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USDA Rural Development 2000 Budget Summary

(Dollars in Millions)


                                              Program Level                               Outlays

                                                           1999                Change                 1999                Change

                                                  1998   Current       2000   1999 to        1998   Current       2000   1999 to

               AGENCY / PROGRAM                  Actual  Estimate    Budget     2000        Actual  Estimate    Budget     2000



RURAL DEVELOPMENT



Utilities Programs:

  Loans and Grants ...........................    2,837     3,206     3,346       140          347       534       407      -127

  Salaries and Expenses ......................       66        66        68         2           59        59        61         2

    Total, Utilities Programs ...........    2,903     3,272     3,414       142          406       593       468      -125



Housing Programs:

  Rural Housing Loan and Grant Programs ......    4,998     5,263     5,873       610          925     1,279     1,021      -258

  Salaries and Expenses ......................      412       422       446        24          370       380       400        20

    Total, Housing Programs .............    5,410     5,685     6,319       634        1,295     1,659     1,421      -238



Rural Business - Cooperative Service:

  Loans and Grants ...........................    1,306     1,167     1,186        19          288       349       282       -67

  Salaries and Expenses ......................       27        27        28         1           24        24        25         1

    Total, Rural Business - Cooperative Servic    1,333     1,194     1,214        20          312       373       307       -66



Alternative Agricultural Research and

 Commercialization Corporation ...............        7         4        10         6            8         6         9         3



Rural Community Advancement Program ..........   (2,836)   (2,798)   (3,045)     (247)        (580)     (759)     (683)     (-76)

    Total, Rural Development .................    9,653    10,155    10,957       802        2,021     2,631     2,205      -426



a/  Less than $0.5 million.


Rural Development Program Highlights


The Rural Development (RD) mission area helps to improve the quality of life for rural Americans and helps rural businesses and cooperatives compete in the global marketplace. The Administration remains strongly committed to providing economic opportunities to support sound development of rural communities. RD provides financial and technical assistance to help individuals, local communities and rural businesses, concentrating on those with the greatest need. These opportunities include decent, safe, affordable housing, establishment of rural businesses and community facilities, development of modern and affordable water and waste services, and installation of electric and telecommunications services.

The budget provides about $11 billion for direct loans, loan guarantees, grants, and technical assistance -- over $800 million more than the 1999 level. Highlights of the request include:


Rural Development Mission


The Rural Development mission area strives to improve the quality of life in rural America by providing financial assistance and working with rural communities through partnerships, empowerment and technical assistance. Outreach and targeting are used to ensure that rural communities that have been under-served in the past will have an opportunity to receive their fair share of Federal assistance.

Three agencies comprise the Rural Development mission area: the Housing Programs (Housing Programs), the Utilities Programs (Utilities Programs) and the Business Programs (Business Programs) which also houses the Alternative Agricultural Research and Commercialization Corporation (AARCC). Under the Department's streamlining and reorganization effort, the field office delivery system for the three agencies was consolidated and is now co-located within USDA Service Centers.


Rural Development


Program Level (P.L.) and Budget Authority (B.A.)
(Dollars in Millions)

                                                                1999

                                              1998             Current              2000

                                             Actual            Estimate            Budget



         Program                       P.L.         B.A.     P.L.       B.A.     P.L.        B.A.



Utilities Programs              $2,903         $696   $3,272       $771   $3,414        $675

Housing Programs                 5,410        1,279    5,685      1,299    6,319       1,174

Rural Business-Cooperative

  Service                             1,333          103    1,194        116    1,214         150

Alternative Agricultural Research

  and Commercialization Corporation       7            7        4          4       10          10



    Total, Rural Development         $9,653       $2,085  $10,155     $2,190  $10,957      $2,009



a/ An additional $60 million is available from the Fund for Rural

   America to support Rural Development activities and research, extension

   and education grants of which at least $20 million will support Rural Development

   activities. The distribution of the funds among the authorized activities

   has not been developed.

