PROGRAMS OF GOVERNMENT AID
FOR ALLEVIATING RURAL POVERTY
MARK KRUGLER
PROGRAMS OF GOVERNMENT AID FOR
ALLEVIATING RURAL POVERTY
In the past decade, the poverty stricken central cities
with their ghettos, spirallying unemployment rates and rapidly
worsening economic c ondi tions have commanded a great amount of
public attention.
Indeed, the urgent plight of the inner city
has received so much attention that the av.erage American is led
t .o overlook or seriously underestimate the extent of rural poverty.
Unfortunately, state and federal gmlernments have been
almost equally guilty of overlooking or bypassing the portion of
the farm and ranch population most in need of financial aid and
assistanc.e. 1
On the state scene" most states including 'rex.as seem to have
adopted a "let the farmer help himself" attitude by providing
little i f any state aid for poverty stricken farmers and ranchers.2
E;2'
Indicative of this attitude is the fact that Texas has
statutues providing for the direct: application of public funds
to low-income groups of farmers and ranchers nor any state-sponsored programs designed to increase. the availability of credit
to these people.
The most T.exas legislators have done to make
c.r edi t more readily available to the farmer/rancher is represented by their rec ent passage of the Credit Union Act, 3 the Co-operative Credit Association Act,4 and the Farmers· Co-operative
Soci.e.» Act. 5
Generally, these acts permit farmers to establish
public and private cooperative ventures which are authorized to borrow for, and make loans available to, their respective members.
Page 3
GOVERNMENT AID
the plight of the small farmer and rancher. 12
Fortunately, the
last few years have indicated a new awareness in Congress of the
extent of the farm problem, and this has resulted in several new
or enlarged programs to reduce rural poverty.
Of foremost importance in the implementation of federal aasistance programs to the farmer/rancher is the Farmers Home Administra tion, ref.erred to hereafter as the FmBA, which was established
in 1946. 13
ment of
Thi.s federal agency, operating under the U.S. Depart-
Agri~ultureJ
covers all fifty states and operates out
of approximately 1100 county offices
ac~oss the country.14
Under
the programs administered by · the FmHA, assistance ia offere.d ill
the form of actual grants or, more commonly, in the form of government l .oans or credit.
The credit programs offered by the FmHA.
fall into two . major ca tegories--guaranteed loans or insured loans.
Guaranteed loans are simply those loans made and serviced by private lenders who receive a guarant.ee from the FmHA. that any potential loss they may suffer upon default will be limited to a specified percentage of up to 90;' of the. loan. 15
The interest rates
for such loanS are generally determine-d by the lender unless the
ra te is limited by laW!.16
Until recently, the rna jori ty of assis-
tance. came through this type of credit leading critics to castigat.e
the underlying government pol.icy as being aimed primarily at protecting
ins~±tutional
lenders and their profits instead of at
increasing the availabili.t y of credit at reasonable terms to the
low-income farmer/rancher. 11
Page 5
GOVERNMENT AID
failure to give him notice of its interest in the property as
required by Tennessee law, his materialmen's and mechanic's
liens should be accorded priority over the l.ien held by th.e FmHA..
The Court held that stat.e law cannot give a materialmen's or
mechanicJs li.en priority over a FmHA deed of trust which had been
executed and recorded prior to the. creation of the contractorts
liens.
Likewise,. all courts passing an this issue have held that
the federal "first in time, first in right" rule as to priority
of liens would con.trol notwithstan;ding contrary stat.e laws.
Also, of importance in alleviating rural poverty is another
branch of the U.S. Department of Agricult.u xe, the Food and Nutrition Service (FRS).
The FRS is divided into regional off ices
from which an officer in charge supervises the. activities of the
loc.al representatives.
