Hays Daily News, KS
09-07-07
Farm bill reformers urge focus on rural development in rural states like Kansas
Westlink Communications
By CHRIS GREEN
and SARAH KESSINGER
Harris News Service
TOPEKA -- Supporters frequently argue that farm bill payments play a crucial
role in keeping rural America from simply drying up and blowing away.
Yet when Jon Bailey looks at the emerging version of the 2007 farm bill now
before Congress, he sees an imbalance that actually perpetuates rural
population outflows.
The director of research and analysis at the Center for Rural Affairs in Lyons,
Neb., Bailey joins those who want to see some federal farm payments -- those
for the wealthiest landowners -- instead devoted to rejuvenating rural
communities.
"The biggest effect right now with the farm bill is that there is essentially no
money for rural development, especially compared to the commodity payments,"
Bailey said.
Advocates, including agribusiness lobbying groups, argue the existence of
commodity payments for crops such as corn and wheat have stemmed
population outflows by slowing farm consolidation and pumping crucial dollars
into Main Street businesses.
Yet across Kansas and other rural, Midwest states, an agrarian way of life is
steadily vanishing anyway.
More than three-quarters of Kansas counties, predominantly rural, suffer from
long-term declines in population, at the same time that more than $9 billion in
crop subsidies have poured into Kansas during the last decade.
Bailey and other reform advocates argue an overemphasis on crop subsidies at
the expense of rural development aid is speeding up this phenomenon.
"There isn't the public investment in these communities and the job creation,
business creation and the infrastructure they would need to retain and attract
people into the community," Bailey said of rural towns.
No obligation
Although farm subsidies make up just $42 billion of the $286 billion farm bill
moving through Congress, they dwarf the amount of money allotted specifically
for rural development.
Bailey said the House's version of the bill, passed in July, includes $456 million
for rural development.
But only $30 million, aimed at a program to promote value-added crop products,
must actually be spent.
The remaining spending is budgeted by law but still must go through the process
of being appropriated by Congress.
A report released by the center in July showed the phenomenon occurring in
Kansas, too. In the Sunflower State, the top 20 farm payment recipients received
$25.1 million while the 20 most stagnant or declining counties received only $5.5
million in rural development funds.
Such differences matter, Bailey said, because the massive scale of farm
payments further perpetuates an ever-increasing growth in the size of farms.
"The money is so skewed between the two that the ultimate effect is that you end
up with an enormous amount of money subsidizing large farms and very little
going to investment into rural communities," Bailey said. "You end up with farms
getting larger and larger."
Subsidies, he said, allow the largest farms to bid up the price of land, hike rents
and expand their operations. The subsidies also encourage farms to grow
because farmers can obtain additional payments by further increasing their
acreage, he said.
When the size of farms grows larger, there are fewer farms for individuals to work
on, leaving fewer opportunities in farming, he said. As a result, there are fewer
business opportunities directly linked to farming operations.
"People who don't have the resources then are sort of left out of the equation,"
Bailey said.
He also said there's evidence that as farms get larger, they take their business to
larger, regional hubs instead of locally owned shops.
Unlike some farm bill critics, Bailey doesn't suggest ending crop subsidies.
Instead, the center would like to see strict limits on them and an end to loopholes
that allow for the largest payments.
That would free up money to encourage small business entrepreneurship in rural
communities and promote value-added agriculture products, which could help
bring more and younger people in to help rejuvenate rural communities.
'Driving engine'
One such alternative approach to rural development is the Center for Rural
Affairs' Rural Enterprise Assistance Program, which has helped 7,500
businesses in rural Nebraska since 1990. Director Jeff Reynolds said he believes
it's the nation's largest program devoted exclusively to rural businesses.
The nonprofit organization provides small businesses with loans of up to $35,000
to help with startup costs or expand existing operations and can help package
several loans together to finance larger projects.
Since 1990, the program has made 537 loans totaling $3.7 million and leveraged
$8.3 million in additional funds. However, Reynolds said the effort's primary task
is providing educational opportunities and technical assistance to develop rural
businesses.
Most of the program's funding comes from micro-loan aid available through the
U.S. Small Business Administration and the state of Nebraska. It receives no
money under the farm bill, and only a fraction of its funding comes through the
USDA.
Kansas has its own micro-loans programs -- the South Central Kansas Economic
Development District has loaned out $5 million to 14 counties since 1993 -- but
none dedicated exclusively to rural areas.
Reynolds said it's important for small communities to have entrepreneurs willing
to take risks. Areas that don't have a strong small business climate struggle even
more to pull in larger employers, he said.
"In a lot of these communities, businesses with five or fewer employees are the
driving engine of that area," Reynolds said.
The effort has produced dozens of success stories touted on the REAP
program's Web site.
When Becky Wyatt wanted to start a business in Sidney, a town of 6,372 in the
southwest Nebraska panhandle, she had no idea how to do it.
