultural. It is always 
cultural. Every rural region is very different. In almost all 
of those where success occurs, you have an inclusive model of 
buy-in at the start. That could be the council churches, it 
could be a Governor, it could be a mayor, it could be a tribe, 
it could be a development organization. But the reality is that 
you have a challenge in your USDA structure right now given the 
history of the grant and loan programs.
    I think it is going to be an uphill slog, but I urge this 
Committee to stay engaged. Everyone is working really hard to 
move this, but we need every Federal agency engaged in some 
way. It is more than scoring. Thunder Valley was a great 
example, frankly, HUD-funded--HUD-funded, Housing and Urban 
Development--to do that.
    The second thing is I think we need Governors and mayors 
and county commissioners much more involved.
    The last thing I would say is I think any quick answer is 
wrong, but let me share a quick answer, and that is, scale is 
so critical. Once you have solved the cultural issue, I think 
you have to look at convincing that woman who is a mayor of 
that micropolitan region that her future is not to become an 
MSA mayor but to become the center of a regional growth hub 
with 15 or 20 contiguous counties that aligns with that growth 
hub. We have 700 micropolitan regions, and in the West we have 
smaller growth regions of four to five thousand. Figuring out a 
way, to your question, to assure every one of those contiguous 
rural counties does not suffer from that great sucking sound 
when that money goes to their regional area, but they begin to 
build a compact around distributed food, energy, 
entrepreneurship, workforce education, and health and human 
services, finding some scale to start I think does advantage 
your opportunity.
    Ms. Keeley. Thank you. I have a couple of thoughts. I think 
that we are currently in the development of our SETs, and the 
approach that I took was to develop four individual county 
plans first as the foundation for our regional planning.
    EDA private sector funding through our planning grant 
program, which is funding much of the time that I am investing 
in doing this work, and I supplemented the EDA funding by each 
of these participating counties contributing additional funds 
so that we could do these individual plans.
    But I think there is not--we are still carrying on our day-
to-day business while we are in the middle of this 
extraordinary planning effort, and there are not adequate 
resources to fund enough time to really do the job really well.
    I think that somebody may have mentioned it already, too, 
but I think that on the flip side of that is making sure there 
are resources available, and I think there are a lot of 
project-driven resources that can be made available. I think 
the most difficult struggle that I have is trying to figure out 
how I can pay for our staff time, it is just being the 
champion, being the leader, being the can-do spirit guy on the 
team, and if I have to figure out nickels and dimes to be that 
guy, it gets really to be a challenge to just maintain our 
workforce within my group and then to--I mean, building a can-
do spirit means a lot of boots on the ground and a lot of time 
investment in building that spirit.
    So I would love to be that champion. I just struggle a bit 
sometimes to make sure that we have adequate funding in place 
so that our staff has the confidence that we are going to be 
able to keep their job around. It is not just an annual grant-
based job.
    Senator Johanns. You know, you raise a valid point. It 
occurred to me years and years ago, as I would work with 
communities across the State as Governor, that resources were 
always tough to come by.
    Number two, most of the local government was volunteer. You 
know, your city council person might be getting some 
insignificant stipend. Gary, I do not know what you pay your 
city council people there.
    Mr. Person. It is insignificant.
    [Laughter.]
    Senator Johanns. I do not mean to embarrass anybody, but 
typically it was--it just was something to recognize that they 
had attended the meeting. But, by and large, whether it was the 
school board, the local city council, or whatever, they were 
operating as volunteers in setting aside significant amounts of 
time in that volunteer activity. So your point is extremely 
well taken.
    We have been talking about the relationship at the Federal 
level with the State and more specifically the local 
communities. I would like to have you explain what are the 
challenges in attracting capital or somebody making a loan into 
a small community so when a business comes to you and says, ``I 
have got this great idea,'' how difficult for them is it to get 
their business up and going, attract the capital, the loan 
support that they need to open that business and maybe start 
with two employees or whatever and maybe build Cabela's 
someday. And, Gary, I will go to you. What challenges do you 
face in that?
    Mr. Person. They are enormous. When we went through that 
transformation back in 2008 with the banking community and the 
regulations that come down, the projects, I look back 10 years 
ago, that would have been a no-brainer to take to the local 
banking community. Today they are so overregulated now, and it 
is like there is this scare factor. If you dare make a wrong 
decision by funding something there is a huge penalty to pay in 
the end.
    I will just give you one critical example in our community. 
We have grown our economy. We now have 8,000 jobs in a town of 
6,700 people. We need market rate housing in the worst sort of 
way. Developers have wanted to build a tax credit project, and 
I get that. I understand it. We have a need for it. But we have 
several now that have openings. We have 100 people every day 
looking for a place to live, but yet they cannot live there 
because of the income restrictions.