The 2000 budget includes $2 billion in budget authority for Rural Development, which is intended to support about $11 billion in program level. This is an increase of about $800 million in program activity over 1999 and reflects the Administration's strong support for ensuring that rural Americans have the same opportunities for economic growth that exist in urban areas.

The major provisions of the Rural Development budget include:


Rural Community Advancement Program


Sources of Funding
(Dollars in Millions)

                                       1999            2000

                                      Program         Program

     Program                           Level           Level



Water and Waste Disposal Loans:

  Direct                                $724            $900

  Guarantees                              75              75

Water and Waste Disposal Grants          523             503

Solid Waste Management Grants              3               3

Community Facility Loans:

  Direct                                 169             250

  Guarantees                             210             210

Community Facility Grants                  7              13

Business and Industry Loans:

  Direct                                  50              50

  Guarantees                           1,000           1,000

Rural Business Opportunity Grants          0               5

Rural Business Enterprise Grants          37              36



    Total, Loans and Grants.          $2,798          $3,045

Utilities Programs


Program Level (P.L.) and Budget Authority (B.A.)
(Dollars in Millions)

                                                              1999

                                              1998           Current              2000

                                             Actual          Estimate            Budget



         Program                       P.L.         B.A.   P.L.       B.A.   P.L.        B.A.



Loan Programs:

  Electric Loans:

    Direct 5%                          $125           $9    $72         $9    $50           a/

    Direct, Treasury (Proposed Leg)       0            0      0          0    400           a/

    Municipal                           500           21    295         26    250          $9

    FFB Guaranteed                      300            3    700          0    300           0

      Total, Electric Loans             925           33  1,067         35  1,000          10



  Telecommunications Loans:

    Direct 5%                            75            3     75          7     50           1

    Treasury Rate                       288            a/   300          1    300           2

    FFB Guaranteed                       34            0    120          0    120           0

      Total, Telecom. Loans             397            3    495          8    470           3



  Rural Telephone Bank (RTB)            168            4    157          4    175           3

    Total, Elec., Tele. and RTB       1,490           40  1,719         47  1,645          16

  Distance Learning and Telemedicine

    Treasury Rate Loans                   5            a/   150          a/   200           1



  Water and Waste Disposal Loans

    Direct b/                           787           73    724        120    900          64

    Guaranteed b/                        15            0     75          0     75           0

      Total, Wtr & Wst Dis Loans        802           73    799        120    975          64



Grant Programs:

  Distance Learning & Telemed.           21           13     12         12     20          20

  Water and Waste Disposal b/           516          501    523        523    503         503

  Solid Waste Management b/               3            3      3          3      3           3

    Total, Grants                       540          517    538        538    526         526



    Total, Utilities Programs Loans & Grants         2,837          630  3,206        705  3,346         607



Salaries and Expenses                    66           66     66         66     68          68



        Total, Utilities Programs                   $2,903         $696 $3,272       $771 $3,414        $675



a/ Less than $0.5 million.

b These are included in the Rural Community Advancement Program.

  (See page 42.)

The electric and telecommunications programs administered by Utilities Programs provide loans to establish, expand, and modernize facilities to improve service to rural residents. The 2000 budget signals a shift in these programs from the highly subsidized direct 5 percent and municipal rate loans to greater reliance on FFB-insured and direct Treasury rate loans. To facilitate this shift, the Administration will propose legislation authorizing $400 million in direct Treasury rate electric loans. This authority will be similar to the direct Treasury rate authority currently used by the telecommunications program. Overall, the 2000 program level for electric loans is about $67 million lower than 1999. This level of funding is expected to create about 23,000 jobs in rural areas and provide improved electric service to 1.6 million rural residents.

