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58th Annual Meeting of the Southern Legislative Conference

Agriculture & Rural Development Committee Chair's Report


Little Rock, Arkansas

August 14 to August 18, 2004

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October 12, 2004

TO:      Members of the Executive Committee

FR:       Representative Steve Holland, Mississippi
Chairman, Agriculture & Rural Development Committee

RE:       Report of Activities of the Agriculture and Rural Development Committee at the 58th Annual Meeting of the Southern Legislative Conference in Little Rock, August 14-18, 2004

      Prior to the Annual Meeting, the SLC and the Rural Policy Research Institute sponsored the 2004 Rural Policy Forum on Saturday, August 14 and Sunday August 15.  The Agriculture and Rural Development Committee convened on Sunday, August 15, for a business meeting and on Monday, August 16, for a program session during the 58th SLC Annual Meeting.  The following is a summary of the speaker presentations and Committee activities from each of these programs.

RURAL POLICY FORUM

Saturday, August 14

I.          The 2003 Rural Forum:  Background for the 2004 Rural Forum

            Jonathan Watts Hull - Senior Policy Analyst, Southern Legislative Conference, Georgia

      The 2004 Rural Policy Forum represents a continuation of the discussion the Committee began at the 2003 Rural Forum held in Point Clear, Alabama, which itself was the culmination of a number of discussions on rural development which the Committee has conducted during the past several years.  The 2003 Rural Forum had three objectives:  identify the most critical concerns for rural areas; identify the potential partners for addressing these concerns; and determine the appropriate role for state government in improving the condition of the Rural South. 

            Several key areas of concern arose, including:  infrastructure; education; workforce development; business and entrepreneurial support; healthcare; housing and homelessness; community capacity; rural crime and homeland security; welfare reform; and changes in the food and fiber economy.  This extensive list of concerns raised questions about how to best address all of these and who could, or would, be able to take on this broad a task.  The group’s discussion of partners for rural development was impressive not simply in its length (with over 100 groups and kinds of groups identified) but in its variety.  These partners for rural development included offices and agencies of local, state and federal government, non-profit organizations, the philanthropic community, faith-based institutions, and regional authorities. 

      Participants in the 2003 Rural Forum identified three principal roles for state government in rural development.  The first was to provide for the laboratory in which effective rural policy could be developed.  State government is at the appropriate distance from rural problems to be able to encourage innovation and craft the changes that need to happen to make policy work for rural places.  The federal government, being distant, is best equipped to implement immediate emergency response.  Local government, being the closest to the issues, can manage implementation over the long haul, but often lacks the long view of things necessary for innovation.  State government and particularly elected officials also are very well-positioned to facilitate the creation of networks that serve rural places.   Finally, there was a need identified by several participants to have someone at the state level who was watching out for rural areas’ interests. 

      The 2004 Rural Policy Forum builds upon this base by selecting some of the key themes from the 2003 discussions to delve into in more depth.  Among the issues for the 2004 Rural Policy Forum are economics, community capacity, and education and workforce development. 

II.        A Framework for Comprehensive Rural Policy in States

            Charles Fluharty - Executive Director, Rural Policy Research Institute, Missouri

      Mr. Fluharty began his comments by noting that rural policy is at a tipping point in America.  There is an aggregation at the local, state and federal levels of individuals and organizations interested in rural places.  This creates the potential for a local to national advocacy chain for rural policy.  There is a new institutional framework arising that cuts across jurisdictions and borders.  This is complemented by a more sophisticated understanding of the rural economy and the people living there.

      Rural policy, Mr. Fluharty continued, may be at a unique point, with new political realities and structural changes in the federalist system leaning toward rural areas.  Even so, rural areas receive most of their federal funding in transfer payments to individuals, unlike urban and suburban districts.  This difference represents the gap in infrastructure for development.  Rural places also are treated differently because of their size when seeking federal grants and programs.  There exists a structural imbalance between urban and rural community development support, an imbalance reflected in the amount of funding available per capita and in absolute terms for community development in rural areas compared to urban areas.

      The demographics of rural America –-lower median incomes, higher poverty, lower school spending, almost non-existent public transportation, limited personal transportation—represent a structural challenge in public policy.  Mr. Fluharty observed that there is a need for a new public policy construct composed of regional collaboration or scaling, cross-sectoral activity, private and public investment, and a new emphasis on rural entrepreneurs. 

      Rural areas currently are at the bottom of the economic and policy hierarchy.  Changing this will take the introduction of a rural lens on policy, a change that is most likely to take place at the state level.  Change is most often driven by visionary individuals, but this change is seldom institutionalized.  Mr. Fluharty recommended a new approach to governance, one that brings together interdependent public and private organizations to coordinate, facilitate and negotiate policy for rural places, combining their diverse and at times overlapping skills, interests and abilities, and connecting their constituencies.  This new governance model raises several questions, including how to link community organizations in new and effective ways; how to link philanthropy with public policy in a new way; and how to convince engaged players that agriculture and rural policy are not opposed to one another.

      There are unique challenges and opportunities in rural areas where this is concerned, as well, Mr. Fluharty continued.  Rural areas have strong loyalty to grassroots organizations, an asset which is diluted by limited access to financial and human resources, the limitations of part-time elected officials in rural areas to shoulder the numerous administrative and financial responsibilities, and the limited experience many rural places have with joining forces with neighboring communities.  To affect this kind of change, there is a need for intermediaries to promote the public interest, whether they are from the public sector, or are civic, philanthropic, issue-specific advocates or those simply helping to build community capacity.  The importance of this shift will be to take on the community-capacity disadvantage rural places have and introduce a place-based, non-sectoral framework for policy.

III.       Economic Trends in Rural America

            Tom Johnson - Director, Community Policy Analysis Center, University of Missouri

      Dr. Johnson opened his presentation by noting that, contrary to current myth, agriculture is not the economic base of rural America.  Production agriculture represents less than 2 percent of U.S. employment, with agriculture and agriculture-related employment under 15 percent, three-quarters of which is in metropolitan counties.  Farming-dependent counties are very few, with most concentrated in the Midwest.  Farm-dependent counties also do a worse job in creating non-agricultural jobs than other counties.

      A second myth discussed was that farm families depend upon farming for their livelihood.  In fact, three-quarters of farms have negative farm incomes, with only the largest, high-sales operations earning positive revenue from their land.  Because income in rural areas is likely to come from off-farm sources, rural communities are highly dependent on service, government and manufacturing jobs, with a greater reliance on government jobs (influenced in part by the presence of prisons in rural areas) and less on service jobs than in metropolitan counties.  The employment profile for urban and rural counties actually is not that different, he noted, although manufacturing still is a much bigger player in rural areas. 

      Dr. Johnson noted that rural communities are facing six trends simultaneously: changing technology; changing economic structure; localization; changing demographics; changing lifestyles and settlement patterns; and new governance.  Technological change includes the growing importance of economies of scale, which places rural communities at a disadvantage.  The increased importance of information communication technology has the potential to reduce the importance of distance but requires costly public infrastructure, which has caused rural communities to lag behind. 

      Changing economic structures include greater global competition in commodities and the changing structure of agriculture, both of which exert downward pressure on prices and incomes for many farmers, Dr. Johnson said.  The very idea of a farm is being changed by the concept of supply chains, as farmers become integrated into vast food production systems.  Furthermore, there is increasing spatial concentration of activities and firms and the emergence of industry clusters throughout rural America.

      This last element plays into the idea of localization, with rural areas achieving the scale they naturally lack through the development or encouragement of industry clusters.  These pose challenges with respect to the quality and quantity of labor available, as well as the availability of the most recent generation of information communication technology.  The demographics of rural places are changing, with an aging population and a decline in natural growth and an increase in the importance of immigrants in the population mix.  This, in turn, is causing a rise in demand for some services and a decline in demand for others. 

      Dr. Johnson noted that changing life styles and settlement patterns are creating “amenity communities” which place new demands on public services as people leave urban and suburban areas for rural places.  This fuels sprawl and a demand for space while it decreases the household size in rural areas.  These changes have altered governance in rural areas as information and information technology become more important, especially the Internet.  Furthermore, there is a shift toward regional strategies, public-private partnerships and national and international networks to help rural places meet the challenges they face.

      The future holds two rural Americas, Dr. Johnson noted.  Growing rural communities—many of which are clustered near metropolitan areas—will experience high land values, smaller hobby farms and intensive niche farms, growing land-use conflicts, a loss of rural character and “farmscape,” and growing congestion problems.  Declining rural communities will have large farms and large employers with few local entertainment or retail alternatives.  They also will have declining property and sales tax bases, leading to minimal public services and will become destinations for international immigrants, mostly seeking low-wage employment. 

      Rural areas have several economic advantages and disadvantages, Dr. Johnson explained.  Rural advantages include amenities, space and quality of life.  Rural economic disadvantages include the scale (or the lack thereof) to provide healthcare and education, among other services, as well as to attract industry; distance, which increases the costs of infrastructure and transportation; and other quality of life issues, such as limited employment options.  The challenge for rural communities, Dr. Johnson concluded, is to overcome the costs of distance and small scale and to enhance the value of space and amenities while protecting these assets as their success threatens their advantages.  In closing, Dr. Johnson stressed that a new rural reality with economically sustainable rural communities and sound environmental and natural resource strategies is in the interest of all Americans.