    We have not built a market rate apartment complex in our 
community for 60 years. We just went through a 10-year cycle 
trying to build an apartment complex. They see this economy, 
and they see all these jobs, but it is always the what-if 
factor when they look at Sidney, Nebraska, because we have got 
a lot of great employers, but obviously Cabela's is our 
flagship, and it is the what-if. What if they are not here in 
20 years at the end of my mortgage? How are we going to 
survive? And, consequently, they have to have all these 
guarantees from the private employers in order to build it.
    To make a long story short, we eventually gave up after we 
worked through three different development groups trying to get 
an apartment complex built. Cabela's had to wind up building 
it. Now, it will open in July, and then maybe at that point 
when it is filed, it is operational, it is successful, we will 
have an example for the banking community to say--but it just--
it was so frustrating, and all the funding agencies even, 
though they said the right things when you were talking to 
them, behind the scenes they must not have been, because the 
projects did not happen. That is a really, really frustrating 
thing in rural America. We all get categorized into this one 
little lump sum instead of looking at those of us that are an 
anomaly out there and that we still need people to take that--I 
would call it a ``minimal risk.'' It is an investment in rural 
America's future, but it is extraordinarily frustrating.
    Senator Johanns. I want to hear from everyone on this. Mr. 
Tilsen, I will go to you next, because I am especially 
interested how you got your business up and going. But, Gary, 
it occurs to me that in some respects there is less risk in 
Sidney, Nebraska, than there would be on some projects whether 
they are in Omaha, Lincoln, Des Moines, or whatever, just 
because the employment base is so strong and there is such a 
tremendous need. I do not know if you have ever analyzed it, 
but I will bet there is a need for how many apartments, how 
many houses, in Sidney?
    Mr. Person. If we build 1,000 tomorrow, they would be all 
filled. I know when I say that people look at you like you are 
crazy, but I honest to God believe it. We have people coming in 
to city hall every single day just begging for a place to live. 
They know we run the utilities, so they want to know if 
somebody shut off their utilities today that they are moving 
out of town.
    The other frustrating thing is because the local banks have 
been so regulated down, they have a cap where they can lend to. 
So they have to partner with a larger bank. Well, when they 
look at rural western Nebraska, the percentage rate on 
financing just went up as a result of just solely from the fact 
of where you are located, because in Omaha and Lincoln, it 
would have a lower rate. Then the cash flow starts becoming 
even more challenging.
    Senator Johanns. Mr Tilsen?
    Mr. Tilsen. This is a really, really big problem. Three 
years ago, I went to 11 banks in South Dakota when we were 
growing so fast, and we could not find anybody to lend us any 
money. We recently started--our first investor was the local 
Lakota Fund, which is a CDFI, and using a PRI from a private 
foundation, we were able to get our first investment of 
$61,000. But because we are on an Indian reservation, banks, 
like most of the banks in Rapid City, which is 100 miles away, 
consider the reservation to be outside of their service area, 
so they provide no commercial lending on the reservation 
without a Federal guarantee.
    Now, here is an interesting problem. To have a Federal 
guaranteed loan, you need to have 20 percent equity. We are in 
the natural food industry where the key principal driver of the 
business is your brand value. But the Federal Government loan 
program does not recognize brand value as an asset. They 
consider it an intangible when it is considered the only 
tangible asset in my industry.
    So most of what I am building is not recognized, and so I 
cannot access USDA-guaranteed money, BIA-guaranteed money, or 
SBA-guaranteed money. So that is a particular problem.
    The reason that we are still in business is that the CDFI 
clearinghouse out of Los Angeles, California, and us put 
together a complicated transaction that involves investors of a 
tribe, two foundations, a bank, the Federal Reserve, and the 
clearinghouse CDFI, and that is just to get us where we are at 
now. Now we are faced with having--having just done that in the 
last year, we have to do it again. Like I said earlier, we are 
experiencing 125 percent growth. We want to add more jobs.
    Then the last thing is about 48 percent of the people who 
work on Pine Ridge cannot find housing, so we have this low-
income housing problem, but now we have a workforce housing 
problem. Just as my colleague from Sidney just outlined, there 
is a need right now, a market for these houses, and the 
financial structure to build them and get them on the market is 
a huge gap.
    So we have some real serious challenges being rural. You 
mentioned that about 3 percent of the foundations in the 
country give to rural America, and about 3 percent of them give 
to Native Americans. So that is about one-third of 1 percent of 
the philanthropy that is going out there.
    From a step back, you would think there is a lot of money, 
but when you actually try to bring a business to scale, it is a 
huge challenge for us.
    Senator Johanns. Chuck?