The primary program administered by this
agency for the purpose.s of this paper is the Food Stamp Program
authorized by the Food Stamp Act of 1964, as amended. 23
~i.s
paper will discuss the various federal assistance. pro-
grams availabl.a to the farmer/rancher through the FmHA and the
FRS, and will attempt to explore the case law which has resulted
from these programs.
Fo,r organi.za tional purposes, the programs
offered through the FmHA and the. FN.S will be divided into three
primary categories:
(1) Housing ASSistance, (2) Farm ownership
and operating assistance, and (3) Income producing and supplementary assistance.
HOUSING ASSISTANCK
Perhaps the most acute pra.Cl.em confronting the poore.r
GOVERNMENT AD
Page 7
requirem.ents:
( 1)
He must be an owner of a farm or non-farm trac t in a
rural area;
(2)
He must be a U.S. citizen or have been legally admitted
for permanent residenc.e;29
(3)
He. must hav.e an adequate income to meet operating and
family liv.ing expenses including repayment of the proposed loan;
and
(4)
He must be without adequate ho·u sing or witholu t sufficient
1
resources to provide the necessary housing for himself. 3 0
Under this program,. l .oan recipients currently pay a maximum
of 8 3/4% interest31 which can be reduced as low as 1% for certain very law-income families who qualify for interest credit as
prov.ided f or in s521 of the; Ho.using Act of 1949. 32
~is interest
credit is available only to. families with an adjusted income of
less than $850.0..
Adjusted income is determined by combining the
income of all family members then subtracting 5% for social securi~
or retirement benefits and $30.0..0.0. per each dependent.
Then,
the FmHA determines, on a case by case basis,. the. effective rate
of interest to be paid by the applicant, and the ga.vernm.ent,. in
effect, subsi.:dizes the difference b,etween this and the maximum
rate of interest. 33
llilis intere.sii credit program got off to a slow; start follow.ing
the addition of ~521 to the Housing Act in 1968, and in January,
1973, the FmHA annQ.u nced a complete cessation of interest credit
loans under the. Law to Moderate-Income Housing Program.
This
GOVERNMF..N~
Pag.e 9
AID
low-rent housing for dome.stic farm laborers, 39 resulted in the
making of an estimated 61 loans for the purchase and construction
oi' appraxima tely 1500 living units f or farm/ranch laborers i.n
19:75. 40
Under this program, loans are made directly to either
large-scale farm/ranch applicants or to farm.franch associations
to help them provide their hire-d. laborers with adequate housing.
In order to be considered f or such a lo,aEJ, the farm/ranch appli-
cant must furnish the FmHA the following information:'
(1)
The number of domestic farm laborers being used in the
(2)
The kind of labor performed by such laborers;
(3)
The future need for domestic farm labor. i.n the area;
(4 )
The kind, condition, and ade,quacy of housing presently
area;
used for. such labor;
(5)
The ownership of presently o.ccupied housing; and
(6)
The ability of the worker to pay necessary r.ent. 41
Even though there have not as yet been any plans promulgated
to continue this loan program during 1976, at least one aspect of
the program is still of importance to the lawyer and the rural
poor--the aspect of rent increases and the due process requirements
necessary before such increases can be implemented.
In Ponce v.
Rousing Authority of County of Tulane:,42 the tenants of a lo.wrent farm labor housing complex brought an action to have the
Court declare invalid and permanently enjOin an asse,ssment of rent
increases by the owner.
The district court held that the tenants
had a constitutionally protected right to a hearing with respect
GOVERNMENT AID
Page II
(2)
To provide streets, and water and waste disposal sys-
(3)
To supply appropriate recreation and service facilities;
(4)
To install laundry failities and equipment; and
(5)
To provide lan~caping or other measures to make the
tems;
housing attractive.
