Special Message to the Congress on Rural Development.

To the Congress of the United States:

From the very beginnings of our history, the vitality of rural America has been at the heart of our Nation's strength. It is essential that we preserve and expand that vitality in the years ahead. For America will not be able to look eagerly to the future with a sense of promise and hope unless those who live in its rural areas are able to share in this vision. To help improve the quality of life in the American countryside, I am today presenting a series of proposals designed to marshal more effectively the energies of the private sector and of government at all levels in a cooperative program of rural development.

THE PROBLEMS OF RURAL AMERICA

All Americans have a high stake in rural development. For the problems which many rural areas are now experiencing are directly linked to those of our cities and suburbs. Changing patterns of life in rural America have changed the pattern of life in all of America.

A central cause of these changing patterns has been the increasing mechanization of agriculture and of other natural resource industries such as mining and lumber--a process which has resulted in a substantial reduction in jobs in these occupations in recent years. While employment opportunities in other occupations have more than offset these declines, the overall growth of economic opportunity in rural America has lagged far behind that of our urban areas. Today, dramatic disparities exist between metropolitan and rural areas in such indices as per capita income, housing standards, educational attainment and access to medical care.

At the same time, political institutions designed to deal with simpler problems in simpler times have frequently been unable to cope with these new challenges. The Federal Government often finds that it is too remote and too unwieldy to respond with precision to State and local needs. State and local governments are frequently too impoverished or too fragmented to undertake the necessary planning and development activities. Their problems are accentuated by the fact that widely dispersed rural population inevitably means a higher expenditure per person for most government programs.

One result of all these factors is that semi-deserted country towns-- nee centers of life for the surrounding countryside--stand today as stark reminders of unused and abandoned rural resources. In each of the three decades since 1940, half of our counties (not always the same ones) have lost population. Two out of every five of our counties lost population in all three decades. As I said in my State of the Union Message two years ago, many of our rural areas are being emptied of their people and their promise.

In many cases, those who have left the countryside have simply taken their problems with them. Indeed, many have seen their problems intensify as they have settled in over-crowded urban areas.

It is striking to realize, as I noted in this year's Message on the State of the Union, that even if we had a population of one billion--nearly five times the current level---our area is so great that we would still not be as densely populated as many European nations are at present. Our problems are not so much those of numbers as of distribution. And their solution requires the revitalization of the American countryside.

CHANGING OUR APPROACH

In seeking to solve the problems of rural areas, we must not simply seek more money from the Congress and the taxpayers. In the past decade we have seen the folly of pouring money into projects which were ill-considered and lacking in local support. What we must now seek instead is a fundamental change in the way government approaches the entire developmental challenge.

The Federal Government has spent considerable sums on rural development. Programs which we have recommended for inclusion in our rural development Revenue Sharing plan alone are spending almost $I billion this year and this is only a small part of our overall rural development spending. And yet, despite this substantial funding, the problems have continued to grow. What is it that has been missing from our rural development programs?

MORE CONTROL AT THE STATE AND LOCAL LEVEL

I believe that a major missing ingredient has been effective control of development programs at lower levels of government. Because we have relied so exclusively on Federal funds--handed out through bureaucratic processes and through narrow categorical grants--too many decisions have been made in Washington and too few have been made in rural America. I believe this is wrong. I believe we should return power to officials who are selected at the State and local levels.

As long as the Federal Government sets rigid rules, both through legislative and administrative guidelines, there is little room for local initiative. Under our present system, a project that does not meet Federal standards does not get funded. This means that the talents of local government officials, of leaders in the private sector, and of public-spirited citizens cannot be fully utilized. Almost all of the success stories that can be found in rural economic development have occurred because local officials and private leaders have entered into a public-spirited partnership and have taken the initiative. We must do all we can to encourage such partnerships.

IMPROVED PLANNING

Even as we seek to decentralize, we must also work to improve planning. In many respects these goals represent two sides of the same coin. For plans which are developed at levels close to the people are likely to be more realistic, more imaginative and more useful than abstract blueprints which are drawn up far away from the scene of the action or which are altered to meet rigid Federal rules. Effective development does not require plans that can survive the scrutiny of Washington. Effective development requires plans that people believe in and will work to accomplish.