IV.       One Small Bank—One Big Difference

            Philip Baldwin - President/CEO, Southern Development Bancorporation, Arkansas

      Mr. Baldwin began by emphasizing that the Southern Development Bancorporation is a real bank—a bank holding company to be precise—that is 15 years old with other social and community service programs.  The stockholders of the bank, primarily large foundations which do not require dividends, allow the bank to reinvest its profits in communities.  In this regard, the bank serves as an intermediary organization that can affect local communities.  The bank has $520 million in assets, $30 million in total shareholders equity and $620 million in development loans funded.  The holding company owns three local banks in southern Arkansas and northern Mississippi in what is understood to be the poorest region in the country.  The bank’s branches are all in small towns, with the largest town to have a Southern Bancorp branch being Greenville, Mississippi, population 40,000.

      The secret of Southern, Mr. Baldwin continued, is its four other non-profit operations:  the Good Faith Fund, which is a workforce training and education organization; Opportunity Lands Corporation and Southern Community Development Corporation, which are both housing organizations; and Southern Financial Partners, which is a non-traditional lender.  These non-profits exist to affect positively the communities in which the commercial banks do business. 

      Mr. Baldwin noted that community development involved a circle of demands­—for leadership, economic development, housing, healthcare and education—with the question always being raised as to which demand you address first.  The answer, he has found, is that you must address them all at once, a daunting task for small rural communities which often lack the capacity to tackle them. 

      The Opportunity Land Company (OLC) aids in redevelopment through a variety of tactics.  One approach is to purchase and renovate commercial property in the downtown area and then sell or rent it out, an activity which turned an 85 percent vacancy rate to a 90 percent occupancy rate in the community of Arkedelphia, where this approach was applied.  OLC also funds multi-family and single-family housing, moving individuals out of substandard housing and into federally rent-subsidized, quality homes. 

      Another example of the community work Southern engages in that Mr. Baldwin highlighted is the Delta Bridge Project, funded by the Walton Foundation, a comprehensive and geographically focused approach active in a 75-mile radius of a Southern bank, which means that these are projects driven largely by individuals inside the community.  The Bridge Project includes economic, political and social components.  He added that the Project started out with a literature review of economic development proposals for the Delta over the past several decades, which returned a preponderance of academic studies with little practical application, long-term expectations or local buy-in. 

      Mr. Baldwin explained that the process the Bridge Project uses to approach community development is to seek a community steering committee to develop a strategic plan for what they want to see in the community in 15 years and then work backward through the steps needed to get there.  Each steering committee is informed by several roundtable groups working on specific issues, which ties together various members of the community as well as serving as a vehicle for generating ideas. 

      This approach was taken in the small town of Drew, Mississippi, which had a vacant downtown and almost no commerce, Mr. Baldwin explained.  The town formed a non-profit organization and started to develop a strategic plan with assistance from a professor from Delta State University.  The town decided that they needed to improve their downtown, and with $200,000 of funding from Southern and volunteer labor, the downtown area has been dramatically changed, with new businesses moving into town.  The volunteerism of the community is what makes this work, he noted

      Mr. Baldwin noted that a bigger challenge and bigger opportunity than small towns are medium-sized cities with brown fields and decrepit buildings.  There is only so much a small town can do, but there is capacity in medium-sized places to really take off in terms of economic potential.  Southern has made connections with people who can work with government agencies to help access Superfund money to help clean up contaminated sites.  Other projects include the establishment of a health education center using alternative funding from Southern bank guaranteed through the USDA.  The health center will bring in staff from the University of Arkansas to provide a good health facility for the town of Helena, Arkansas.  Finally, Mr. Baldwin highlighted Southern’s involvement in turning over foreclosure properties to Habitat for Humanity for renovation to provide improvements to available housing stock, and the creation of a charter school in Helena serving children who had been performing poorly in traditional schools.  The school has a radical approach to education that has improved the outcomes for these children and, Mr. Baldwin noted, in so doing, fundamentally changed the community. 

V.        High Schools:  Catalysts for a Strong Economy

            Ferrel Guillory - University of North Carolina, Chapel Hill

      Mr. Guillory’s presentation was based upon the 2004 State of the South Report from MDC, which has just been released.  There currently is a great deal of interest in reforming high schools.  The South, particularly the rural South, is being squeezed by demographic trends.  The South is getting older and more diverse with above average rates of children living in poverty, he observed.  Furthermore, the employment mix is changing away from manufacturing, transportation, and resource-based industries and toward management, professional and service industries.  The result of many of these changes is an actual decline in earnings for less-educated men over the past quarter century, with only modest gains for women in this category, but marked income gains for individuals with bachelor’s degrees or above.  The conclusion, Mr. Gullory noted, is that high school education pays off only for those who go beyond high school.  The question then, as he posed it, is how to propel students beyond high school? 

      High schools work well for some students, particularly those who are well-motivated, Mr. Guillory noted.  Other children don’t connect with high schools well and leave disconnected from society and opportunity.  But a greater concern is the many children for whom high school fails to provide direction or motivation, who graduate without any expectations to move much beyond high school.  The trends in education are pointing in the right direction, with enrollment up in advanced math, increased rates of college participation, particularly among women, although ethnic achievement gaps remain.  The problem, Mr. Guillory observed, is that as standards and expectations of students have increased, more students are dropping out.

      Schools, particularly high schools, can serve as levers for change.  By leading the rejuvenation and redesign of the public high school, the South will bolster both the competitiveness and democratic life of its communities.  There are four challenges associated with this: prosperity requires higher skills; the young population is increasingly minority; the South has many low-income youth attending isolated, resource-poor schools; and high schools fail to engage and inspire many students. 

      MDC has, in turn, identified five “levers for change” for high schools.  Schools need to move beyond seat time and test scores as measures of performance.  Multiple pathways to opportunity for students must exist.  Schools need to connect adults and adolescents.  There is a need to eliminate high-poverty schools.  Finally, there is a need to recognize the primary importance of teaching.

      Mr. Guillory explained that moving beyond seat time and test scores would ensure that all young people graduate from high school prepared for further education.  To do so, there is a need to align the high school curriculum and standards with the requirements of the emerging economy and postsecondary education and to extend literacy instruction through high school. 

      Multiple pathways to opportunity include offering training for skilled occupations, accelerated learning options, blended institutions, and the establishment of career academies.  This will offer equitable options to all students, connecting academic and technical/practical work.  Mr. Guillory added that connecting adults and adolescents includes using guidance counselors, as well as including adult mentors and business and work-based learning. 

      Mr. Guillory noted that while race matters, income matters more, and it is this that is behind the need to eliminate high-poverty schools so that no school has a high concentration of students living in poverty.  This is very difficult in rural areas, but the extent to which poor children are packed in the same school, learning suffers. 

      The final lever—the importance of teachers—Mr. Guillory noted, will require expanded professional development, increased incentives to improve recruitment and retention and a shift away from the habit of assigning vulnerable teachers to vulnerable schools.  Such an effort should aim to develop a corps of superbly trained, well-paid professional teachers. 

      In conclusion, Mr. Guillory raised two interrelated questions: Can the South muster the will to develop public schools aligned with the demands of a fast-changing economy? And can the region develop schools that meet the needs of a multi-ethnic, democratic society?

VI.       Building Rural Family Success

            Miriam Shark, Annie E. Casey Foundation, Maryland

      Ms. Shark began her remarks by explaining that the Casey Foundation—traditionally understood as a children’s advocate—has begun looking at rural communities because rural families are especially vulnerable to challenges and are disconnected from the supports that would otherwise enable them to succeed.  Children do well when families do well, and families do well when they live in supportive communities.  She noted that more rural families are in poverty than non-rural families, and that more than half of rural children’s families are either poor or low income.  This contributes to poor health outcomes, educational attainment, youth development outcomes, and job prospects for poor children. 

      The majority of rural poor families are working families, Ms. Shark added, with about one in four rural workers earning wages that are below the level needed to lift a family out of poverty.  This is compounded by the fact that many rural workers do not have full-time, year-round work and rely on uneven employment.  This is particularly true for minority women.  Rural unemployment rates also are high, which adds to the stress on families.  Bankruptcies also are on the rise, both in urban and rural areas, which Ms. Shark noted, points to a widening gap between what people make and what it costs to live, as well as the abundance of ways for families to get into downward financial cycles.

      Family economic success, Ms. Shark explained, means families can meet their basic needs, both expected and unexpected, envision a strong financial future, and know how, and are able, to make steady progress toward achieving their goals.  Increasing family economic success boils down to helping families earn, keep and grow their financial resources. 

      The Casey Foundation believes that by weaving these three strands together and keeping families at the center of a people- and place-focused strategy, families will move ahead.  Even in places where the multiple opportunities exist for poor families to tie together the various supports available to them, many poor families need help identifying and utilizing the services that are out there, she added. 

      When the Casey Foundation discusses helping families earn, the goal is to help families develop confidence, predictability and sufficiency in their income.  Ms. Shark noted that the difference between workers who were just holding on and those who are moving forward comes down not to having enough income but to having a sense that this income will be predictable and sustainable.  Planning begins to be possible when there is a predictable nature to income.  This takes workers who are “ready to earn” with good basic education; specific job skills; and plentiful opportunities in high quality jobs with a seamless link between workforce development and economic development.  There remain gaps between earnings and expenses for many families, which require various patching strategies, either a second job, working in the informal economy, or sharing resources.  The most successful strategy for these families, Ms. Shark added, is the Earned Income Tax Credit. 

