Blog for Rural America

The Center for Rural Affairs, a private, non-profit organization, is working to strengthen small businesses, family farms and ranches, and rural communities. Permission to reprint items from this web log is hereby granted, on the condition that clear credit is given to the original source of the material. If the blog provides information for a story, please let us know by sending an email to

Monday, March 20, 2006

President's Budget Endangers Rural Programs

President’s FY07 Budget Endangers Rural Asset-Building Programs

by Jon Bailey, Center for Rural Affairs,

The Fiscal Year 2007 budget proposal released by President Bush on February 6, 2006, makes another attempt at dismantling any federal role in rural economic and community development.

As with the FY06 budget proposal, the president’s FY07 budget proposal again recommends the termination of nearly every rural economic development program. Small Business Administration programs that provide capital and technical assistance for rural small businesses are also again recommended for elimination. And the president’s budget again proposes a new initiative that will reduce the federal investment in economic and community development and which, we have shown, will not work well in many rural areas of the nation.

With that background, following are selected highlights of the president’s FY07 budget proposal:
>> Rural Development. The rural development portion of the USDA budget would suffer a $433 million cut in program funds from the FY06 budget, a 22 percent reduction. As it did last year, the budget proposal recommends the elimination of several rural economic development programs, including several that assist in the development of rural small businesses. In fact, the budget proposal recommends a 40 percent cut in the Rural Business-Cooperative Service, a collection of USDA programs that assist in rural businesses and job creation. The budget proposal also recommends cutting nearly half the funding and half the staff of the Resource Conservation and Development (RC&D) program, a private-public partnership that assists local communities on community and economic development projects.

>> Entrepreneurial Agriculture. The budget proposal would scale back the Value Added Producer Grant program from $40 million to $20.3 million, a 49 percent reduction. For the past two years, the president’s budget has requested the same amount as the previous year’s actual appropriation.

>> Small Business Development. As happens annually, the president’s budget recommends the termination of three microenterprise programs administered by the Small Business Administration – the MicroLoan program, the MicroLoan Technical Assistance program, and the Program for Investment in Microentrepreneurs (PRIME).

These programs are crucial to rural economic development because they focus on rural low and modest-income and start-up businesses in a way that no other SBA program does. In the interest of full disclosure, the Center’s REAP program is a beneficiary of these programs.

>> Rural Housing. The budget would also eliminate two programs that help community organizations develop affordable housing in rural communities, the Department of Housing and Urban Development’s Rural Housing and Economic Development program and the Department of Agriculture’s Rural Community Development Initiative.

These programs are crucial to creating assets in rural communities through funding local affordable housing projects and addressing the issue of aging and deteriorating housing stock in rural communities. The budget proposal would also eliminate rural rental housing loan programs and severely decrease rural rental grant programs. While home ownership rates are high in rural areas, the availability of affordable and decent rental housing is a challenge.

>> Community Development. As he proposed in his FY06 budget, President Bush again proposes a major community development initiative in his FY07 budget. Again, this proposal appears to fail many rural communities.

The FY07 budget proposes to reduce funding for the Community Development Block Grant (CDBG) program by over 27 percent. This would take another $300 million out of the rural economy, funds that are used to modernize crumbling infrastructure and to create businesses and jobs in rural communities. In addition, the budget proposes changing how these funds are distributed to communities. While details are sketchy at this time, the budget proposal speaks to linking funding to community indicators that will not serve many rural communities well (unemployment and low home ownership rates, for example).

The budget proposal also seeks to implement the Strengthening America’s Communities Initiative (SACI) proposed in the president’s FY06 proposal. SACI calls for the termination of numerous community and economic development programs. The budget calls for the eventual merging of all federal economic and community development programs into one competitive grant program tailored toward technology-based economic development.

Our analysis of SACI last year found it would not meet the needs of many rural communities – particularly those in the Midwest and Plains – because of its emphasis on job loss and unemployment. One omnibus economic and community development program also may not meet the needs of rural communities suffering from aging infrastructure and housing, low-wage work, and declining and aging populations. Several federal agencies will be developing this initiative in FY07 if President Bush has his way.

The silver lining of this budget proposal is that many of the same ideas were proposed and rejected by Congress in the FY06 budget deliberations and appropriations. As that process begins anew for FY07 we will keep you informed. A convenient way to stay on top of these important issues is through our Rural Action Briefs. Contact Jon Bailey, or 402.687.2103 x 1013 to be added to the Rural Action Brief.

post a question or comment here or contact John Crabtree,

Center for Rural Affairs
Values. Worth. Action.


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