Interim Joint Committee on Agriculture


Subcommittee on Rural Issues


Minutes of the<MeetNo1> 1st Meeting

of the 2010 Interim


<MeetMDY1> November 10, 2010


Call to Order and Roll Call

The<MeetNo2> 1st meeting of the Subcommittee on Rural Issues of the Interim Joint Committee on Agriculture was held on<Day> Wednesday,<MeetMDY2> November 10, 2010, at<MeetTime> 10:00 AM, in<Room> Room 131 of the Capitol Annex. Representative Mike Denham, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Senator Vernie McGaha, Co-Chair; Representative Mike Denham, Co-Chair; Senator David Givens; Representatives John "Bam" Carney, Mike Cherry, James R. Comer Jr., C. B. Embry Jr., and Terry Mills.


Guests: Dr. Alison Davis, Department of Agricultural Economics, University of Kentucky; Robert Finch, Farm Programs Chief, USDA-FSA and Mitch Whittle, Farm Loan Chief, USDA-FSA.


LRC Staff: Biff Baker, Stefan Kasacavage, Tom Middleton, Graduate Fellow, and Susan Spoonamore, Committee Assistant.


Update on State of the Rural Economy in Kentucky

Dr. Alison Davis, Associate Extension Professor at the University of Kentucky, Department of Agricultural Economics, spoke about the current state of the rural economy in Kentucky and economic development strategies for rural communities. Kentucky ranks in the bottom ten nationally in per capita income, which is partially attributable to the lower earnings of our rural residents compared to both urban residents in Kentucky and rural residents of other southern states. Rural areas in Kentucky also suffer from low numbers of residents with high school degrees, with many counties in eastern and south-central Kentucky having only about 60 percent of residents with high school degrees. Rural areas of eastern and south-central Kentucky also have as many as 45-60 percent of working age (18 to 64 year old) males not in the labor force. This percentage, which does not include the unemployed who are seeking employment, may be due to policies that unintentionally incentivize staying out of the workforce. Widespread drug use in rural areas of Kentucky has also limited applicant pools for the jobs that are available. Nevertheless, in recent years rural counties have begun to make improvements in income growth, education, and poverty rates, and it does not appear that the recent economic downturn has been any more severe in rural areas of the state than in urban areas.


Dr. Davis suggested several strategies to address some of the problems rural Kentuckians face. First, it is important to distinguish between rural and agricultural policy. Historically, agriculture has been a dominant force in the rural economy and it continues to be a very important component. However, the current problems that rural Kentuckians face are distinct from agricultural issues, so distinct policies should be considered to address these problems. Additionally, rural economic development should focus more on investment and less on spending. A higher proportion of federal funds are used on spending for social security, disability, and welfare benefits in rural areas as opposed to urban areas, but this spending does not increase the long term competitiveness or economic capacity of an area in the same way as investments in public infrastructure, healthcare, and education do.


Another strategy for rural economic development is to focus on retention and expansion of existing employers in rural communities. Often times, too much emphasis is placed on creating incentives to lure new employers to rural areas while existing employers’ needs are ignored. Research has shown that growing existing businesses can be more economically beneficial to rural communities over the long term than the recruitment of new businesses. Dr. Davis further suggested that increasing the availability of health care, using regional economic planning, and implementing a more cooperative framework for rural development were all important strategies for improving rural communities in Kentucky.


            In response to a question from Co-Chair Denham, Dr. Davis stated that the Community & Economic Development Initiative of Kentucky (CEDIK) is the group of University of Kentucky faculty who work with rural communities on economic development initiatives. The first session of a rural economic development initiative usually entails a smaller group of CEDIK members meeting with community and business leaders to determine the needs of the community and the goals of the initiative.


Representative Embry commented that he represented a rural area and he agreed with Dr. Davis’s suggestion that rural communities engage in regional economic development plans instead of trying to engage in the recruitment of outside businesses alone.


In response to a question from Representative Carney, Dr. Davis stated that she would enjoy any opportunity to speak to public school students to explain the landscape of the economy in their communities and what jobs were available there.


In response to a question from Co-Chair Denham, Dr. Davis said that she was unsure of how the rural economy will change in Kentucky over the next 10 years. On one hand, she was skeptical of the current enthusiasm for green jobs and the buy-local movement and how these initiatives can be integrated into rural economies in a sustainable way. However, she stated that she was optimistic about the future of regional economic development planning in rural communities and the positive results that will accrue.