      Poor families face innumerable challenges in keeping the money that they have earned.  A paradox exists, Ms. Shark added, in that many basic services are less expensive to those with greater resources.  An example of this is found in banking, in which checking accounts require a minimum balance or certain fees apply.  Because of this, many working poor people do not have checking accounts and must resort to check-cashing businesses, which charge 3 percent at a minimum.  There needs to be a focus on making more affordable the services low-income families need, including basic goods and services, and transportation services, she added.  Furthermore, to help low-income families keep the money they earn, a focus must be placed on reducing the number and frequency of financial crises they face, by increasing their financial literacy, making available affordable financial and credit repair services.  The third element of helping families keep their earnings is to help families build assets, she added, including savings accounts, funds toward home ownership and the like. 

      The final component of family financial success is for families to live in economically thriving places where their investments increase in value and the tax base increases.  This requires investments that support new start ups as well as support for existing businesses and access to technology and capital. 

      Everyone has a role to play in putting together the kinds of support families need to earn, keep and grow their incomes, Ms. Shark said.  Among the policy actions the Casey Foundation recommends are to help families help themselves by making financial literacy programs relevant and readily available and to make savings options affordable and accessible.  Also, state policy should reward working families’ efforts through a state Earned Income Tax Credit and outreach programs to promote and disseminate information about these programs.  Finally, Ms. Shark added, states can expand programs that help working families work, such as a state program that provides loan guarantees for affordable car purchase or to upgrade home-based child care supports; reduce families’ risk by regulating predatory practices; match workforce development activities with workforce needs; and provide incentives for private investment (including public investments that pave the way).

VII.     The Mid-South Delta Initiative 

            Freddye Webb-Petett - Kellogg Foundation, Arkansas

      The Kellogg Foundation focuses primarily on health, philanthropy and volunteerism, youth and education, and food systems and rural development, Ms. Webb-Petett explained.  About seven years ago the Foundation decided to look at grant-making in rural areas in a non-traditional way and after reviewing three rural high-poverty areas, decided to work in the Mississippi Delta region.  Because this was intended as a partnership and not just grant making, Kellogg opened an office in the Delta.  The Mid-South Delta Initiative took shape through a series of listening sessions where Kellogg staff sat with people in the public, private and non-profit sectors to learn the optimal way for Kellogg to invest their money in the Delta.

      These listening sessions resulted in the identification of three principle areas of need, Ms. Webb-Petett explained:  leadership development; community-based economic development; and conflict resolution, particularly across race, age, and gender.  The Initiative developed four strategies, including a community strategy, building capacity of intermediary organizations, public policy, and working with philanthropic organizations. 

      The Initiative eventually established 15 demonstration communities, which are very different from each other, Ms. Webb-Petett continued.  Most of these cross county/parish boundaries, which means that there are different political as well as community issues to be addressed.  The process began by placing the community in charge of the work that they were doing, so long as the activities met criteria established by the Initiative.  The projects needed to include all sectors of the community, so while there is one fiscal entity for the project, they all must be collaborations among various entities.  This stipulation grows from Kellogg’s experience in the past that the most successful projects include involvement from the public, private and non-profit sectors, she said.

      Another lesson that has been learned in Kellogg’s work, Ms. Webb-Petett continued, is that most people understand their problems and have a good idea of what the solutions might be, but lack the support network or mechanism to keep them moving forward toward resolving these problems.  The Initiative provides, in addition to financial resources, a support network that helps the communities do the work that they want to do and are able to do given the time and resources.  In addition to the financial resources the Initiative provides to these communities, each receives a coach who is in the community four or five times a month initially (with the frequency of visits decreasing over time), and networking for all projects involved, which are tailored to the needs of the community group.  Another component of the project is the introduction of technology by providing hardware and training.  This is a significant issue because many of the managing partners are small non-profits, which have not had the resources or inclination to use technology in their work.  By including a technology component in their projects, Ms. Webb-Petett noted, many organizations have been able to engage young people in new ways.

      Ms. Webb-Petett continued with two examples.  The first was a gardening project that has subsequently developed into a farmer’s cooperative with organic produce which is able to supply food to a national grocery chain.  With some of the revenue, the cooperative established a grocery store, the only one in a 40-mile radius.  The project now has a day care facility and is opening a new business annually, each with strong community training components.  The lesson of this, she pointed out, is that there are things that communities can do if they are willing that do not take large amounts of money, and yet have tremendous impact. 

      A second example comes from a community near Memphis that lacked public transportation.  This community, Ms. Webb-Petett explained, leveraged the financial resources beyond the initial scope with assistance from private, state and federal resources.  They got assistance from institutions at low cost and developed a strong information base that supported their proposals to state and federal agencies resulting in regular transit service to employment centers in Memphis.

      Furthermore, there is an imperative for the Initiative not to build new institutions where functional ones already exist.  Projects are encouraged to network with the other organizations working in the Delta to develop partnerships that will lead to greater sustainability after the grant period.

      The Initiative is in these communities for the long haul in order to see if the various approaches they have taken have worked.  One of the lessons the Initiative has learned in this process is that the private sector has been insufficiently engaged in this process.  In the next phase the Initiative will put more emphasis on this.

      Ms. Webb-Petett noted that the Initiative put most of its emphasis on community-based rural development.  This was very intentional since so much of rural economic development is directed at getting the “big plant” to come to town.  But smaller communities are not going to see that kind of development, she explained, and the Initiative’s job is to help these communities see the opportunities they do have.  Finally, the other piece the project is going to be working on in its next phase is to help communities understand how public policy interacts with community economic development. 

VIII.    Strengthening Rural South Carolina 

            Senator John W. Matthews - South Carolina

      Senator Matthews noted that the goal of rural development should be to change communities from where they are to where they ought to be.  In any analysis of the South, two regions emerge, one that is progressive, competitive, meeting national standards and per capita income averages, while the other is the old South that is not that competitive or meeting national standards.  The old South, Senator Matthews noted, is not closing the gaps that exist between it and the new South or the rest of the nation. 

      Senator Matthews noted that part of what he has done in communities in his district is to seek a way to close these gaps, an effort that took root following the closure of several manufacturing facilities in the area and shifts in the textile and manufacturing sector.  Dorchester County, where the communities are primarily based, is 61 percent minority, with a per capita income that is 85 percent of the state average (which is itself only 92 percent of the national average, with only 16 percent of the population holding college degrees.  Following a variety of community meetings and hearings, a few issues came up that seemed imperative to deal with, including education, healthcare and recreation.  The biggest issue was education, because each of the eight school districts in the county had different revenue potential, different student profiles, and different political structures. 

      Schools had to be dealt with because of the inequities that existed, Senator Matthews continued, so a move was made toward consolidation.  Doing so without a painful millage increase is difficult, but they had a unique opportunity in that a utility was locating a large power generation plant in the county that would contribute to the tax rolls.  The county needed $5.5 million to consolidate the school system, which would be used in part to erase a $5,500 teacher pay discrepancy between the districts and a $1,600 per pupil expenditure differential.  The county was able to use the tax revenue from the power plant to equalize per pupil expenditures and teacher salary and still had $700,000 remaining to spend in the community.  Thus, the school systems were consolidated, resolving funding inequities, but the high schools remained in the communities, which was key.  Consolidation was not achieved without a degree of pain, but with the commitment and leadership of public policymakers, change was possible.

      Additionally, the county has imposed an infrastructure tax of 1 percent, the revenues of which only can be used for infrastructure and economic development, he continued.  This has allowed the county to build industrial parks and create jobs.  These facilities are generating revenue that is being reinvested in this effort.  The parks are sited in a part of the county where industry is looking to locate, which allows some of the more rural parts of the county to maintain their character. 

      The county sought out the Duke Foundation, which traditionally works with Methodist churches through local congregations, Senator Matthews explained.  The county established a non-profit for this purpose, with a board that “looked like the county.”  By bringing in the local Methodist churches, the county was able to draw upon a new and previously untapped source of energy.  While the grant was not enormous, it did serve as a vehicle for pulling people together to see where the county wanted to go. 

      If you are going to get local people to change, you need to change local people, Senator Matthews said, by developing leadership within the local community.  There are numerous assets in the community, but leadership often is lacking.  Increasing the leadership base for the county was imperative if economic development was to be sustainable. 

      In the communities in which the non-profit was working, there existed a wealth gap that consisted primarily of home ownership.  For every frame home built in the county, 34 trailer homes were permitted, he explained.  This ratio points to a great number of working families investing their money in a depreciating asset.  The county is now working to improve home ownership rates and provide financial education.

      The county is also looking to develop job opportunities in the community.  An analysis of the job market in the community indicated healthcare and construction were the two areas with the highest growth potential.  In healthcare, the non-profit has a partnership with a Low Country Technical College to prepare certified nurse’s assistants (CNAs).  The program has now graduated two classes of CNAs, almost all of whom are employed and half have received raises, he added.  The project is working with the nursing home community and healthcare providers who have agreed to employ every program graduate.