    Mr. Fluharty. Just very quickly, every region is going to 
be different, but the CDFI example, if Gary cannot do it, we 
have got a huge problem. Let me just say that is an example of 
what I would urge the Committee to think about in a more 
integrated scoring or public-private alignment. I would urge 
you to look at what CDFI in Kentucky--Kentucky Highlands, one 
of the really good ones--did recently with the houseboat 
industry that completely crashed down around Somerset. They 
have started building high-energy-efficiency homes using that 
facility in the winter when they are not doing houseboats. It 
is a wonderful model. It is market scalable. The price point is 
right, and they cannot even get funding to start because they 
do not believe they will be sustaining commitment for 
developers.
    That is an issue where some combination of the alignment 
between HUD and the housing program at USDA and our CDFIs, our 
philanthropic communities, there must be a way to think about 
this if you are in a sustaining regional strategy that has been 
in some way vetted, you can begin to get at these issues that 
are an impediment to growth that are structural. I think the 
Committee should think seriously about looking at that issue.
    The reverse is the issue in the shale area, is you can get 
all the housing you want in the shale areas right now, and no 
one is thinking about the end of that entity, and the history 
of shale extraction is rather amazing when it ends. Gary's 
community is much safer, and he cannot get it done. So it is 
something we could work on.
    Senator Johanns. Dawn, have you faced the same challenges?
    Ms. Keeley. I think I have a good example to talk about 
just a little bit. I think some of our key--many of our 
communities, even though we are small and have had population 
decline, are facing housing demand issues that they cannot 
meet, so there is that need for market rate housing 
development. The key piece of all that really is in the 
infrastructure and extending the infrastructure as well as the 
development.
    But I am currently involved in a project right now where we 
are attempting to reuse an existing building that happens to be 
owned by the State of North Dakota in our town of Grafton. This 
project received a 30-percent housing award grant through the 
State of North Dakota. The lending institutions would like us 
to have the USDA guarantee on the bank note, even with a 30-
percent downpayment on the project.
    So I went back to the drawing board, and I said, well, we 
manage the CDBG program in our region, and I would like to put 
some CDBG money into it. And, by the way, I think I would like 
to own the building and I want to build this nonprofit 
developer capacity right within our office so that we can do 
more projects.
    The CDBG feedback was that you have conflict of interest. 
You manage the CDBG program; therefore, you cannot invest in 
your own project. I found this to be a barrier, and I said 
rather frankly--this was a Monday conversation--that there are 
only a few of us that are going to be able to step up to the 
plate, and if we just continue to put barriers before us, we 
are not going to be able to continue to support these 
communities in the ways that they need to be supported.
    Senator Heitkamp. [Presiding.] Thanks, Dawn.
    Senator Johanns has to go vote, and I have fulfilled my 
commitment, at least for these two votes, so I have a little 
more time to spend with you. Thank you all for your patience 
and the adjustment to schedules.
    You know, I have a number of questions that I would love to 
ask all of you, but we would be here all afternoon, which I do 
not think would suit anyone's purposes. But one of the things 
that concerns me--and I hear this among Federal programs that 
typically get siloed. You know, you have got this program for 
water development; you have got this program for 
infrastructure, other kinds of infrastructure; you have got 
this program for workforce development, on and on and on. As we 
divvy out those programs and look at indirect costs of all 
those Federal programs nonprofits and folks who do work like 
you do all across the board, not just in rural development, 
throw up their hands and say, ``What are we doing? We are not 
going to apply for a $50,000 grant that will cost us $10,000 to 
audit. That is just not realistic.''
    One of the concerns that I have going forward is that we 
still keep a level of accountability on Federal dollars, but 
that we do things, we maximize the collaboration and we 
increase the flexibility.
    I want to ask you, Mr. Fluharty, in your experience working 
across the board, do you think it has gotten better or worse? 
What recommendations would you have to me as somebody who 
serves not only on this Committee but also on Government 
Operations on the kinds of discussions that we should have to 
maximize Federal dollars?
    Mr. Fluharty. Madam Chairwoman, I will bet if you stayed 
the afternoon, these three fine people could fill you with 
horror stories for 5 hours.
    Senator Heitkamp. Yes.
    Mr. Fluharty. While you were gone, I raised for your 
colleague the very real need you have to stay very actively 
engaged in this. Unless we can address that, this program will 
definitely not achieve the intent. I would say two or three 
things.
    This administration has really tried to build cross-
administration alignments. I commend them for that. They have 
worked very, very hard. Part of the challenge USDA has is fully 
statutory. I am in that building a lot. There is a lot of 
interest. It is statutory. I would say two or three things.