In response to a question from Co-Chair McGaha, Dr. Davis stated that she believed that some of the tobacco settlement money could have been spent in a more community investment-oriented way in rural areas of Kentucky. Co-Chair McGaha replied that it was important that individual producers received their share of the tobacco settlement money, because they needed that money for sustenance.  


In response to a question from Representative Carney, Dr. Davis stated that some of the data contained in her presentation was from the 2000 Census, and that it would not be possible to update some of the data, because the 2010 Census did not ask many of the same questions posed in the 2000 Census.


In response to a question from Representative Cherry, Dr. Davis said that the data on males not in the labor force in her presentation came from census data. She believed that the census counted people who were not receiving a paycheck as “not in the labor force”. This number did not include the unemployed who were actively seeking employment.


In response to a question from Representative Mills, Dr. Davis stated that in the eastern part of the state, a good portion of the males not in the labor force were receiving some sort of federal assistance, whether it be from social security, supplemental security, or disability payments.


Current USDA Farm Service Agency Programs in Kentucky

Robert Finch, Farm Programs Chief for the USDA-FSA, spoke about the conservation and farm subsidy programs administered by the FSA. The FSA is currently working on new initiatives on biofuels and bioenergy, including rolling out the second phase of the Biomass Crop Assistance Program (BCAP) that provides assistance to producers for the establishment and cultivation of biomass crops. In the first phase of BCAP, some money has already been paid to Kentucky processors of wood products for production of bioenergy. The second phase of BCAP funding will be used to offset some of the costs of transporting the biomass as well as paying for up to 75 percent of the cost of establishing a perennial biomass crop within an approved project area. Many believe that Kentucky is an ideal place to grow some biomass crops, and hopefully BCAP can be used to remove some of the barriers to establishing these crops in Kentucky.


Mr. Finch stated that the latest sign-up periods for the Direct and Counter-cyclical Program (DCP) and Average Crop Revenue Election Program (ACRE) will begin soon. The Tobacco Transition Program Payments (TTPP) will be winding down in the next few years, but another payment will be made in January 2011. The signup period for the Conservation Reserve Program has just ended and the first payments for that program will be made in October 2011.


In response to a question from Co-Chair McGaha, Mr. Finch stated that the biomass transportation assistance provided by USDA was not only for wood products, but for any biomass product. There must be a contract with an approved facility to process and purchase the biomass in order to be eligible for the program.


In response to a question from Senator Givens, Mr. Finch stated that he believed that the land enrollment portion of BCAP would continue to be funded in the 2012 Farm Bill, but that other changes may be possible.


Mitch Whittle, Farm Loan Chief for the USDA-FSA, discussed the farm loan programs administered by the FSA in Kentucky. The FSA loaned almost $125 million to Kentucky producers in fiscal year 2010 (October 2009 to September 2010). Kentucky is ranked in the top ten nationally in six farm loan program categories. For direct loans made by the FSA in Kentucky, the delinquency rate was less than a 3 percent and the loss rate was 0.1 percent as of September of this year. For guaranteed loans, the delinquency rate was 1 percent, and the loss rate was 0.2 percent. The 2008 Farm Bill raised the direct loan limits on farm ownership and farm operating loans to $300,000 per owner or operator. Kentucky FSA also leads the nation in youth loan borrowers from the direct farm operating program. The Conservation Loan Program began in September and allows any farmer with a conservation plan to get a loan to promote conservation practices. Direct emergency loans are available to disaster victims, including victims of tornadoes, floods, and the recent drought. On November 3, Secretary Vilsack designated 63 counties in Kentucky as Primary Natural Disaster Areas due to the continuing drought conditions in those areas. Those counties and 28 contiguous counties are now eligible for emergency loan (EM) assistance and for payments through the Supplemental Revenue Assistance Payments (SURE) Program.


In response to a question from Co-Chair Denham, Mr. Whittle stated that the delinquency and loss rates for the loans issued under the various FSA loan programs had been very low.


Co-Chair McGaha commented that he appreciated the good work that Mr. Whittle and the FSA had done for his constituents.


There being no further business, the meeting was adjourned.