      A second program is pre-employment for manufacturers.  A manufacturing alliance helps to develop the instructional program, including soft and hard skills, and agrees to hire the 20 graduates from the program.  When the advertisement ran in the newspaper, 437 people showed up for the course.  This demonstrates a willingness to work, he added, but also the challenge of getting community members the skills they need to work in a knowledge-based economy. 

      Senator Matthews emphasized that change in communities is a long-term project.  The problem is sustainability, he added, which is where leadership comes in, particularly with public policymakers, because they can get the right people into the room.

      The best way to achieve success, Senator Matthews concluded, is to experience success, particularly in the early stages.  When designing programs, the first venture needs to be something that can be achieved.  Furthermore, he encouraged everyone to use everything that was available, including the philanthropic community, people from within the local community, and government policymakers to bring all the assets together.  Doing this will improve and maximize all available funding, matching grant funds and state and federal aid, and in so doing make the old South look like the new South.

RURAL POLICY FORUM

Sunday, August 15

I.          The Globally Competitive South (Under Construction)

            Jim Clinton, Executive Director, Southern Growth Policies Board, North Carolina

      Mr. Clinton began his remarks by explaining that the Southern Growth Policies Board (SGPB) was created, in part, to bring a diverse range of voices to discuss how to bring economic opportunity to the entire South.  The Board produces an annual report on the South, with next year’s annual report focusing on the rural South.

      The Board conducts community forums, focus groups and surveys on the highlight issue for the year to insure the recommendations made by the Board reflect the feelings of the citizens of the region,.  When this process was done in the past year on issues of globalization and immigration, among the things the Board heard were that communities need to start by raising public awareness of issues and facts related to globalization.  Furthermore, the sessions yielded a theme that education is key to changing attitudes and preparing the workforce for a global future.  A third theme that arose was that the global economy offers opportunities for job creation, not just job loss.  A fourth theme was striking a balance between having immigrants conform to “mainstream” culture and making efforts to identify their unique skills and talents.  The final theme was the urgency of addressing issues related to globalization.

      This culminated in one new goal, Mr. Clinton added:  Southern businesses, institutions and residents will pursue global opportunities and relations with an entrepreneurial spirit.  With this goal came three objectives in how to reach that goal.  The first is to eliminate the gap between the export performance of Southern businesses and the nation as a whole.  Southern businesses trade at a lower rate than the rest of the nation.  Closing this gap would result in 379,000 new jobs and $27.6 billion more revenue for the region.  These figures may not reflect the reality of trade for the South, however, since trade is most often tallied at the point of export and not the point of manufacture.  Reforming this data problem is a concern for SGPB.

      Businesses that export are more technology intensive, have higher productivity and higher wages and enjoy faster growth, Mr. Clinton added.  All of this is a reason to look to export businesses.  Strategically, it is important to be paying attention to entrepreneurs and small and medium-sized enterprises, given their importance to the economy.  Furthermore, there is a need to integrate and align state strategies for industrial recruitment, economic development of existing businesses, workforce development and such, he said. 

      A second objective is to internationalize P-16 and adult education to respond to evolving business and community challenges, Mr. Clinton explained.  To be globally competitive, the South needs to have a globally competitive workforce.  This effort needs to include language and cultural education as well as a focus on life-long learning. 

      A third objective Mr. Clinton outlined is to achieve a shared sense of community by drawing upon the strengths, talents and interests of all residents.  This shared sense of community includes immigrants and native born.  The foreign-born population of the United States is roughly 10 percent, with Mexico, China and India as the top three countries of origin.  The result is a net positive economic impact of $10 billion, with immigrants shifting from a net cost to the system to a net contributor in between 10 years and 15 years. 

      What it comes down to, Mr. Clinton concluded, is a need to alter our perception, deal with reality and take action.  It is very important for Southerners to move beyond the concept of global victimization.   He noted the irony in holding this perception at home while abroad the United States is viewed as a global predator.  It is important that the South recognize that change is a constant component of the economy and that the focus on getting through a period of transition is an insufficient strategy. 

II.        Georgia’s Entrepreneur Development Initiative

            Don Betts - Manager, Enterprise Development, Economic Development Institute, Georgia Institute of Technology

      Mr. Betts noted that he represented the transition between policy and analysis to action on the ground to change local communities.  The Economic Development Institute is a component of Georgia Tech, complementing the university’s role as an internationally recognized technology incubator and a focal point for innovation.  The Institute, which has regional extension offices and offers community development services, has been working with entrepreneurs for decades. 

      The Institute focuses on entrepreneurs because they are the engine for economic growth, creating and growing wealth through investments, as well as jobs throughout the region.  The focus is on people, not simply businesses, and not just on new technology ideas. 

      The Institute has two sets of customers, Mr. Betts added:  entrepreneurs and communities.  The Institute looks at changing the idea of development from the “big box” approach to the big idea.  There is impatience with this at times, since it can be a slow process, but all of the various economic development strategies require entrepreneurs, a fact that development offices often forget or fail to include in their plans at the local level. 

      The spark for change in Georgia was the first Summit on Entrepreneurship that was convened in Tifton, Georgia, with champions from 80 of the state’s 159 counties.  From this came several recommendations to the governor on how the state can support entrepreneurs, including creating an entrepreneur development commission, Mr. Betts added.  There was a need to provide entrepreneurs with better support as well as better coordination of programs.  Furthermore, a governor’s small business network and office have been established to focus support on entrepreneurs.  The governor has insisted on measuring progress and insuring accountability for what the government does in this arena, he continued.  This has established a coordinating network to bring agencies together, with committees working on a variety of issue areas. 

      Mr. Betts described a new landscape for entrepreneurs at the state level, with the governor applying pressure to bring state agencies on board and a coordinating network in place to make sure efforts are well-aligned.  The state recruiting office now has an Office of Entrepreneurs and Small Business Development that catalogs resources and centralizes information.  The state also is using some of its tobacco settlement money to fund innovation centers and to support communities in their development activities.  There are five centers of innovation with specific technical focuses, which use a cluster concept, providing portals for the entire state.  These centers also tie university research to creating business opportunities in the state and create entrepreneur outreach specialists around the state.

      The Institute developed a new partnership with the state Office of Entrepreneur and Small Business Development, training representatives from the office, giving the program scale, with over 55 communities interested, Mr. Betts said.  The Institute has a community process that includes leadership, building awareness and support, and focusing on existing resources.  Furthermore, the process maps entrepreneur assets in communities and input from entrepreneurs and develops new programs to meet unique opportunities and challenges. 

      Once this process is completed, the community can look at their assets and opportunities and see if a strategy can be developed to line up their entrepreneurial talent and development capacity with their development goals.  Not all communities have the capacity to address all of their development objectives immediately, he noted. 

      The challenges for the Institute are many, including spreading the word about not just the Institute but its approach, Mr. Betts explained.  Communities often also have an entitlement mentality which must be retrained to create solutions locally.  There is also reluctance among state agencies to involve entrepreneurs in decision making.  In addition, there is a need to bring a mix of people to the table to ensure that the diversity of the community is reflected in the development process.  Also, it is important for communities to measure their activity and progress toward their goals.  The final challenge is to remove the program from politics to make sure that the efforts can survive changes in administrations. 

      Leadership is needed to accomplish community economic development, Mr. Betts said.  People in positions of influence in the community need to be aware and informed to help create an innovative culture where pressure for change is applied at the local and regional level as well as at the state level.  This leadership must always look for ways to connect people and groups and must demand accountability and efficiency from its activities.  And, finally, leadership is necessary to review and adjust programs against their goals to improve their outcomes

III.       What States Are Doing about Rural Policy

            Bobby Gierisch - Senior Fellow, Rural Policy Research Institute, Texas

      Mr. Gierisch began his remarks with a simple question for legislators:  what can my legislature do to help our rural citizens survive and thrive?  Answering this question crosses a significant divide between sector-based analysis to place-based analysis.  Sector-based analysis, Mr. Gierisch explained, would be looking at issues from the perspective of education or transportation or human services or agriculture or any one of a number of specific areas.  When talking about one of these areas, life is relatively easy, because there are experts to give advice in these areas.  But by asking a question not about a sector but about a place, the policy question becomes comprehensive and cross-sectoral and much more complex. 

      When asking the question about how to help a community, there are myriad directions to go—from infrastructure to education to healthcare to housing and beyond—but no roadmap as to which is the best choice compared to the others, or even if there is a best choice, Mr. Gierisch said.  These new place-based questions require identification of problems and opportunities, which in turn require data, information and analysis, as well as the translation of analysis into legislation and policy.  States are acting on this, with a number conducting rural studies—some of them several times­—as well as creating centers to look at issues affecting rural areas.  Mr. Gierisch explained that rural centers coordinate activities, services and resources of the state or other agencies; monitor legislation, initiatives and activities, and programs for rural impacts; assist policymakers in developing rural policy; coordinate and conduct research; serve as a clearinghouse for information, data and resources; report on rural conditions and trends; provide technical assistance; and administer grants related to these responsibilities.  These rural centers, he observed, should not overshadow the fact that there are many institutions already involved in rural programming and will need to continue to be involved for rural communities to succeed.