MORE ADEQUATE PUBLIC AND PRIVATE

RESOURCES

More adequate development also requires more adequate resources. This does not simply mean more Federal money; it also means that Federal funds now available must be freed from the inhibiting restrictions within which they are now entangled. Funds which are free of these restrictions can be used in each locality where the needs are greatest, eliminating a great deal of inefficiency and waste.

But Federal grant money provides only a part of the Federal contribution to rural America. Adequate credit resources can also be extremely important in developing community facilities and in attracting private investment. In the end it is not Federal money, nor even the vast sums spent by State and local governments, which hold the key to rural development. The private sector has an enormous role to play and public efforts must keep this fact centrally in mind.

HELPING THE FARMER AND PROTECTING

THE ENVIRONMENT

Rural America cannot move forward effectively into the future unless it respects those elements which have been the base of its strength in the past. We cannot build a stronger rural economy, for example, unless we also build a stronger agricultural economy. While we must work to change the American countryside, we must never do so at the expense of those who produce our food and fiber. We must work to create a better life for American farmers even as we provide an expanded range of opportunities for those who are no longer needed on the farm.

Even as we do more to promote agricultural prosperity, so we must do more to protect the rural environment. Just as development must not come at the expense of the farmer, so it must not come at the expense of environmental concerns. We cannot fully develop the American countryside if we destroy the beauty and the natural resources which are so much a part of its essential value.

BASIC PRINCIPLES

These then are the basic principles which should guide our new approach to rural community development:

We must treat the problems of rural America as a part of a general strategy for balanced growth.

We must reverse the flow of power to the Federal Government and return more power to State and local officials.

We must fight the rigidities of narrowly focused categorical grants.

We must facilitate more adequate advance planning.

We must reorganize the Federal Government so that it can more effectively support planning and execution at the State and local level.

We must provide adequate resources and credit, in ways which attract greater private resources for development.

We must develop rural America in ways which protect agriculture and the environment.

On the basis of these principles, we have prepared the following recommendations for action including proposals which have been submitted earlier and a number of new initiatives.

PROPOSALS ALREADY SUBMITTED TO THE CONGRESS

DEPARTMENT OF COMMUNITY DEVELOPMENT

One of the most significant barriers to effective planning and coordination in rural areas has been the fragmentation of Federal efforts. Too many programs which should be closely related are operating as very separate entities. As a result, State and community leaders must often run a complex obstacle course in order to obtain development assistance. Frequently there is poor coordination and wasteful duplication and in some cases the action of one Federal agency actually conflicts with that of another.

The principal reason for this fragmentation has been the failure of the Government to recognize the inter-relationship among rural, suburban and urban problems and the need to strengthen the essential social and economic partnership between rural America and our great metropolitan centers.

I believe the proper solution to this problem is to gather the principal Federal programs which support community development within a single new Department of Community Development.

This new department would both simplify and expedite the tasks of State and local governments through a broad range of program and technical support efforts. Because fewer questions would have to be resolved in Washington at the interagency level, the new department would also expedite the decentralization of Federal decision-making which this administration has already begun. The new Department of Community Development would take over most of the functions now perforated by the Department of Housing and Urban Development; some of the functions of the Department of Transportation, the Office of Economic Opportunity and the Small Business Administration; and the responsibilities of the Department of Commerce with respect to the Title V regional commissions.

Under our revised plan for executive reorganization, the Department of Agriculture would remain as a separate department focusing on the needs of farmers. But a number of present Department of Agriculture development functions would be moved to the new Department of Community Development, including the Farmers Home Administration loan and grant programs for rural community water and sewer systems and for rural housing; the Rural Electrification Administration loan programs for electric and telephone systems; the recently established Rural Telephone Bank; research programs related to rural community development conducted by the Economic Development Division of the Economic Research Service; and the programs of the recently established Rural Development Service.