The total funding for the telecommunications programs will be $7 million less than the 1999 levels. Direct 5 percent telecommunications loans will decrease about $25 million, while the Rural Telephone Bank programs will increase about $18 million. The total level of telecommunications assistance will result in the creation of almost 15,000 jobs in rural areas, over 200,000 new residents and businesses will receive telecommunications service.

The water and waste disposal program provides grant and direct and guaranteed loan assistance to communities with populations not in excess of 10,000. Communities must first be denied access to commercial credit to be eligible for assistance. Loan and grant funds are provided to communities to establish, expand, and modernize water treatment and waste disposal facilities. Through the Administration's Water 2000 initiative, the Department targets a portion of its water and waste disposal resources to the rural residents who have some of the Nation's most serious drinking water availability, dependability, and quality problems. At the 2000 budget levels, the program is expected to create 41,000 rural jobs, provide new water services to 648,000 rural residents and improved water services to over 1.3 million rural residents. The 2000 level will also provide new or improved waste disposal facilities serving an estimated 619,000 rural residents.

The Distance Learning and Telemedicine (DLT) program provides assistance for facilities and equipment to provide telecommunications linkages among education and health care facilities. Grant funding is available for those areas experiencing high poverty levels while loans or a combination loans and grants are available for areas with higher income levels. The program continues to experience a demand for grant funds far in excess of the amount of funding that has been available. The budget provides $20 million in grants and $200 million in loans for distance learning and telemedicine. This would increase grant funding by about $7.5 million and loan funding by $50 million over 1999. The total funding is expected to provide assistance for about 800 grants and 40 loans and provide assistance to over 1,000 schools and over 2,000 health care facilities.


Housing Programs


Program Level (P.L.) and Budget Authority (B.A.)
(Dollars in Millions)

                                                              1999

                                              1998           Current              2000

                                             Actual          Estimate            Budget



         Program                       P.L.         B.A.   P.L.       B.A.   P.L.        B.A.



Rural Housing Loans:

  Single-Family:

    Direct                           $1,008         $128   $965       $114 $1,100        $94

    Guarantees                        2,822            7  3,000          3  3,200         20

  Multi Family Housing:

    Direct (Sec 515)                    151           68    114         55    100         40

    Guarantees (Sec 538)                 40            1     75          2    200          0

  Very Low-Income Repair                 30           10     25          9     32         10

  Farm Labor Housing                     15            7     20         10     25         11

  Self-Help Housing                       a/           a/     5          a/     5          a/

  Housing Site Development                a/           a/     5          a/     5          a/

  Credit Sales                           23            3     17          4      8          1 

    Total, Housing Loans              4,089          225  4,226        197  4,675        176



Community Facility Loans:

  Direct b/                             211           17    170         23    250         15

  Guarantees b/                          65            a/   210          0    210          0

    Total, Community Facility Loans     276           17    380         23    460         15



Grants and Payments:

  Community Facility                      9            9      7          7     13         13

  Very Low-Income Repair                 26           25     22         22     30         30

  Farm Labor Housing                     13           10     11         11     15         15

  Mutual and Self-Help                   27           26     26         26     30         30

  Supervisory and Technical Asst.         a/           0      0          0      0          0

  Compensation for Const. Defects         a/           0      a/         0      a/         0

  Rural Housing Preservation             11           11      8          8      9          9

  Rental Assistance Payments c/         545          542    583        583    640        440

  Fire Protection Grants                  2            2      d/         d/     d/         d/

    Total, Grants                       633          625    657        657    738        537

Total, Loans and Grants               4,998          867  5,263        877  5,873        728

Salaries and Expenses                   412          412    422        422    446        446



      Total, Housing Programs                     $5,410       $1,279 $5,685     $1,299 $6,319     $1,174



a/ Less than $0.5 million.

b/ These are included in the Rural Community Advancement Program.

   (See page 42.)

c/ Of the $640 million program level, $440 million shall become

   available on October 1, 1999 and $200 million shall become available on

   October 1, 2000.

d/ Funding is requested in the Forest Service budget.