      Returning to the question of what can be done for rural communities, Mr. Gierisch explained, the landscape has become very complicated with various sectors (such as education, agriculture, healthcare and broadband), functions (such as research, policy development, coordination and leadership), and venues and organizations (such as the governor’s office, local officials, and the legislature).  Trying to make sense of this mix to make sure that these functions, structures and needs all match up in a reasonable way leads to the creation of rural centers.  In the absence of clear models, states have come up with a variety of structures to arrive at this policy goal.  Texas, for example, created a large executive agency with comprehensive functionality.  North Carolina established a large, private non-profit with state support which still has comprehensive functionality.  Pennsylvania, however, has a small legislative agency with a mandate to conduct research and information activities only.  Other states have other rural center models, he noted.  Three states establishing new rural centers just this year.  It is significant that so many states have a rural entity, a situation that is the result of policymakers asking place-based questions and realizing that there was no existing institution that could answer those kinds of questions. 

       Mr. Gierisch went on to highlight the rural institutional focus in two states whose rural centers have comprehensive functionality and resources and personnel on a scale to really have a statewide impact:  North Carolina and Minnesota.  The North Carolina Rural Center is a non-profit entity with strong political support.  Because of its leadership on rural issues, it is now looked to by many other significant players for setting the framework and direction for rural development and is a collaborative partner for many of these organizations.  The North Carolina Rural Center has a concept of comprehensive economic development that pulls together the building blocks of business development, workforce development, physical capital and infrastructure and social or civic capital. 

      Mr. Gierisch noted that the North Carolina Rural Center has strong internal leadership and broad programming, as well as a heavy research and development emphasis.  The Center maintains a strong community orientation and strong collaboration on projects with excellent political and partner relations and stakeholder aggregation.  This all takes place in a supportive environment which includes related organizations interested in similar work

      The Minnesota model is very different.  Mr. Gierisch explained that the Minnesota model exists outside of state government, with a number of organizations doing excellent rural programming and rural work, much of it well-funded and staffed.  Characteristic of the Minnesota model is the number of organizations working autonomously or semi-autonomously making their own programming decisions and having state government in the back seat.  Even with the autonomy these many organizations enjoy, they have developed a fairly common approach and philosophy toward rural development.  Key to success in Minnesota has been the presence of philanthropic organizations, principally the McKnight Foundation, which created six regional Minnesota Initiative Funds which provide resources to organizations in the state.  The McKnight Foundation has put about $200 million into these six foundations with the expectation that the foundations work toward independence, building their own endowments, which today are worth an amount equal to the McKnight Foundation’s contributions. 

      In Minnesota, Mr. Gierisch continued, the McKnight Foundation and other philanthropic institutions have brought over 30 organizations together as the Regional Economic Development Group, representing all sectors, including players such as the Federal Reserve Bank, the state Chamber of Commerce, the state University coordinating board, the Legislature and the state Rural Development Commission, among others.  These organizations have signed off on a set of principles and have agreed to align their efforts on a demonstration project for each of the six regions.  The principles are regional alignment; building on existing assets; local leadership; integrated education and training responsive to business needs; primacy of the private sector in economic development; government creating affordable infrastructure responsive to business needs; and measurement and evaluation to enhance learning and adaptation.  This is, Mr. Gierisch concluded, one of the most innovative approaches in any state.

IV.       Maryland’s Rural Focus

            Senator Mac Middleton - Maryland

      A lesson Maryland has learned, Senator Middleton began, is that before talking about money with respect to rural development, there needs to be a program in place that is a good fit.  When money does enter the discussion, however, rural communities receive a disproportionately smaller amount, in general, because rural communities fail to ask for assistance and do not have a plan in place for their development.  Rural communities in Maryland are typical in their lack of planning for their development.

      Rural communities do not have much clout in the General Assembly based on numbers alone, Senator Middleton noted.  An opportunity arose to take federal funding for a rural center, called the Maryland Rural Council, which gave the state a means to coordinate rural services.  The Council is composed of political and private sector (for-profit and non-profit) leaders from the rural parts of the state.  The Maryland model is very small and limited, with a total budget of $160,000, but has tremendously strong participation from across the state and across sectors because the Council is viewed as the engine for coordination. 

      The Council has benefited from having a strong executive director who is familiar with and works well with the General Assembly, Senator Middleton noted.  A key to the Rural Council catching on was its ability to demonstrate early successes, including returning funding for agriculture education to the budget after a round of budget cuts.  The Council also created a Maryland Agriculture Education Research and Development Assistance Fund with $800,000, a fund that requires a 100 percent match from recipients, and managed to capture some of the tobacco settlement money for rural primary healthcare, largely due to the Rural Council’s having a plan for what to do with the money. 

      The Rural Council has a housing component to provide assistance for housing in non-Smart Growth designated rural areas, Senator Middleton continued.  A lesson from the Council’s actions on the Smart Growth program, the Senator added, was that rural communities needed infrastructure and investment funds to allow these older towns to accommodate any growth.  From this was born a statewide infrastructure study to identify needs, which lead to increased funding for infrastructure for rural communities and to a more general awareness of the challenges rural communities face in raising the revenues necessary for needed infrastructure investments from within their smaller tax bases. 

      In the agricultural arena, the rural council worked hard during the development of the state’s mandatory nutrient management plan, which resulted in a technology development fund, a manure transport fund and a cover crop program.  Southern Maryland, which was most affected by the nutrient management plan, formed a tri-county council that developed a strategic plan for the region that demonstrated the need for assistance from tobacco settlement funds.  The success of this cooperative planning model prompted other rural regions of the state to set up tri-county councils of their own to develop strategic plans.  These councils receive state funds with the condition that they eventually become financially independent. 

      Finally, Senator Middleton noted, the Rural Council had the University of Maryland conduct a strategic plan for agriculture in the state, which pointed to a need to move out of traditional agriculture and into alternative revenue sources for the resource-based economy.  A task force was formed to look at what the needs in the state were and legislation was passed to build a fund to set up a financing authority for resource-based industries.  In closing, Senator Middleton noted that in order to have success politically, the legislative rural caucus needs the facts, facts provided for by the Rural Council.

V.        Louisiana Priorities

            Senator Noble Ellington -Louisiana

      In Louisiana, like much of the rest of the region, rural areas often are overshadowed by large metropolitan areas in garnering state and federal funding for development, Senator Ellington explained.   After years in which the only state entity that focused on rural affairs was the House Rural Caucus, the state created an office of rural development which has allowed the state to move forward on rural issues.  This office has been able to secure about $7.5 million in funding that has been spread out by parish and locality, he explained, although the funds may not have been used as well as they could be.  The office is trying to leverage this funding through matches with USDA and other entities. 

      The state was fortunate to get four renewal communities, Senator Ellington continued, a federal program that offers new and existing businesses tax credits for expanding employment.  In the last two years, the state created a Rural Task Force, composed of legislators from the House and Senate as well as staff from the state Rural Development Office, and passed legislation to create rural initiatives in the form of collaborations between Louisiana State University and Southern University.  One of the main accomplishments was the Louisiana Broadband Advisory Council, whose job is to ensure that rural Louisiana has access to high speed Internet in a timely fashion. 

      Another problem rural Louisiana is facing is insufficient support for rural roads that are maintained by the state, Senator Ellington continued.  There has been insufficient money to secure federal matches for these roads and the Rural Task Force has recommended using oil and gas revenues to invest in these roads for rural communities.  Senator Ellington emphasized the need to ensure high quality education in rural places and to be mindful of the perilous situation of rural hospitals.

VI.       Where Do We Go From Here?

      Following the presentations, participants were asked what the next step should be in rural development.  It was noted that there were a number of inequities between urban and rural areas, including access to federal funds, healthcare, and highway funds.  Creating the infrastructure for the knowledge economy in rural areas was acknowledged to be an effort similar to rural electrification, which may require a broad tax on all users to subsidize the costs of providing service to sparsely populated, low-wealth areas. Supporting growth in rural areas in a way that fits the character of the rural area also was identified as a key concern.

      A number of participants pointed to a need to set up a dialogue with non-rural people and policymakers.  Doing so, however, requires having a well-articulated rural agenda that is supported with facts and figures that will speak to both the importance and the significance of rural places to the entire state.  Because of the urgency of the situation, the Chairman agreed to appoint members of the Committee to a special Rural Development Working Group to articulate a rural agenda and develop a framework for dialogue with non-rural people and policymakers. 

BUSINESS SESSION

Sunday, August 15

I.          Global Agriculture and Local Economies

            Daryll E. Ray, Ph.D. - Professor and Blasingame Chair of Excellence, Director of Agricultural Policy Analysis Center, University of Tennessee

Background

      The global nature of the marketplace is felt perhaps nowhere more acutely than in the agriculture sector, where planting patterns, weather events and, increasingly, national policy and trade negotiations can affect profitability for farmers and prosperity for their rural communities.  This program will continue the Committee’s tradition of putting agriculture policy and economics in context.

Presentation

      Professor Ray began by observing that farm prices, which were at record highs, have all dropped in the past few months.  Price volatility in the past few years largely has been weather related, emphasizing that the high prices recently seen are not prices farmers should expect in the future.  While current prices might improve some, Dr. Ray noted that with current legislation and average weather, prices should settle in to slightly below the current figures, with similar declines in livestock prices as cycles continue.

      What happens in the farm sector, Dr. Ray continued, affects the rural economy.  When the USDA measures farm productivity and income and fails to take into account the other investments farmers make, it vastly underestimates the impact farmers have on the rural economy. 

