The Department of Agriculture presently has most of the necessary components for a national rural development program, such as financing for housing, water, sewer, solid waste disposal, watersheds. farming, recreational facilities. electricity, and telephones. In addition, it has authority to supply technical assistance in most phases of rural development.

By action of Congress during the last 2 years, USDA received authorities which vastly expanded its potentials in housing and community facilities so that now it could, within this decade, replace all of the 3 million substandard rural houses with modern units, as well as finance water and sewer on an equally massive scale. The single most important "missing" tool in the USDA rural development tool kit is the authority to finance job creating enterprises, and we would agree with Senator Curtis 100 percent that jobs should receive the highest priority in rural development. They are absolutely essential.

A few relatively simple amendments to USDA legislation would supply this essential component, providing the USDA with a rural development capability designed to meet the top priorities of rural revitalization-jobs, housing and community facilities.

Authorities to finance other kinds of community facilities such as medical centers, community halls, libraries, and fire stationscould very easily be supplied by amendments to existing USDA

laws.

The authority for financing industrial and commercial enterprises should permit USDA to participate in loans with community development banks proposed by pending legislation, thus expanding the impact of both sources. None of these bills has yet received action by Congress, but it is possible that one of them may be approved.

And similar authority should be provided to allow USDA to enter into joint financing arrangements with other Federal, state, and local agencies. Such financing should also include facilities related to industrial development through both loans and grants.

With offices and personnel in practically every rural county, plus long experience working with rural people, USDA is much better qualified it seems to us than any other department, existing or proposed, to deliver a rural development program locally.

In keeping with the resolution of our membership, we would hope that this subcommittee will develop the legislation and recommendations which will supply the few missing parts to the USDA's rural development capability in addition to the structural changes that will enable the department to effectively discharge that capability. This, it seems to us, is a practical proposal with a greater chance of success than the plan which the administration sponsors.

4. SPECIAL RURAL REVENUE SHARING

While we would agree with the objectives of the administration's special rural revenue sharing proposal, we do not believe that the plan could achieve those objectives. More likely, it seems to us, the proposal would be a serious setback to rural development.

The proposal would abolish several valuable programs including Appalachian Regional Commission, title V Regional Commissions,

FMHA water and sewer grants, and others. Whether or not the States would continue these programs, or could continue them on the present scale, is very uncertain. With no maintenance of effort required on the part of the recipients, revenue sharing might well result in less money going into rural development than at present. Moreover, states would be permitted we understand to use the funds for matching share requirements in categorical grant programs not included in the rural revenue sharing package. Also we understand they would also be allowed to use the shared funds to reduce taxes. There certainly would be a strong temptation for States, already overburdened with demands for funds, to use shared money for matching requirements and tax reduction.

With the exception of a relatively small amount of new money-$179 million-the $1.1 billion rural revenue sharing package is obtained by abolishing existing Federal programs and distributing the proceeds to the States.

However, since the introduction of the revenue-sharing legislation. actions by the administration and Congress have reduced the $1.1 billion that would be available for transfer to the States to a little more than $400 million by our calculations.

Recently Congress voted to extend the Appalachian Regional Commission, title V Regional Commissions and the Economic Development Administration. This action would eliminate $543 million from the rural revenue-sharing total. In addition, the administration has earmarked the $149 million originally taken from the cooperative extension service for continuation of that program at the 1971 level. Subtracting the totals for these four programs leaves about $400 million of shared funds over which the States would have control. We do not think this is a very significant amount compared to the enormity of the needs for rural renewal in the 50 States.

Despite the fact that the legislation (S. 1612) would guarantee the continuation of the extension service, it could seriously weaken the effectiveness of one of the most succeesful Federal-State-local governmental partnerships ever developed. The educational functions performed by the cooperative extension service are a tremendously valuable asset in overall community development. They should be strengthened, not weakened in our opinion.

The inclusion of Farmers Home Administration water and sewer grant funds-$42 million-in the revenue sharing package is particularly ill advised. In about 70 percent of FMHA loans for waste disposal systems and 30 percent for water systems during the last 5 years, grants were required to make the projects feasible. FMHA no longer have jurisdiction over grant money.