Comprehensive reorganization would mean that every Federal dollar spent on rural development could have a far greater impact. I again call on the Congress to establish this new department, which would be uniquely capable of launching a well-developed, well-coordinated campaign to achieve the nation's community development goals.

A REVENUE SHARING PLAN FOR RURAL

AMERICA

Our revenue sharing plan for rural America proposes to unite the funding for a number of existing programs into a single more flexible resource for rural community development. Our proposed program would add $179 million to the various programs to be consolidated, bringing the total annual program to a level of $ 1. 1 billion. Each State would receive at least as much under revenue sharing as it receives under the current system of categorical grants. The program would take effect at the beginning of Fiscal Year 1974.

Rural community development revenue sharing funds would be paid out to the States and to Puerto Rico, the Virgin Islands and Guam according to a formula which takes three factors into account: the State's rural population, the State's rural per capita income in comparison to the national average, and the State's change in rural population compared to the change in population in all States. In addition, every State would receive a minimum amount to assure that all States participate in the program.

The revenue sharing proposal incorporates a requirement for statewide development plans to ensure that activities carried on under the rural community development revenue sharing program could be coordinated with activities under the other general and special revenue sharing proposals, including those for urban community development and for transportation. Each year the States would prepare a comprehensive statewide development plan which would outline spending intentions for programs in rural areas and smaller cities, as well as in metropolitan and suburban areas. It would be the responsibility of the Governor of each State to draw up this statewide plan. This process would be supported by another major administration initiative, our proposed $100 million planning and management grant program.

The development plan would be formulated through a consultative process which would consider plans submitted by multi-jurisdictional planning districts, which the Governors could establish with rural revenue sharing funds. These local planning organizations would be composed of local elected officials and would be established in all areas of the State. One member from each of these district planning bodies would sit on a panel to assist the Governor in the comprehensive planning process.

This process for developing a statewide plan would ensure that public officials and the general public itself would focus attention on the inter-relationships between rural and urban development within each State. The plan would identify potential growth areas and development sites as well as areas which are of special environmental concern. The plan could also take into account interstate projects and programs developed through the regional commission mechanism.

The rural community development revenue sharing program represents a reaffirmation of faith in State and local governments. It is based on the concept that local people have the best understanding of local problems and on the belief that they have the will and the ability to move vigorously and intelligently to solve them. The revenue sharing approach removes the often stifling and always frustrating strictures which require that Federal grants be used for narrow purposes. It provides the flexibility which State and local governments need in order to fund those projects which they themselves believe would best ensure rational development in their areas and most effectively enhance the quality of life.

The development plans drawn up under this program would cover an entire State. Rural revenue sharing funds would be spent largely outside metropolitan areas while urban revenue sharing funds would be used within those areas. It is important to note, however, that rural areas include almost 2800 of the more than 3100 counties in the United States.

Last March, when I submitted the rural community development revenue sharing proposal for the first time, I said that "the major challenge facing rural America is to diversify its economy and to provide full opportunity for its people to enjoy the benefits of American life." I still believe that revenue sharing can do a great deal to help rural America meet that challenge.

NEW PROPOSALS

Revenue sharing and reorganization can have a great long-range significance for rural America. But we must also take a number of other steps which I am outlining today, including two major new proposals. The first involves a new approach to rural financial assistance. The second concerns added authorities for improving the environment and attaining conservation objectives in rural America.

EXPANDED CREDIT FOR RURAL AMERICA

I am recommending today a new rural community development credit sharing authority which would give the Secretary of Agriculture and the State Governors new tools to help revitalize rural areas. Under this proposal, a new Rural Development Credit Fund would be established to provide loans, loan insurance and loan guarantees to the States for their use in assisting development. This credit would be made available through the Farmers Home Administration for up to 80 percent of the cost of establishing or improving businesses which help create economic growth in rural areas. This fund would also make loans and guarantees for sewer and water facilities and other public works and community facilities, such as industrial parks and community centers, which work directly or indirectly to improve employment opportunities.

Loans and guarantees would be made in accordance with the State development plan required under rural revenue sharing. The States would select specific projects which are consistent with this development plan.