The apartments or other type of' mul ti-uni t dwellings c onstruc ted
wi th loans under this program can only be rented to low. and moderate-income families or persons over 62 years of age, and the rent
charges are limited by the FmHA to those which eligible occupants
can reasonably afford. 45
FARM OWNERSHIP AND OPERATING ASSISTANCE
Going to this next cate.g ory of federal assistance to the
farmer/rancher, two major programs are administered by the FmHA-the Farm Operating Loan Program and the Farm Ownership Loan Program. 46
Both of these programs st.em from Congressional recogni-
t .ion of the fact that American agriculture has traditionally been
based on the family farm and their recognition that unless additional forms of credit were made available to the would-be owners
and operators of such farms, they would be forced to abdicate
their land an.d farms to the large-scale agri.- business, c onc erns. 4 7
The Farm Operating Loan Program is the largest of the two with
some 53,000 loans totaling over 524 million dollars being made in
1975 alone.
According to Ralph Griffitts, County Supervisor of
the FmHA in Lubbock, this program was the most hil9.Uy utilized o.f
GOVERNMENT_ AID
Page 13
owner-QPer.ator of not larger than a family-sized farm and to afford
his family an opportunity to maintain a reasonable standard of
living.
As under the Farm Operating Loan Program, eligibility for
this program is also determined by the county FmHA committee and
such determination is made on the following basis:
(1.)
The applic-ant_ must be unable to obtain adequate credit
from other sources at reasonable term.s ;
(2)
He must be a U.S. Citizen of legal age; 54
(3)
He must have the necessary experience, training,. and
management ability to operate a family farm;
(4)
He. must agree. to ref inance the balanc e due on his loan
as soon as he is able to obtain adequate credit at reasonable terms
elsewhere; and
(5)
He must have an indebtedness to FmHA of no more than
$100,000. 55
The provisions for appeal and reconsideration are the same as
those under the Farm Operating Loan Program, and the effective
interest rata for such loans are likewise. revised annually.
De-
pending again on use, the_se loans are scheduled for repayment over
a period of up to 40 years. 56
INGOMS PRODUCING AND SUPPLEMENTARY ASSISTANG:B
The third major category of federal assistance to the farmer/
rancher consists primarily of the following programs:
(1)
The F.mergency Lg:an Program;
GOVERNMENT AID
Page 15
decide whether or not the. disaster was serious enough to merit
this designation and the duration of such aid to the area. 60
Once. the Secretary has designated an area as an emergency
loan area, however, it has been held that he is not empow,ered to
prematurely terminate the b:enefits accruing thereunde.r without
according the eligible county residents a hearing and other due.
process requirements.
In Berends v. Butz,61 a case turning on
this issue, four Minnesota farmers brought suit for injunction
and declaratory relief against the Secretary of Agriculture contending that the Secretary's unilateral termination of the emergency loan.iprogram in their area prior to the end of the deSignated period had violated the due process: requirements of the 14th
Amendment.
The Court, afirer studying the statutes and the congr-es-
sional intent behind it, held that although the decision wheth.er
to de.signate an area as an "emergency loan area" is c ornmi tted to
the discretion of the. Secretary, once such a designation is made,
Congress intended that emergency loan money should be made available to the residents of the afflicted area.
Therefore, the Secre-
tary was ordered to effectively administer the loan program in
the area until either the deSignated period expired or until not .ice and a hearing were afforded area farmers to determine whether
or not an earlier termination date would be in order. 62
In order to receive an emergency loan, a farmer/rancher in
an area deSignated an "emergency loan area" m.ust meet these additional requirement.s:
( 1)
The applicant must be an established farmer or rancher;
Page 17
GOVERNMENT AID
scheduled for repayment over a period of up to seven years. 61
The interest rates for real estate purposes and operating purpose.s, on the other hand, are det.ermined by the prevailing rates
available on the private market for comparable long-term and intermediate credit.• 68 Real estat.e loans are. repayable for up to
forty years while operating loans are usually scheduled for repayment each year when the principal income. from the year1s oper" reCe.lve
" d • 69
"
a t lons
lS
It is important to remember that any appli-
cations made under this program for loans to replace damaged or
destroyed property must be filed within sixty days of the date Qf
the emergency designatio.n . 70
The: second major program offered by the FmHA. in this area of
assist.ance is the. Recreational Facility L.o an Program.