The 2000 budget for Housing Programs supports a program level of over $6.3 billion, an increase of more than $600 million from 1999. Of the total program level, over $5 billion is in the form of loans.

The single family housing direct loan program provides subsidized loans for the purchase of modest housing in rural areas. Loans are made at a graduated interest rate level from 1 percent to 100 basis points over the Treasury rate, which is currently 6.06 percent, depending on family income, to families who have income under 80 percent of the area median. The average annual income of a direct loan borrower is generally about 55 percent of area median income or about $17,000 on a National basis. Loan guarantees primarily serve families with moderate incomes, with the interest rate negotiable between the lender and borrower.

The Section 515 multifamily housing loan program would be funded at $100 million in 2000. This program provides direct loans to construct and maintain multifamily rental projects that serve low and very low income families. Projects receive payment assistance to make rents affordable. The average annual income of a Section 515 tenant is $7,300. The 2000 request will provide for the construction of 1,900 new units and the rehabilitation of over 2,400 existing units.

The Section 538 multifamily housing loan guarantee program guarantees loans that are made by private lenders. It differs from the Section 515 direct loan program in that the projects it finances serve tenants with incomes up to 115 percent of the area median, rather than those below 80 percent of the area median. The 2000 request of $200 million would provide for the construction of over 5,000 units.

The 2000 budget provides $640 million for the rental assistance program, an increase of $57 million from the 1999 level. Rental assistance is provided to project owners in the form of 5-year contracts. These contracts are tied to the income of tenants in low-income units, who pay no more than 30 percent of their income in rent. Rental assistance makes up the difference between what the low-income tenant pays and the rent required for the project owner to meet debt servicing requirements. When the 5-year contracts expire, they typically are renewed to keep the unit available for low income families and the project viable for the sponsor.

Consistent with meeting the Secretary's civil rights goals, the 2000 budget recommends $25 million for farm labor housing loans and $15 million for farm labor housing grants, an increase of $5 million in loans and $3.5 million in grants from 1999 levels. This would provide for the construction of about 600 new units and rehabilitation of about 350 existing units of housing for farm workers.

The community facilities program provides direct loans, guarantees and grants to finance essential community facilities, with priority given to health and safety facilities. There are three interest rates available on direct loans, with the lowest, 4.5 percent, offered to communities where the median income is below the poverty level and for projects to meet health and safety standards. The 2000 budget provides $250 million in direct loans, $210 million in guarantees, and $13 million in grants, including $5 million for early warning system grants that would allow rural areas to reduce the loss of life resulting from inadequate warnings of hazardous weather. This level of funding will support over 200 new or improved health care facilities and other facilities which improve the standard of living in rural America.


Business Programs (Business Programs)


Program Level (P.L.) and Budget Authority (B.A.)
(Dollars in Millions)

                                                              1999

                                              1998           Current              2000

                                             Actual          Estimate            Budget



         Program                       P.L.         B.A.   P.L.       B.A.   P.L.        B.A.



Loans:

  Business and Industry:

    Guarantees a/                    $1,100          $11 $1,000        $10 $1,000         $31

    Direct a/                            21            0     50          0     50           0

    NAD Bank                             72            0      0          0      0           0

  Intermediary Relending Prog.           35           17     33         17     52          23

  Rural Economic Development             25            6     15          4     15           3

      Total, Loans                    1,253           34  1,098         31  1,117          57

Grants:

  Rural Business Enterprise a/           37           37     37         37     36          36

  Rural Business Opportunity a/           b/           b/     1          1      5           5



  Rural Cooperative Development           2            2      2          2      5           5

  Appropriate Technology Transfer

    for Rural Areas                       1            1      1          1      2           2

  Rural Economic Development             11            c/    11          c/     4           c/

  Cooperative Research

    Agreements                            2            2      2          2      2           2

  Agribusiness and Cooperative

    Development Program                   0            0      b/         b/     0           0

  Empowerment Zones and

    Enterprise Communities                0            0     15         15     15          15

      Total, Grants                      53           42     69         58     69          65

Total, Loans and Grants               1,306           76  1,167         89  1,186         122

Salaries and Expenses                    27           27     27         27     28          28

        Total, Business Programs                   $1,333         $103 $1,194       $116 $1,214        $150



a/ These are included in the Rural Community Advancement Program.