A significant new feature of this credit sharing proposal is the requirement that most of the authorizations be divided among the States according to the same formula established for rural community development revenue sharing. Specifically, 80 percent of the loan funds for commercial and industrial development and for community facilities would be allocated to the States on a formula basis. The remaining 20 percent of loan authorities would be administered by the Secretary of Agriculture. A large portion of the authorization--65 percent in each fiscal year--would be reserved for commercial and industrial development uses and the remainder would be available for community development purposes. Each State would know in advance the amount of grants and credit it could commit according to its plan each year.

This proposal would involve private lending institutions as fully as possible in the rural revitalization effort. Financial assistance would not be provided under the program unless it was clear that firms and communities could not obtain credit elsewhere. Fully three-quarters of each year's authorization would have to be in the form of a guarantee of loans made by private financial institutions. Hopefully, almost all loans could be made by this sector of our economy. In addition to the direct involvement of private banks, this program would also emphasize loans to private entrepreneurs for job creation through commercial and industrial development. Since some equity would be required, these business decision-makers would be far more likely to make realistic, workable development decisions than far-removed Federal bureaucrats can now do. It is also likely that these market oriented decisions would provide sounder, long-term employment opportunities. This combination of Federal funding, local initiative and statewide planning utilizing the private market economy should produce a far more productive use of our resources.

I am proposing an authorization level for this credit-sharing program, which includes the existing Farmers Home Administration water and sewer program, of $ 1 .3 billion in fiscal year 1974.

My new proposals also involve additional features and technical improvements which would streamline and improve the effectiveness of farm and rural loan programs now administered by the Department of Agriculture. Among these are proposals to increase the farm operating loan limit to $50,000 and to increase the limit on new loans to be held in the agricultural credit insurance fund from $100 million to $500 million. This latter provision would provide adequate levels to ensure that the expanded loan and guarantee program would have a substantial impact on rural areas.

In summary, this new approach to credit assistance contains several advantageous features:

(1) It would establish a direct link between credit assistance and revenue sharing since both programs would be administered according to the same statewide plan.

(2) It would expand the role of private lending institutions. Firms otherwise unable to obtain credit would have a chance to mature under this plan so that they could borrow from private lending institutions at a later time without Federal guarantees.

(3) The plan could work through a delivery system for servicing loans which is already in operation--the Farmers Home Administration, which has offices in more than 1,700 counties. There is an office within a relatively short distance of practically every rural community in the United States. This whole system, moreover, could be readily transferred to a new Department of Community Development.

(4) Projects could be jointly financed by a number of Federal agencies, such as Small Business Administration, the Department of Housing and Urban Development, and the Environmental Protection Agency, as well as by other private and public State and local agencies.

(5) Improved planning and program coordination would be possible under statewide plans which grow out of the needs and suggestions of multi-jurisdictional planning districts already established in more than half of the States. These planning bodies would also provide expertise for communities that are too small to employ their own development experts.

IMPROVING THE RURAL ENVIRONMENT

To help carry out our environmental concerns, I propose that the Secretary of Agriculture be authorized to share the costs of long-term conservation in watershed areas. Such an authorization has worked most successfully under the Great Plains program. This measure would foster the orderly establishment of needed land treatment measures within the small watershed areas of the country.

In addition, technical and cost-sharing assistance should be authorized within watershed areas for the improvement of water quality. This would mean that, for the first time, Federal cost-sharing would be made available to improve water quality on a year-round basis. Such technical and cost-sharing assistance should also be provided in Resource Conservation and Development Project areas.

Finally, the Secretary of Agriculture should be authorized to inventory and to monitor soil, water, and related resources and to issue a national land inventory report at five-year intervals. Such data could be used at all levels of government in land use policy planning.

All these proposals would broaden the dimensions of Federal service and would give new impetus to the entire rural development task. But I would emphasize again that this task must be one in which the people themselves are directly involved--and it must begin in rural America. Our proposals would provide rural people and communities with the tools they need to achieve their goals and I hope these recommendations will receive early and favorable consideration.