Also au-
thorized by the Conso.lidate.-Q. Farm and Rural Development Act, the
Qb.je.ctive of this ac"t is to assist eligib.le farm and ranch owners
to convert all or a portion of the farms they own or operate into
income producing outdoor re.cre.a tional enterprises which will supplement farm or ranch income. 71
In order to b,e eligible for these loans, an applicant must
meet the following qualifications:
( 1)
He must be unabl.e to obtain adequate credi.t. from other
sources at reasonable terms;
(2 )
He. must be a U.S. citizen;
(3)
He must. be engaged in farming or ranching;
(4 )
He must have enough exper ienc e or training to be suc-
cessful in the proposed recreational enterprise;
GOVERNBNT AID
Page 19
Food and Nutrition Service, a branch of the U.S. Department of
Agricul ture.
The Food and Nutri t .ion Service (FNS) maintains re-
gional offices--usually including selleral counties each--which
are primarily concerned with receiving and determining requests
from food retailers and wholesale concerns for authorization by
the FNS to participate in the food st~p progrrua. 77
In contrast, the stat.es--and the state agency each is required
to designate as the agency in charge of implementing the Food
Stamp Pro.g ram within such state--are primarily concerne.d with processing requests from potential fo.od st~p recipients. 78
In
Texas, the State Department. of Public Welfare was designated
by Article 695c, ~7-A, V..A.T.S., as the agency in charge. of this
program within this state. 79
In order to be e.l igible to participate in the Food Stamp Program, an applying farmer or rancher must be found to either be in
need of food assistance, be receiving some form of welfare assistance, be unemployed, working for low wages, or living on limited
pensions. 80 I f families are not receiving welfare assistance,
eligibility is based on family size and income.
According to the Officer in Charge of the West-Central Region
which includes Lubbock,
~he
.great '.ma.jdlrity
Qf
food stamp recipients
in this region are rural residents and many more are expected to
participate in the near future as !R.exaa c, iril.p+em.ents the additional
outreach requirements imposed on it by the Bennett v. Butz rulin€-: .in 1974. 81
The issue. involved in the Bennett case was whether
GOVERNMENT AID
Page 21
carries with it a potential fine of up to $10,000.00 and imprisonment of up to 5 years.
An identical penalty is prescribed for
retail dealers and other concerns who either present, or cause
to be presented coupons worth more than $100.00 for redemption or
payment knowing them to have been received in contravention of
the Food Stamp Act. 86
Fo.r violations involving coupons in an amount of less than
$100.00, the prescribed penalty is a misdemeanor punishable by a
fine of up to $5,000.00 and/or imprisonment of up to one year.
For authorized retail dealers and other authorized concerns, the
addi tional penalty of disqualification from further participation
in the Food Stamp Program can be imposed. 87
At the present, the most widespread abuse of the Food Stamp
Act, as could be anticipated, has been the exchanging of proscribed
commodities such as alcohol and tobacco for food coupons.
Since
the value of the coupons involved is generally less than $100,.00,
few felony convictions have been imposed for this offense.
The
most common form of punishment handed out is in the f arm of a
fine--well below the statutory maximum.--coupled with suspension
or disqualification from the Food Stamp Program •.88
CONCLUSION
It should now be apparent that although most states have
been slow or unwilling to implement programs of assistance to the
low or moderate-income farmer/rancher, there are several programs
of assistance available to them on the federal level.
It also
FOOTNOTES
1.
Cochran, The Scandal of Rural Housing, Architectural Forum, March,
1971, at 52-55 [hereinafter cited as Cochran].
2.
Interview with Ralph Griffitts, Lubbock County Supervisor, Farmer's
Home Association, in Lubbock, Texas on March 12, 1976 [hereinafter cited as
Griffitts] •
3.