The woman who owned the health products store she worked for was retiring
and closing her shop. The town's residents faced the prospect of traveling 65 to
100 miles into neighboring states to buy vitamins, organic food and other
specialty health and beauty products.
Wyatt said she turned to REAP for a loan and technical aid to start up her own
store in Sidney. Since opening in March 2006, business at Becky's Health Hut
has been strong, she said.
A single woman in her 50s, she gives credit to REAP in helping her, especially
since it's tough for entrepreneurs like her to borrow money. A local bank denied
her application for one business loan, but she was able to have her father co-sign
a loan, in addition to help from the REAP program.
"They are there every step of the way," Wyatt said.
Still, Jerry Terwilliger, REAP business specialist in the western Nebraska's
panhandle region, said it takes a lot more than one organization or program to
spur a turnaround, he said.
A small town must also develop an economic development structure and housing
to attract people back to their communities.
Foundations for building
Some federal money reaches communities for rural development. Yet it pales in
comparison to farm aid for crops.
Chuck Banks, Kansas director of the USDA's Rural Development office, said
federal loans and grants have increased to their highest level in decades -- some
$1 billion during the past five years.
"I think there's a recognition among communities that it's necessary," Banks said
of the need to improve decaying or nonexistent infrastructure.
To attract new families and business to a town, the rural health care, affordable
housing, telecommunications, water systems have to be there, Banks said.
"You've got to have that foundation to build upon."
With new opportunities in energy production such as wind farms and bio-fuel
plants, rural areas are looking for ways to draw them.
Federal officials also have tried to blend farm and rural development through
another program that has grown in popularity -- value-added producer grants.
They help farmers who want to offer products developed from their crops, such
as ethanol and milling flour.
Banks said it's proven a way to help farmers capture more income and perhaps
keep their operations afloat, which in turn helps communities.
First District Congressman Jerry Moran, a Hays Republican, said enhancing rural
development and creating rural jobs are important, especially considering a
second income is often vital for families to continue operating farms.
It's unclear, though, whether Congress will target more aid to rural development
before signing off on this year's farm bill.
Status quo costs
Placing stricter caps on farm payments would be difficult politically, Moran said.
Growers of predominantly southern crops, such as rice or cotton, tend to favor
higher subsidies to help cover their higher production costs.
Plus, reducing the amount of federal aid for commodities doesn't necessarily
mean money will end up going to rural development instead, Moran said.
"In broad terms, it's possible," he said. "In real terms, it's difficult to make certain
that's what would happen."
Yet without a reduction in payments to the largest farms, rural communities will
continue to decline, said Cornelia Butler Flora, Iowa State University
professor of agriculture and sociology.
"Generally, what we have found are correlations that show the greater the
amount of farm payments, the greater the out-migration," Flora said. "The greater
the payments, the greater the crop monoculture, and less diverse the local
economy."
Support for subsidy caps appears to be growing among some rural business
leaders.
Creighton University economist Ernie Goss' regularly surveys community
bankers in several Midwestern states. He has found most of them support a
$250,000 cap on farm payments.
"Only 16 percent disagree," he said of his study done earlier this year. "In this
part of the country, a lot of bankers thought that should have been in (the House
bill). It wasn't."
As in most of Kansas' 105 counties, most of Nebraska's 99 counties have lost
population as farm sizes have doubled in acreage during the past 50 years.
"Without a cap, you'll have larger and larger farms, fewer and fewer farms," Goss
said. "You'll have out-migration, lower population and, likewise, that hurts
businesses that sell to the family farm, grocery stores that sell to the family farm."
In terms of economic development, Goss said, "as these bankers see it, anything
that undermines family farms, undermines the community, undermines
population growth."
Sustainable future?
Lowering payment limits could prove a more sustainable policy during the long
term, Flora said, particularly if the aid went to benefit both the farmer and the
community.
Such assistance could come in the form of payments for clean water, soil, biodiversity and clean places for recreation.
"That seems a more logical thing for the public to pay for," she said, because
such aid doesn't alter farm markets and won't interfere with international trade.
Goss said recreation would be one of the areas rural communities can tap to
revive their economies.
"There will be communities who will thrive, especially those closest to ethanol
plants and those that have amenities, such as mountains, streams, lakes -recreational opportunities," he said. "Those that won't make it will be the remote
ones without ethanol plants, without an interstate nearby."
Without policy changes, though, federal aid might not be available to support for
new and diverse ventures.
Bailey acknowledges the fight to create more balance between farm subsidies
and rural development faces an uphill battle. One of the problems, he said, is
there is little consensus among reformers on what programs best enhance rural
development.
That's in stark contrast to the agribusiness lobby, which is organized, strong and
centered around the simple goal of getting the most money possible in payments,
Bailey said.
"There's just not a real organized constituency for rural development," Bailey
said. "There isn't really one organization or one constituency that brings all of
those things together politically. When it comes time to divide up the money,
everybody is kind of out there asking for their own small slice of pie."