Whether applicants would be able to obtain grants from the shared funds controlled by the States is not clear. Even if they were able, this would certainly produce more redtape than at present when the applicant obtains both the loan and grant from a single source. The $42 million, even assuming the States used all of it for grants, would only support a $160 million insured loan program next year. This is $140 million less than the administration recently approved for FMHA in fiscal 1972. With a $12 billion need for water and sewer facilities in rural areas, a realistic annual program level would be $750 million in loans and $250 million in grants.

In summary, we would oppose this legislation as well as the reorganization proposal as related to the Department of Agriculture. Instead, we would recommend expanding the capability of the USDA to carry out a comprehensive, nationwide rural development program designed to correct the present imbalance between rural and urban America for the benefit of all our citizens.

That concludes my statement, Mr. Chairman.

I would be happy to answer any questions. Also, I have given to the members of the committee a summary of our recommendations which perhaps some of you would like to question me about.

Senator HUMPHREY. We should include those, I believe in the record, along with the resolution.

Do you have a copy of your resolution of the meeting in February? Mr. MURRAY. Yes, it is attached to the statement. I think the reporter has it.

Senator HUMPHREY. We shall include that as part of your testi

mony.

Mr. MURRAY. Thank you, Senator. (The documents are as follows:)

SUMMARY OF RECOMMENDATIONS FOR A NATIONAL RURAL DEVELOPMENT PROGRAM BY THE NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION

1. Assign mission and responsibility for a nationwide rural development program to the Department of Agriculture including responsibility for coordination with other Federal agencies and with state and local organizations.

2. Change name of the Department of Agriculture to more clearly reflect this mission; such as the "Department of Agriculture and Rural Development" or the "Department of Rural Development."

3. Restructure the Department by creating two subdepartments headed by undersecretaries, one for agricultural matters and one for rural development. 4. Change the name of the Farmers Home Administration to something more indicative of its broad authorities and primary responsibilities in rural community development; such as the "Rural Credit Administration."

5. Establish rural development goals in order to measure progress.

6. Expand existing rural development components in the Department of Agriculture in keeping with goals.

7. Provide Department of Agriculture with authority to fund multi-county planning districts, including funding for staff.

8. Provide Department of Agriculture with additional authorities, including the authority to finance job-creating enterprises including related facilities, which would require the following technical amendments to existing legislation-Consolidated Farmers Home Act of 1961:

(a) Elimination of present grant ceilings, both for construction and planning of community facilities.

(b) Expansion of the kinds of community facility projects for which planning and construction grants can be used.

(c) Increase the population limit of rural areas eligible for FmHA assistance from 5,500 to 10,000 so as to be consistent with the authority Congress gave FmHA last year to make housing loans in rural areas up to 10,000 population. (d) Increase the present $100,000,000 ceiling on the Agricultural Credit Insurance Fund to $500,000,000.

(e)1 Increase the maximum loan and grant for water and waste disposal projects from $4,000,000 to $10,000,000.

(f) Extend the deadline for completion of comprehensive plans required as part of community facility projects from the present deadline October 1, 1971 to October 1, 1973.

(g) Change type of bonding now required for FmHA employees from faithful performance of duties bonds to fidelity bonds. Present bonding is an important

1 (S.1806, passed recently by the Senate, provides for these changes.)

63-582-71-pt. 2- -5

inhibiting factor in the delivery of FmHA programs, since it holds FmHA employees financially liable for losses resulting from procedural errors or errors of inadvertence as well as losses caused by fraud or dishonesty. Fidelity bonds would protect the government against losses from fraud or dishonesty, while removing the requirement for imposing fiscal penalties on employees for technical, procedural or inadvertent errors.