    It is absolutely essential that you build a sufficient 
evaluation and evidence base to provide risk management for 
yourself as a Committee, the Under Secretary as Under 
Secretary, and the public entrepreneurs that are going to do 
it. But we are going to have to solve that one, and I would say 
that structural thing is more critical than anything you do to 
work with USDA as they start to think about this rule. I would 
urge that you stay actively engaged as rulemaking comes.
    We have worked across the Federal departments for 20 years, 
working with development organizations, cities, counties, and 
Governors. There is a lot that could be done incrementally to 
alleviate some of that challenge if we would have had a 
framework to do it, if you would have had some platform upon 
which to say in this case, with this rule, we will do this. It 
is not just scoring on a grant because you are going to be 
precluded, you are going to have to have waivers if you want to 
go in it, et cetera, et cetera. It is your largest challenge to 
make this work, frankly; otherwise, you are nibbling at the 
corners.
    The last thing I would say in that regard--and every sector 
we work in, there would be differences. I think there are three 
things we can do: really ask philanthropy nationally to step up 
in the first six or eight regions and say the soft 
infrastructure necessary, the glue to begin this. If USDA 
cannot do that, I do not know how these folks are going to free 
up staff. I will tell you what we did in Kentucky. I am doing 
two jobs full-time. My entire staff is in the SOAR region, 
because everybody else is full-time. It takes that to build 
this. That could come through Federal regs. I doubt it can 
legally, so it has to come somewhere. Beyond that, once you 
have the walk-around potential, I really do think you need to 
think about very, very serious commitment to some kind of 
public-private intermediary trust that allows in regions you 
certify that have strong SETs plans, strong government plans, 
some variation. I would say housing stock and capital stock are 
your two most critical questions. I would really think about 
bold thinking in this. If you do not, this is going to be 
nibbling at the edges, in my opinion. I think it will be good, 
but to me that is the most critical question. What could we do 
in this rule to just take the last five horror stories we had 
and start to get after them a bit in Federal regulation.
    Senator Heitkamp. Well, I know from my perspective, I serve 
on the Housing and Banking Committee, I serve on the Small 
Business Committee, and every Committee that I serve on, when 
it comes time, I ask questions about what is the impact in 
rural areas and what is the impact in Indian country. I serve 
on the Indian Affairs Committee. I think many times I have met 
with blank stares, like, ``We do not know how to do housing.'' 
When I ask the affordable housing groups, ``What have you done 
to encourage housing on the reservations in Indian country?'' 
they will tell me what they have done to provide anti-poverty 
programs in urban areas that do serve Native Americans who live 
in urban areas, but they have no idea how to build capacity for 
housing. I share Mr. Tilsen's concern about housing all across 
Indian country.
    I share everyone's concerns that you have here, but I feel 
like we may be creating, if we do not watch it, a system that 
we hope will reward people for doing things regionally, doing 
things strategically, but the reward will not be big enough to 
really overcome turf discussions, to really overcome the kind 
of natural competition that you see that grows out of Class B 
schools sitting across the gym from each other, right?
    I mean, we all know, if you grow up in rural communities, 
you know Hankinson and Ledgerwood are going to fight over who 
gets the ethanol plant, and they are going to brag for years it 
was Hankinson--which it was. Never mind.
    [Laughter.]
    Senator Heitkamp. Ledgerwood now is going to be mad at me. 
But these are really, really important questions, because we 
have an underutilized resource in America. It is called ``rural 
America.'' We have people--and, Mr. Person and Mr. Tilsen, it 
is a microcosm, as you talk about aging of your counties and 
you talk about an average age of 25. It is not one size fits 
all. But the results and the process has to be regional.
    But we need the people who are doing the entrepreneurship, 
as you point out, Mr. Fluharty, to stay involved, to tell us 
what lessons you are learning from this process, how this can 
work better. I think Mr. O'Brien is an excellent person, and I 
think Secretary Vilsack is very committed to this process, but 
they cannot do it in a vacuum, and they cannot do it alone. I 
loved your example of now we are transitioning to crop 
insurance. We really are transitioning to regional strategies.
    You all have been very, very patient with us. I want you to 
know--I think sometimes people who come to these hearings feel 
like we came and we testified and that was the end of it. This 
is a key component for us and certainly for me and Secretary 
Johanns and a lot of the members here who have seen those rural 
communities in decline, in what was always a pretty vibrant 
economic condition now look for alternatives. You are on the 
cutting edge. You are modeling that opportunity for everyone. 
You are proving out best practices. We want everyone to learn 
from those best practices. We want you to teach Congress about 
what the impediments are for exercising those best practices.
    I want to thank you all for coming. We are going to leave 
the record open for--I have to check out my date here--until 
Thursday, May 8th. I know that you will be receiving questions 
from other members on the Committee. The Committee stands 
adjourned.
    [Whereupon, at 12:02 p.m., the Subcommittee was adjourned.]
      
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