RESULTS OF OUR INCREASED EMPHASIS ON RURAL DEVELOPMENT

These essential steps now depend on action by the Congress. But while action on past proposals has been pending, we have also been taking a number of administrative steps to improve our rural development programs and have substantially increased program funding. For example:

--The funding of principal rural development programs in the Department of Agriculture this year ($2.8 billion) is more than four times that of fiscal year 1961 and twice that of fiscal year 1969. Twenty-nine of the thirty-four rural development programs in that department have been expanded since 1969.

--Since 1969, the Department of Housing and Urban Development has nearly tripled its grants for non-metropolitan planning districts. It funded 155 districts which received $3.4 million in grants in the last complete fiscal year.

--Rural housing assistance, with an emphasis on low and moderate income families, has reached a record level of $1.6 billion under the Farmers Home Administration program--more than triple the 1969 level.

--Research on rural development and housing is estimated at $9 million this year, more than double that of 1969.

--Funding for community sewer and water facilities has reached a record high level of $300 million in loans, plus $42 million in direct grants. This represents an increase of almost 80 percent over the level provided two years ago.

--Soil Conservation Service resource conservation and development, flood prevention, and watershed programs have expanded from $103 million in fiscal year 1969 to an estimated $156 million this year.

--With the recent release of an additional $109 million in funds for rural electrification, total available funds for the Rural Electrification Administration have been increased to $438 million for the current fiscal year. REA loans from 1969 to 1971 totaled more than $ 1.4 billion. Since 1969, REA-financed systems connected 700,000 new electric services and 420,000 telephone users--the largest three-year growth since the 1950's.

--The Rural Telephone Bank, with an initial Federal subscription of $60 million in the first two years, has been established to provide new credit resources for telephone cooperatives seeking to improve rural communications.

--Extension Service community development activities this year attained a funding level estimated at $12.7 million, an increase of $3.7 million over 1969 levels.

--To broaden the role of the employment service in serving our rural population, a Rural Manpower Service has been established in the Department of Labor.

--A cooperative program called Concerted Services in Training and Education has involved several Federal agencies as well as local organizations in helping individuals better utilize Federal programs.

--A special office has been created within the Department of Health, Education, and Welfare to focus on special problems of human resource development in rural areas.

This expansion of Federal efforts to stimulate the development of rural communities has been paralleled by the increased efforts of individual citizens, civic organizations, private enterprise and government at the State, county and municipal level. There are many evidences of the resulting overall progress.

--Out-migration from rural communities slowed from 4.6 million during the 1950's to 2.4 million during the 1960's. Most of the population losses during the 1960's occurred in the Great Plains and inter-mountain areas of the West, but gains were realized in parts of the Southern Piedmont, the middle Tennessee Valley, eastern Oklahoma, and northern and western Arkansas. This is evidence that the migratory tide can be slowed--and in some instances even reversed.

--Income per capita in rural America is growing faster than in metropolitan America, though it still remains below the urban level.

--While the incidence of poverty is greater in rural than in urban America, its reduction rate is nearly twice as fast.

--Non-farm employment outside the metropolitan centers has generally grown at a slightly faster rate than employment in metropolitan areas. Manufacturing employment is expanding more rapidly in rural areas than in the large cities.

--Although rural America still contains about two-thirds of our inadequate housing, the ratio of inadequate to adequate rural housing units has been reduced from one-third to one-seventh in recent years. Rural electric and telephone services have improved; more than 98 percent of America's farms are now electrified.

--During the past three years, per capita farm income has averaged about

75 percent that of non-farm workers. This is still too low, but it represents a significant improvement over the past decade.

--The ,median years of school completed by persons 25 to 29 years of age is now about the same--12 years plus--in metropolitan and non-metropolitan areas.

All of these signs of progress are most encouraging. But this record is not something to stand on--it is something to build on. Much significant work has already been done--but the most important tasks are still before us.

The longer we put off these tasks the more difficult they will be. With the cooperation of the Congress we can promptly take up this work, opening new doors of opportunity for all who seek a better life in rural America.

RICHARD NIXON

THE WHITE HOUSE,

February 1, 1972.