      Dr. Ray noted that in the United States—historically—there have been two major components of farm and commodity policy:  the policy of plenty and the policy to manage plenty.  The policy of plenty—which has been the agriculture policy since the beginning of this country—includes ongoing public support to expand agricultural productive capacity through research, extension and other means.  This has guaranteed increases in productive capacity.  In the past, there also has been a policy to manage plenty, which included mechanisms to manage productive capacity and to compensate farmers for consumers’ accrued benefits of productivity gains.  This policy was eliminated in the 1996 Farm Bill, a situation that needs to be investigated as it has led to some price surprises, he added.

      Among the components of the “managing plenty” policy which the United States has dropped are a floor price for commodities, supply management tools, and price stabilization, Dr. Ray noted.  Over the years and especially since 1996, all three were eliminated because of expectations that exports would drive agricultural growth and prosperity, and that if markets are allowed to work, agriculture will do just fine.  The reason that the managing plenty policy was eliminated was that in the run-up to the 1996 Farm Bill, policymakers were convinced that agricultural exports were going to take care of the growth in productive capacity, he noted.  Export optimism and the belief that agriculture could better self-correct than half a century ago led to confidence that the production control system was unnecessary. 

      What happened in the years since then, Dr. Ray noted, has been very different from what was predicted in advance of the 1996 Farm Bill.  As an example, in preparation for the 1996 legislation, China was predicted to be importing nearly 500 million bushels of corn by 2002.  The reality is that by 2002, China was actually exporting that amount of corn.  On the domestic front, U.S. exports to the rest of the world were projected to rise steadily over the same time period, while the reality was generally an uneven downward trend, he added.  The reality is that over the past two decades, U.S. exports have been basically flat, with domestic demand increasing faster than population and thus representing most, if not all, of the growth in sales for grain agriculture.  While exports are, and will continue to be a major component of the agricultural economy for the United States, they have neither performed to the degree that many people had wished that they would, nor are they as important as most people believe. 

      A major assumption undergirding the elimination of the management of plenty policy was that farmers are now more able and more likely than before to be responsive to prices in making planting decisions, Dr. Ray noted, an assumption that has not been borne out.  Indeed, aggregate acreage in the four major export crops (corn, wheat, soybeans, and cotton) has remained relatively constant even as price and farm payments have declined.  Within individual commodities there have been changes, but the total acreage for planting remains relatively constant even as market signals indicate lower returns. 

      Dr. Ray explained this by noting that agriculture and food are different from other sectors of the economy, in part because it is important to American society to have an increasing productive capacity for agriculture, which means production is constantly ahead of demand.  In most sectors, this is not a problem, but for agriculture, consumers do not consume more because prices are lower due to an oversupply situation, clearing existing stockpiles.  Self-correction does not work on either side of the equation.  Prices do not affect demand at either the high or low end of the scale, he explained.  Furthermore, there is little self-correction on the supply side, with farmers tending to produce on all their acreage with few alternative uses for existing farmland that is not in production.  Livestock is slightly different, since stocking rates can be reduced, but land will be used to produce something every year because there is no incentive not to. 

      Dr. Ray outlined some policy premises to remember with global agriculture, including the fact that United States and world output will continue to outpace demand; aggregate crop agriculture does not self-correct; the United States’ export competitors are as committed to producing for international markets as we are; and our import customers view food as a national security issue and abhor increased dependence.  Some possible directions for agriculture policy include staying the course with the current program structure, which could be costly in some years.  Another option Dr. Ray described was to intensify the free market prescription by eliminating all support programs and trade barriers in the developed world, which could increase prices slightly, but steeply erode land prices, eliminating the equity farmers have built up over decades.  Other options include bringing back some of the traditional farm policy instruments, such as a farmer-owned reserve and land set asides, enlisting multinational cooperation, and merging energy and agriculture policy.  With respect to this latter, he noted that including crops not in the food equation would take some of the acreage out of the food production equation, reducing commodity surpluses, while providing all the benefits of a readily salable crop on the land. 

      Dr. Ray noted that worldwide excess capacity will be the long-run problem, with dramatic yield increases in other countries, the return to production of land that has been recently idled, particularly in Russia and the Ukraine, and new acreage coming into production, particularly in Brazil and China.  This having been said, excess capacity is not a bad thing, he added, but it isn’t needed at all times.  Managing production is the issue.  Total crop demand is not price responsive, and total crop acreage reacts very slowly.  Furthermore, most countries view food and agriculture the way the United States views national defense, and our export competitors are as adamant about keeping their export markets as we are.  These “rules of the game,” Dr. Ray noted, define how agriculture responds.

      A few things on the horizon for Southern agriculture that Dr. Ray highlighted included a Government Accountability Office report that is critical of the USDA’s enforcement of payment limitations which will increase pressure on limiting payments to farmers.  This could have a major impact on cotton and rice in particular.  Furthermore, the World Trade Organization (WTO) will be ruling soon on a case Brazil has brought against the U.S. cotton program, a decision that could affect most of the mechanisms the United States uses in its farm policy.  Dr. Ray added that he felt that trade negotiators from the WTO are being overly optimistic about what would happen to commodity prices if subsidies they view as trade distorting were removed.  He argued that removing them would result in only small increases in price with disastrous impacts on land values, where most farmers hold their equity in the developed world.  Other pressures on agriculture policy will be the looming budget deficit which will make farm programs increasingly unsupportable, increased costs of production due to increased energy costs, and increased interest rates.  Tobacco, rice and cotton, all three important crops in the South, are the crops most affected by this confluence of concerns.

      The long-term challenge for farmers, Dr. Ray noted, is low prices due to overcapacity from increased foreign production of grains, oilseeds, cotton, hogs and other farm products.  Furthermore, he noted, it is going to be hard to maintain farm payments at recent levels.  It is also important to recognize that the United States cannot expect exports to sustain the continued growth in production; is not the low-cost producer; and that U.S. producers may be at a disadvantage against producers in other countries according to the terms of our international trade agreements. 

      In response to a question, Dr. Ray noted that the WTO is not the appropriate venue for discussions of trade in food and commodities, for many of the reasons he outlined.  Pulling food and agriculture out of the WTO, while politically unlikely, offers the best chance of providing an approach to trade that considers the specific nature of the sector.

II.        Legislative Roundtable Discussion

Alabama—The major agricultural industry in Alabama is forestry, and the state is investigating tree farming and its role in capturing greenhouse gases.  Also, the state is interested in applying country-of-origin labeling to grocery stores and restaurants. 

Arkansas—The state has a diverse agriculture sector producing cattle, poultry, rice, cotton, corn and more.  The state has a strong interest in biodiesel, and demand for Arkansas cattle in feedlots is very high, thanks to the exceptional quality of Arkansas’ herds.  The state’s biggest industry is poultry, and in the northwest part of the state where the industry is concentrated, it has created chicken litter disposal problems.  Phosphorous runoff into streams flowing into Oklahoma and Missouri has led to litigation over the pollution of water supplies.  The state is trying to devise an economic solution to the problem that would transport the litter to the cotton- and rice-growing parts of the state, where the phosphorus would be useful.  The state also is worried about the catfish industry, which is seeing tremendous competition from Vietnamese basa fish being marketed as catfish.  Arkansas would also like to see the Cuban market opened up, but that area is still very limited. 

Florida—No Report

Georgia—There is concern about running tobacco out of Georgia through the imposition of taxes on cigarette products.  Tier 1 and Tier 2 counties (71 out of 159 counties) are using tobacco settlement funds to promote economic development in these mostly rural communities.  Also, the state is a major poultry producer and is attempting to diversify.  To this end, the General Assembly passed legislation creating a Division of Aquaculture in the state Department of Agriculture to promote fish farming.  The implementation of this is meeting some resistance from the state Department of Natural Resources, however, with the conflicts slowly being ironed out. 

Kentucky—Kentucky has split the state’s tobacco settlement money evenly between health and agriculture, with a focus on helping tobacco farmers diversify.   Last year during the governor’s race, both candidates agreed to leave this arrangement as it was; consequently, the fund has been undisturbed even during the tight economic times the state has experienced.  A state board gets 65 percent of the agriculture-dedicated money for projects, with the remaining 35 percent is distributed to counties.  Among the projects supported are improvements to cattle herds and forage, fencing and land, as well as diversification into sheep, grapes, ethanol production, and alternative uses for agricultural products.  Agritourism also is growing in Kentucky, although it is in its infancy in the state. 

Louisiana—In addition to the information provided during the 2004 Rural Policy Forum, the state has made great advances on boll weevil eradication.  The program was first met with skepticism by farmers, who viewed it as too costly, but the state has been able to provide support for the program, and it is now viewed very favorably by cotton producers.

Maryland—In addition to the information provided during the 2004 Rural Policy Forum, the General Assembly created a young farmer advisory group through legislation approved by the General Assembly this year.

Mississippi—The state supported a considerable variety of agriculture in the past two years, including legislation related to catfish, soybeans, rice, and cotton.  The state also has a fairly robust aquaculture industry along the coast.  The state has seen an increase in cotton production, with acreage returning to the hill country. 