   (See page 42.)

b/ Less than $0.5 million.

c/ Earnings generated by the interest differential on voluntary

   cushion of credit payments made by Utilities Programs borrowers provide the subsidy to

   support these grants.

Business Programs administers the Department's rural business assistance programs, including technical assistance, development, and research on agricultural cooperatives. The agency delivers a wide variety of services to its clients. Business and Industry (B&I) loan guarantees, for example, provide protection against loss so that private lenders are willing to extend credit to establish, expand, or modernize rural businesses. Other programs, including the intermediary relending program and the rural economic development loan and grant programs allow local sponsors to borrow from the agency in order to make loans to businesses and other organizations for developmental purposes. Special efforts are being made to help rural communities diversify, particularly into value-added processing, by directing B&I funds to cooperatives.

The budget provides $1 billion in guaranteed loans and $50 million in direct loans under the business and industry loan program. Direct loans will be targeted to those areas which have traditionally been under-served by commercial lenders. Loan guarantees help expand investment in rural areas by protecting commercial lenders against loss. In addition, loan guarantees may be used to provide financing to farmers for the purchase of start-up capital stock in a cooperative which will process the commodity being produced by the farmer. The proposed level of assistance is consistent with the Administration's strong commitment to expanding the rural economy and is expected to create or save almost 40,000 jobs in rural America.

The budget provides $52 million for the intermediary relending program (IRP). The intermediary relending program provides loans at 1 percent interest to local intermediaries who relend those funds to local businesses and other organizations to expand or improve the local economic base. This level of funding is expected to create or save about 40,000 jobs in rural America.

Included in the Forest Service request is a $50 million loan program entitled the Smart Growth Partnership Program. This program, part of the Lands Legacy Initiative, will be administered by the Forest Service through an agreement with Business Programs to run the loan program through IRP. (See Page 71.)

The budget provides $5 million for partnership technical assistance grants to help rural communities develop comprehensive strategies for revitalization and to better coordinate Federal assistance.

Rural cooperatives are growing not just in numbers but also in terms of non-traditional forms and uses. Cooperatives are forming strategic alliances with privately held corporations, engaging in value-added processing, and entering the retail and export markets. Through the cooperative form of business, rural residents are finding ways to save their way of life, add value to their product, and bring more income home to the farm gate. Funding for rural cooperatives is $7 million in 2000, up from the $4 million available in 1999. The additional funding will provide technical assistance to small farmers and small farm related operations in developing market and management skills.


Alternative Agricultural Research and Commercialization Corporation (AARCC)


Program Level (P.L.) and Budget Authority (B.A.)
(Dollars in Millions)

                                                              1999

                                              1998           Current              2000

                                             Actual          Estimate            Budget



         Program                       P.L.         B.A.   P.L.       B.A.   P.L.        B.A.



Investments                              $7           $7     $4         $4    $10         $10

The Alternative Agricultural Research and Commercialization Corporation (AARCC) makes equity investments in rural businesses to assist in the technological development and commercialization of industrial (non-food, non-feed) uses for agricultural and forestry materials and animal by-products. These equity investments allow start-up businesses an opportunity to become successful prior to undertaking repayment, thereby offering greater flexibility towards repayment than can be accommodated under conventional loan terms, which require immediate repayment.

The budget provides $10 million for AARCC, including, about $1.5 million for administrative expenses. This level of funding is expected to help bring 6 new products to market and create about 1,500 new jobs in rural America. This level of funding compares to about $3.5 million in 1999.

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