Tex. Rev. Civ. Stat. Ann. arts. 2461-1.01 to -11.17 (Supp. 1975)
4.
Tex. Rev. Civ. Stat. Ann. arts,250S-2513 (1965).
5.
Tex. Rev. Civ. Stat. Ann. arts. 2514·2515 (1965).
6.
See statutes cited notes 3,4 & 5 supra.
7.
Tex. Rev. Civ. Stat. Ann. art. 5069-1.02 (1971) (Texas Consumer
Protection Act).
~~
S.
42 U.S.C.
2701-2994d (1970), as amended.
9.
Older Americans Act of 1965, 42 U.S.C.
§~
3001 et. seq. (1970), as
amended.
10.
7 U.S.C.
11.
Cochran, supra note 1, at 53.
12.
Id.
13.
7 U.S.C.
14.
imHA, u.s.
§§
~
2011-2026 (1970).
1941 (1970).
Dep't. of Agriculture, Program Aid No. 973 (rev. ed. 1974)
[hereinafter cited as Program Aid No. 973].
15.
Griffitts, supra note 2.
16.
Program Aid No. 973, supra note 14.
17.
Cochran, supra note 1, at 54.
IS.
Griffitts, supra note 2.
19.
Program Aid No. 973, sUEra note 14.
F-PAGE 3
33.
Griffitts, supra note 2.
34.
Pea10 v. Farmers' Home Administration, 361 F. Supp. 1320 (D.D.C. 1973).
35.
Housing Act of 1949 s 504, 42 U.S.C.
36.
7 C.F.R.
§
1822.24 (1975).
37.
7 C.F.R.
§
1822.23 (1975).
38.
Catalogue, supra note 28, at 31.
39.
7 C.F .R.
40.
Cata1o~e,
41.
Id.
42.
Ponce v. Housing Authority, 389 F. Supp. 635 (E.D. Cal. 1975).
43.
Id.
44.
Fact Sheet, supra note 27.
45.
In light of Ponce v. Housing Authority, 389 F. Supp. 635 (E.D. Cal.
§
§
1474 (1970).
1822.202 (1975).
supra note 28, at 24.
1975), the FmHA, a final decision-maker with respect to rent increases, may
be required to provide tenants of such housing developments a hearing on the
proposed rent increases.
46.
Catalogue, supra note 28, at 24-26.
47.
Cochran, supra note I, at 54.
48.
Griffitts, supra note 2.
49.
FmHA, U.S. Dep't of Agriculture, Program Aid No. 1002 (rev. ed. 1975)
[hereinafter cited as Program Aid No. 1002].
59.
In light of Gomez v. Butz, 376 F. Supp. 362 (D.P.R. 1974), this eligi-
bility requirement may be invalid.
51.
Cata1o~e,
supra note 28, at 24-25.
52.
Id.
53.
Program Aid No. 1002, supra note 49.
F-PAGE 5
§
76.
Catalogue, supra note 28, at 41.
77.
Sattler, supra note 56.
78.
7 C.F.R.
79.
Tex. Rev. Civ. Stat. Ann. art. 695c, ~ 7-A (~upp. 1975).
80.
Id.
81.
Bennett v. Butz, 386 F. Supp. 1059 (D. Minn. 1974).
82.
Id.
83.
7 C.F.R.
§
270.2(s) (1975).
84.
7 C.F.R.
§
270.2 (kk) (1975).
85.
7 C.F.R.
~
270.4(b) (1975).
§
271 (1975).
See Food Stamp Act ss 14(b),(c), 7 U.S.C.
2023 (1970).
86.
Food Stamp Act
87.
7 U.S.C. 8 2020 (1970).
88.
Statt1er, supra note 56.
89.
Griffitts, supra note 2.
§§
14(b),(c), 7 U.S.C.
~
2023 (1970).