Missouri—No Report

North Carolina—No Report

Oklahoma—No Report

South Carolina—No Report

Virginia—One of the most major changes in Virginia policy this year was an increase in the tax on tobacco from two-and-a-half cents per pack to an eventual 30 cents per pack which was part of an overall budget and revenue package that also increased general sales taxes, among other items.  One of the biggest issues for the agriculture committee in recent years has been animal regulations, particularly pets and companions animals.  The state did a major rewrite of the Department of Environmental Qualities solid waste fees, trying to strike a balance between the environmental community and the agricultural community.  And for the first time, the state will have a Secretary of Agriculture, although the position has not yet been filled.  Finally, there are increasing pressures against agricultural practices from urban transplants, which is leading to land use conflicts. 

West Virginia—Since September 11, 2001, the state Department of Agriculture has developed a plan to respond to animal and plant threats, however federal funding is needed, preferably in the form of block grants.  The state also is seeking legislation to regulate the sale and possession of exotic animals, an issue that was brought to the attention of the Department in the spring of 2003 with the outbreak of monkey pox among prairie dogs kept as pets.  The Department continues to promote and assist producers of value-added agriculture products, with the recent awarding of a federal USDA grant to provide education on risk management tools to these producers.

III.       Nominating Committee Report

      Representative Holland called upon the Nominating Committee, chaired by Representative Adrian Arnold, Kentucky, to make recommendations for the position of chair and vice chair of the Committee.  It was the recommendation of the Nominating Committee that Senator Thomas “Mac” Middleton, Maryland, be elected to serve as chair and Senator Noble Ellington, Louisiana, be elected to serve as vice chair.  With no candidates introduced from the floor, Senators Middleton and Ellington were elected by acclamation.

PROGRAM SESSION

Monday, August 16

I.                   Cattle at a Crossroads

Jay Truitt - Legislative Director, National Cattlmen’s Beef Association (NCBA),Washington, D.C.

Nithi Govindasamy  - Policy Secretariat, Alberta Agriculture, Food, and Rural Development, Canada

Background

      The past year has been a remarkable one for the cattle industry.  With cattle prices at record highs in 2003, the industry received a serious blow in the form of a positive result for bovine spongiform encephalopathy (BSE) in a dairy cow sent to slaughter in Washington state.  In response, beef exports were sharply curtailed, causing considerable anxiety among producers.  Added to this, the U.S. Supreme Court agreed to hear an appeal of a lower court ruling that beef producers do not have to pay a $1 per head fee on cattle (the proceeds of which is split between the National Cattlemen’s Beef Association and qualified state councils), with a decision expected next year.  The USDA also is in the process of implementing a national animal identification program.

Mr. Truitt’s Presentation

      Mr. Truitt began his remarks by noting that world trade in beef is up across the board.  Meat is one of the strongest sectors for the United States in international trade.  The United States is also the largest importer of beef in the world, he noted.  The important difference is that the United States imports meat at an  average of $1.22 per pound and exports it at $1.42 per pound, a 20 cent value differential.  The United States exports about 2.5 billion pounds of beef each year, equal, he said, to the amount purchased by Wal-Mart.  Significantly, the meat products that are exported are those that have low value in the United States.  Because of this, export sales generate extra revenue for U.S. producers on cuts, such as tongue and short plate, that would in many cases have little or no value on the domestic market save as components in variety meats.

      The response to BSE reflected the training and preparedness of the industry, Mr. Truitt noted.  The initial reaction by the USDA calmed the public, and the reaction was aided in part by timing insofar as the event happened just before Christmas when the media and public attention were elsewhere.  The beef industry had a response plan in place, he continued, but the bigger question was how the rest of the world would respond. 

      Unfortunately, Mr. Truitt continued, the export markets responded by rejecting U.S. beef exports, with many of the key markets still closed; in fact, about 71 percent of the total markets have reopened.  Important among these is Mexico, which is the top export market for U.S. beef.  The total impact of these export losses amounts to $165 to $190 per head, an amount that will take some time to recover, he noted.  Even with the BSE incident, however, consumer confidence remained high, actually reaching a peak of confidence less than two months after the BSE event, reflecting a belief among the U.S. public that the discussions and investigation with respect to the disease were forthright and transparent. 

      The question with BSE, Mr. Truitt pointed out, is what is next.  Chief among the next steps the NCBA foresees is a surveillance program, the objective of which is not to find a BSE cow, but to find the prevalence of BSE in the herd.  The difference is one of identifying the extent of any animal health concern, which is why the United States is testing 25,000 head of cattle over the next 12 to 18 months; the point being to discover if additional steps are needed to protect the cow herd with the goal of eradication.  He emphasized that every step already has been taken to protect human safety, but the industry wants to insure the health of the herd as well, particularly to avoid the kinds of problems Europe and Japan have experienced.  Export countries are generally not asking for testing as a requirement for opening up markets, Mr. Truitt added.  Testing also does not help the industry learn anything, and would drain resources away from more pressing areas of concern.  A final issue with BSE is opening up markets, with trade discussions underway.  These discussions must be based on science, he emphasized, reminding the Committee that this was a two-way street, and that opening up the U.S. market to Canadian beef should be based on the same principles we would demand from our trading partners.

      Animal identification follows almost directly from the BSE discussion, Mr. Truitt said.  There are a number of technological solutions, but the decision needs to be made at the state level to suit state needs.  The Cattle Working Group, an advisory council formed by the NCBA, recommends that the USDA establish a premise identification system and conduct education and outreach and test strategies this year, with the first steps in developing the infrastructure taking place in 2005 and the system implemented and tested in 2007.  The system needs to work for cattle at movement, Mr. Truitt suggested, which would mean that cattle are first identified once they enter the commerce stream.

      The Cattlemen’s Association believes that animal identification can be accomplished in the private sector, Mr. Truitt added.  Indeed, because federal funding is unlikely to be continually recurring for this program, private ownership of the system is a must.  Such an arrangement would also protect the privacy of the information and improve producer value, while still offering benefits for animal health, traceability and verifiability. 

      A somewhat related issue the Cattlemen’s Association has had to look at is country-of-origin labeling, Mr. Truitt said, an idea the Association is not opposed to, but one that faces challenges with respect to implementation.  The current law has numerous flaws across almost every industry.  The NCBA wants to start over with a new voluntary policy that is based at the state level.  There are a number of existing programs that are on the ground that could serve as workable pilots.  Mr. Truitt also noted that these programs have implications for our very important trade relationships, particularly with Canada and Mexico

      Finally, Mr. Truitt noted that the checkoff program, which sponsors a number of promotion programs at the national level, is under threat from a handful of larger producers.  A number of states have signed on to an amicus brief supporting producers’ ability to support and enhance their own products, including opening up markets around the world. 

Mr. Govindasamy’s Presentation

      Mr. Govindasamy noted that while the BSE outbreak in Canada has affected the entire country, Alberta, with 40 percent of Canada’s herd and 70 percent of the country’s slaughter capacity, has been the most affected,.  Half of all farm cash receipts in Alberta are from cattle.  Following September 8, 2003, the U.S. border was reopened for cut beef under 30 months but not for live cattle, and no cattle older than 30 months could be slaughtered because to do so would bar any cattle slaughtered in these facilities from the export market.

      The Canada-United States agri-food trade relationship is valued at $30 billion annually, the largest agricultural bilateral trade relationship in the world, Mr. Govindasamy explained.  The size of the cattle herd in Canada, roughly 15 percent the size of the U.S. herd, has been growing since the border closure at about the same size (in absolute terms) that the U.S. herd has shrunk.  The oversupply situation in Canada has occurred primarily because of the limited slaughter capacity in Canada, which previously had shipped a great number of cattle to slaughter in the United States. 

      The supply imbalance will mean that by the end of 2004 Canada will have between 500,000 and 600,000 cattle that have no place to go, Mr. Govindasamy explained.  This has meant substantial price cuts, well below break-even points for producers.  This affects not only cattle producers, but their rural communities, which are at serious risk from this momentous and serious event.  In all, cattle slaughter is down about 11 percent this year over last year.  In Alberta, half of all cattle slaughtered were typically exported to other countries, primarily the United States, which has made the closed U.S.-Canadian border particularly traumatic for the Alberta cattle industry, with losses calculated at $2.27 billion.  There are also only two large packing houses in the province, he added, which have access to huge oversupply.  The U.S. and Mexican markets are now open to cut beef, along with 21 other countries, but the major Asian markets remain closed. 

      Mr. Govindasamy noted that Canada, the fourth largest export market for U.S. beef, did not close its border to U.S. live cattle after the BSE discovery in Washington state, a decision based on sound science.  The United States also is the top market for Canadian beef, accounting for 82.5 percent of all Canadian beef exports in 2002.  The BSE incident reduced 2003 cattle and beef export revenue by about $1.5 billion and farm cash receipts by $1.3 billion, with an average estimated loss of $20,000 per family, he noted.  It also reduced the equity in the cow calf sector, a highly leveraged end of the business, by $3 billion and widened the price spread between U.S. and Canadian cattle from 7 cents to 40 cents per hundredweight.

      Mr. Govindasamy noted that the industry is implementing several contingency plans, including increasing the slaughter capacity of Canadian processing facilities to remove surplus cattle, and develop a delayed marketing strategy.  Cattle producers also are looking for some government assistance to bridge them through this very difficult period.  Domestic consumption remains strong in Canada, with public support of the industry thanks to the transparency and honesty of the response and investigation of the BSE outbreak.  Canada has increased surveillance and slaughter of cattle born before the 1997 ban on feeding ruminants to cattle, with no further positives found. 