RESOLUTION ADOPTED AT THE ANNUAL MEETING OF THE NATIONAL RURAL ELECTRIC COOPERATIVE ASSOCIATION, FEBRUARY 13, 1971, DALLAS, TEXAS Whereas, while efficiency in government is highly desirable, there is no guarantee that dismembering the Department of Agriculture, as recommended by the Administration, and distributing the pieces among a few super departments mainly oriented to urban concerns is going to insure greater efficiency, and

Whereas, the Department of Agriculture has never officially been given the overall responsibility for the mission of rural development which it is obviously better suited to perform than any other existing or proposed department by virtue of its rural and farm orientation, its knowledge of rural people and its extensive local field operations, and

Whereas, in our judgment it would be more logical and practical to reorganize the USDA into an effective rural development department than to disband it as proposed by the Administration; now, therefore, be it

Resolved, That we recommend that the Agriculture Committees of the Senate and House immediately launch a thorough study for the purpose of devising a comprehensive, nationwide rural development program to be undertaken by the Department of Agriculture, identifying the additional components that the USDA will require and the components now existing which require expansion, and the changes or innovations in existing USDA that will be necessary to insure success.

Senator HUMPHREY. Senator Curtis, would you like to open up on the question of-Senator Dole has arrived and he has a statement. Would you like to make your statement?

Senator DOLE. I would like permission to have it inserted in the record following statements by other members of the subcommittee. Senator HUMPHREY. Indeed. We will include it in the record. (For statement, see p. 53.)

Senator HUMPHREY. Senator Curtis?

Senator CURTIS. Referring to your statement on page 10 near the bottom of the page, you state:

The single more important missing tool in the USDA rural development kit is the authority to finance job creating enterprises.

What kind of financing program would you recommend, Mr. Murray?

Mr. MURRAY. It is hard to say, to give the specifics, but it would be a program that would help finance new plants, factories, other commercial enterprises that would provide jobs for rural people.

Farmers Home has similar authority to make loans for water. sewer, and some other things, but what specific kinds of commercial enterprises this is, is something I am not prepared to say.

Senator CURTIS. Would you make loans to manufacturing companies that said they would establish a plant?

Mr. MURRAY. Yes.

Senator CURTIS. I think it is well at this point that we look to an apparatus that has worked very well in this regard. I refer to taxfree industrial development bonds used by our States.

In my State of Nebraska there are many rural areas that have not been successful yet. On the other hand, there are many of our

country towns, where additional industry has been obtained. In quite a few of those instances-the local units of government have bonded themselves to build a facility, they then lease it to the industry over a long period of time in order to recoup their costs. This program was used in many States very successfully. I am told that in Mississippi where the program started it has brought many job-producing enterprises in areas were there was considerable poverty, in areas where many of our blacks needed an opportunity for employment.

During the Johnson administration-I do not recall just what year-the Treasury Department brought that program to a halt by a ruling that those bonds were no longer tax free. The finance committee acted favorably upon a proposal that I offered that restored the tax-free status of those bonds. When it went to the floor, however, we faced another attack. This one was somewhat unexpected. There was a proposal offered which would by statute eliminate these tax free industrial development bonds. Much to our surprise, we lost it. the proposal carried and it carried because of the very intensive action by a few large unions.

They were opposed to a dispersal of industry into the rural areas and their lobbyists were just as thick as flies around here buttonholing everybody and we lost the vote.

Since then it has been brought up a time or two and the taxfree industrial bonds have been restored but only in a limited way. They ought to be restored at least to an amount of a limit of $10 million. This program has enabled local people to finance something that has resulted in jobs in rural areas. I know in my own State the program has been well run. One or two projects have had difficulties, but there is always some business having difficulty. But most of them have proven successful.

Do you have an opinion as to whether or not tax-free industrial development bonds could be used to a greater degree than they are now?

Mr. MURRAY. I, too, do not recall the details of what happened, but I thought that there was a $1 million limit put on them.

Senator CURTIS. Yes, we had to accept that after we lost the battle on the floor. The only way we could get reinstated was to accept a $1 million limitation. And then it was later raised to $5 million. The present urging is that in light of present-day costs that this limit ought to be raised at least to $10 million.

We were put out of business. I say "we," the advocates of industrial development bonds largely by a few of the larger unions. I think they ought to take another look at it.

Mr. MURRAY. It is true that in the beginning the tax-exempt industrial bonds gave many States quite an advantage and it resulted in attracting quite a bit of industry. But then many States passed legislation authorizing them. So the advantage more or less disappeared. But they did produce a great number of jobs, but I do not think that this would be a substitute from what we are recommending. We need a whole lot of sources of financing.

There is a lot of talk about community development banks, but probably what would happen is that since these community development banks have to make money, after a while they get worried