      The policy responses to the BSE threat include the ruminant feed ban which dates back to 1997, the removal of specified risk materials from the food chain, enhanced surveillance, and enhancements to the feed ban in terms of scope and implementation, Mr. Govindasamy said.  He also drew attention to one of the recommendations of an international panel charged with looking into the BSE response: that since the primary method of transmission of BSE is ruminant-to-ruminant feed and cow-to-human transmission is only via infected product, then testing of all cattle for human consumption is unjustified in terms of protecting human and animal health because the two potential points of contamination have been addressed.  More significantly for Canada, Mr. Govindasamy continued, the panel recommended that the United States should demonstrate leadership in trade matters by adopting trade policies in this regard in accordance with international standards and discontinue irrational trade barriers.

      Among the lessons Canada has learned from this recent episode, Mr. Govindasamy noted, is that a single BSE-positive cow in Canada is sufficient to bring the Canadian cattle industry to its knees, as well as the importance of maintaining and enhancing the close relationship with the United States.  This episode also drove home the point regarding the close integration of the North American cattle industry and the export dependency of the Canadian component of that industry.  Furthermore, he added, there is an urgent need to review and revise international guidelines to make them more practical and to ensure that countries do not overreact, while adequately safeguarding human and animal health.  Canada and the United States should move quickly to complete and implement the remaining policy measures necessary to eradicate the disease and reassure consumers and trading partners, he continued.  These measures must be guided by sound science and should not be an overreaction, however.  Finally, there is a need, he said, for multilaterally-accepted international rules of management and trade so as to avert the problems experienced with BSE.

II.                Supporting Healthy Rural Communities

            Jean Crews-Klein -  Vice President of Business Development and Natural Resources, The Rural Center, North Carolina

Background

      A host of economic and cultural forces influences the well-being of America’s rural communities.  Recognizing these forces and how they affect the community can help in the development of positive responses to change.  Guiding communities through changing times, and helping them to recognize the assets they have and those they must work to acquire, is a key component of a proven strategy for supporting rural places in their economic development.

Presentation

      The Rural Center came about, Ms. Crews-Klein explained, because it was clear that two North Carolinas were emerging, one rural and one urban, with rural communities fast falling behind urban counterparts on most measures.  Viewing this, the North Carolina Commission on Jobs and Economic Growth recommended the establishment of an institution to advocate for rural areas.  It came about thanks to leadership from the General Assembly, the executive branch, the university system, the business community and the philanthropic community.  The Rural Center, she noted, was viewed as a vehicle to promote and implement sound economic strategies to improve the quality of life of rural North Carolina.  Funding for the Center comes from a mix of sources, including the General Assembly ($4 million annually), foundations, state and federal grants and North Carolina corporations. 

      The principles of the Rural Center, Ms. Crews-Klein observed, are to put people first; to take a comprehensive approach to rural development; to have a commitment to innovation; to have an impact through partnerships; to practice diversity; and to incorporate accountability, evaluation, and replication.  The Rural Center conducts comprehensive rural development through business development, civic infrastructure and leadership development; improvements in physical infrastructure; and workforce development.  This work is accomplished through a variety of avenues, including research, policy advocacy and development, and programs.  Among the special projects the Center has been involved in, she noted, was the E-NC Authority, which was created to bring Internet service to rural North Carolina.  In the three years that the program has been active, North Carolina has moved from 43rd in the nation on the availability of Internet access in rural areas to 11th.  Another special initiative the Rural Center has taken an interest in is rural entrepreneurship, with the creation of a center for rural entrepreneurs.  This is important for rural areas, she explained, because 96 percent of the jobs in rural North Carolina are in companies with 10 or fewer employees.  These companies represent the greatest part of job growth in the state. 

      Ms. Crews-Klein observed that it was impossible to advocate for rural North Carolina without talking about urban      North Carolina, because of the interconnectedness of urban and rural communities and economies.  This understanding guides the work of the Rural Center, bringing people from urban North Carolina in to work on issues that they would otherwise bypass.  In part, this is a process of education, because there is so little transference between the perspectives of the two communities. 

      The vision of the Rural Center is that rural North Carolina will have jobs that pay livable wages and a strong entrepreneurial spirit, Ms. Crews-Klein said.  She emphasized that the rural parts of the state must have connections to the global economy through transportation and telecommunications services and enjoy a high quality of life, including excellent public schools, high quality healthcare, and decent and affordable housing.  Important to this vision is strong local leadership.

      Rural North Carolina has undergone tremendous change, with an influx of new residents placing new demands on services, Ms. Crews-Klein noted.  Nearly half of the state’s population live in rural counties, with political representation for rural areas and resources for rural areas on the decline, even as rural places compete with very sophisticated urban and suburban communities for resources and a place at the table politically, she said.  North Carolina has seen massive declines in the number of farms and the size of the manufacturing industry which hits the rural part of the state particularly hard.  The loss of manufacturing and textile jobs has given North Carolina the 5th highest unemployment rate in the country, with many of these people having lost jobs that paid well and offered benefits.  Skilled jobs, she noted, are a much greater component of the job mix, something that hurts rural places as well, since educational attainment is lower for individuals in rural places.

      The Rural Center, Ms. Crews-Klein explained, through its ongoing conversations with rural people and formal regional forums about the problems and options for rural areas, identified three top issues for rural places for 2004:  creating jobs, improving education, and retraining the workforce.  The Agricultural Advancement Consortium (AAC) is one project of the Rural Center which responds to these concerns.  The AAC was created by the General Assembly to help retain farm jobs.  Agriculture in North Carolina is a $62 billion industry, she noted, but only $7.4 billion of that are “farm gate” sales, which means farmers only receive about 20 cents of every dollar of agricultural income.  The AAC has a mission to conduct legislative advocacy, coordinate research and development and document the importance of agriculture to the North Carolina economy, environment and culture. 

      The AAC has a membership that stretches across the public and private sector, including leadership from the state’s two tobacco trust funds, the secretaries of several state agencies, legislative appointees, farmers, and researchers, Ms. Crews-Klein said.  These individuals had seldom spoken to one another about policy development, she observed, and the AAC was an opportunity to pull them together for the shared concern of supporting farming in the state.  The Consortium set research priorities, focusing on the gaps in public policy for agriculture.  Among the priorities were farmer cooperative development; production and marketing of alternative crops; Internet best practices; farm transition networks to ease the transfer of farms to new and younger farmers; farmer-involved practical research; agritourism; and biofuels. 

      An example of an AAC activity on the ground is a burley marketing center which the Consortium supports by covering a portion of the warehouse fees, now in its fifth year of operation, offering farmers an alternative to contract production.  Burley, while a small portion of the total tobacco production in North Carolina, is a major crop in the areas where it is grown.  While Ms. Crews-Klein admitted that the marketing center is likely not sustainable in the long term, it is hoped that it has provided these farmers some cushion to allow them to make a transition to other crops.  In the area of agritourism, the AAC has been very active, thanks to support from the tobacco settlement trust funds.  Part of the Rural Center’s activity has been on documenting the impact and determining if the agritourism activities are replicable.  A further activity of the AAC is to produce a benchmark report on the value of agriculture to North Carolina, with a consideration of any dependence on the Farm Bill, to establish a vision for commercially viable farms. 

      Finally, Ms. Crews-Klein noted, during the past few decades the entire policy focus for agriculture has been on marketing, but there is more to making agriculture thrive than identifying markets.  Understanding the forces and getting the agriculture community together to have a conversation about the future of agriculture has been difficult.  But without this conversation, agriculture could slip away from the state, she noted, something that should not be allowed to happen. 

III.       Rural Development Working Group

      Chairman Holland noted that following the Rural Forum, there was an interest in continuing the activity and discussion further.  To that end, he appointed a select number of legislators to a Rural Development Working Group to refine a policy agenda for the rural South and develop a strategy for engaging non-rural people in a discussion about rural issues.  Members appointed to the Group include:  Representative Steve Holland, Mississippi; Senator Thomas “Mac” Middleton, Maryland; Representative Mack Crawford, Georgia; Senator Noble Ellington, Louisiana; Representative Julia Howard, North Carolina; Senator John Matthews, South Carolina; and Senator Karen Facemyer, West Virginia. 

TECHNICAL TOUR

Tuesday, August 17

I.          Heifer Project International Ranch

      Interested Committee members visited the Heifer Project International Ranch, a Little Rock, Arkansas-based charity, for an overview of its activities, both internationally and close to home.  The tour included an introduction to the work of the organization, a review of current projects, and a visit to the facilities on site.  Highlights of the tour included poultry “tractors” which enclose pasture-fed poultry in mobile pens to allow them to scratch and feed on insects in a field before being relocated, and a simple brick making yard where high-quality, sun-dried bricks can be made for pennies.  One additional item on the tour included a summary of the Ranch’s global village educational facilities, which provide organized groups the opportunity to learn about the poverty and hunger issues that are at the heart of the charity’s work. 

SLC Staff Contact:    Jonathan Watts Hull, phone: (404) 633-1866; e-mail: jhull@csg.org

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