Transition Team Recommendations: Support for Beginning Farmers and Ranchers
December 23rd, 2008
The Sustainable Agriculture Coalition recently presented a set of policy briefing papers to members of President-elect Obama’s Transition Team. The briefing papers lay out SAC’s recommendations for addressing the most urgent priorities of the sustainable agriculture movement. This is the first in a series of blog posts that features some of those policy recommendations. All of the recommendations follow the same format, building off promises the Obama-Biden campaign made before the election.
“Encourage Young People to Become Farmers: Becoming a successful farmer is a lifelong endeavor. Barack Obama and Joe Biden will establish a new program to identify the next generation of farmers and ranchers and help them develop professional skills and find work that lead to farm ownership and management.”
Program: Office of Advocacy and Outreach
Agency: New Office within USDA Executive Operations
Recommendation – Administrative Action
As directed by the 2008 Farm Bill (authorized in Section 14013), create the new Office of Advocacy and Outreach and place it at the Departmental level, as a clearly separate office equal to other Executive Operations offices, directly under and reporting to the Secretary of Agriculture, rather than under or through any other office, mission area, Assistant Secretary or Under Secretary. Ensure that the new directors and staff of the Office of Advocacy and Outreach have significant previous experience working with small farms and with beginning and socially disadvantaged farmers and ranchers, as well as a deep understanding of the current and emerging programs of the Department. Ensure that the new office is adequately funded. Make the Office the new Secretary’s centerpiece for moving forward aggressively with major policies and programs for small and moderate-sized family farms and beginning farmers and minority farmers and ranchers.
Background in Brief
USDA’s attention to small and mid-sized farms and to beginning and socially disadvantaged farmers and ranchers—key sectors of U.S. agriculture—has been sporadic and fractured, to the detriment of farmers, rural communities, and the economy. In creating the new Office of Advocacy and Outreach, Congress recognized the clear need to place direct emphasis on smaller farms and beginning and socially disadvantaged farmers and ranchers, as well as better coordination and accountability across all USDA mission areas that apply to these sectors.
The viability and profitability of small farms and beginning and socially disadvantaged farmers and ranchers require a multi-faceted approach — no one program or provision can address all needs. It is therefore imperative that USDA make full use of this new authority and establish cross-cutting departmental goals and objectives, measure progress and outcomes, and provide input into programmatic and policy decisions across all USDA mission areas that relate to small, beginning and socially disadvantaged farmers and ranchers. This will provide clear focus and attention to enable these sectors to flourish.
Within the new office, the Socially Disadvantaged Farmers group includes the new Advisory Committee on Minority Farmers and the new USDA Farmworker Coordinator. The existing functions of the current Office of Outreach and Diversity which serves socially disadvantaged producers and minority serving institutions are also transferred to the Office of Advocacy and Outreach from the Office of the Assistant Secretary for Civil Rights, thereby allowing the ASCR to focus solely on the critical tasks of assuring USDA compliance with civil rights laws and addressing the many unresolved civil rights cases and issues. This transfer allows the functions of the current Office of Outreach and Diversity to be separated from the issues of program and service discrimination and folded into a special group that focuses on building a better present and future in agriculture for socially disadvantaged producers.
The Small and Beginning Farmers and Ranchers group is given responsibility for continuing and building upon the functions for the existing Office of Small Farms Coordination, the Small Farms and Beginning Farmer and Rancher Council, and the Advisory Committee for Beginning Farmers and Ranchers, plus a consultative role on the administration of the Beginning Farmer and Ranchers Development Program administered by CSREES.
“Encourage Young People to Become Farmers: Becoming a successful farmer is a lifelong endeavor. Barack Obama and Joe Biden will establish a new program to identify the next generation of farmers and ranchers and help them develop professional skills and find work that leads to farm ownership and management. They will help our land-grant university system and the cooperative extension services work closely with organizations such as 4-H and FFA to identify and prepare candidates for this program.”
Program: Beginning Farmer and Rancher Development Program (BFRDP)
Agency: Cooperative States Research, Education, and Extension Service
Recommendation – Administrative Action
Ensure swift delivery and implementation of the BFRDP with mandatory funding to support new and established initiatives that provide local and regional training, education, outreach and technical assistance for beginning farmers and ranchers.
Ensure the legislative intent regarding the priority for grants is adhered to: “the Secretary shall give priority to partnerships and collaborations that are led by or include non-governmental and community-based organizations with expertise in new agricultural producer trainings and outreach.”
Recommendation – Budget Proposal
Guarding against budgetary and appropriations measures that threaten to cut mandatory funding is key to successful implementation and usage of the program. Already, the Senate Appropriations Committee has proposed a $2 million change in mandatory spending (CHIMP) that should be rejected, as should any future proposed CHIMPs. It is critical that USDA Budget Requests include full funding and no changes in mandatory spending.
Background in Brief
The Beginning Farmer and Rancher Development Program was reauthorized in the 2008 Farm Bill and for the first time ever received mandatory funding—$18 million, $19 million, $19 million and $19 million for FY 09-12 respectively. As part of a larger beginning farmer package, the BFRDP is a substantial investment aimed at providing support to collaborative networks or partnerships which may include community-based organizations, non-governmental organizations, and extension and educational institutions that provide beginning farmer and rancher education, training, and assistance.
USDA is already moving forward with implementation of the BFRDP. National program leaders assigned within CSREES are well equipped and experienced with delivery of competitive grants programs that work with community based organizations. An initial request for applications is expected early in 2009.
Demand for the BFRDP is great. There is opportunity in agriculture today. New farming opportunities are being spurred by the growth in new markets like organics, local foods, energy crops, and pasture-based livestock production.
Despite the growing opportunities in agriculture, however, this diverse new generation of farmers and ranchers faces a set of very difficult challenges. Adequate access to credit, training, technical assistance, farmer networks, land, and markets are critical to their success.
The BFRDP is a common-sense initiative with the flexibility to support a number of different approaches and strategies to help new farmers and ranchers get started. Community-based organizations and networks can use the BFRDP to address the barriers that new agricultural producers face. Matching federal resources with community-based organizations and networks is a good approach that can produce results.
The 2008 Farm Bill outlines that BFRDP funds must primarily target beginning farmers and ranchers who have been farming or ranching less than 10 years. The term of a grant can be no greater than three years, or more than $250,000 per year. All grant recipients must provide a match in the form of cash or in-kind contribution equal to 25 percent of the awarded grant. The BFRDP also sets aside 25% of the yearly funds for grantees serving socially disadvantaged beginning farmers and ranchers. “Socially Disadvantaged” farmers and ranchers have traditionally been excluded from federal programs and include minority and women farmers and ranchers as well as immigrant and farm workers seeking to become farmers.
A Request for Applications for the BFRDP is anticipated by mid January 2009.
“Encourage Young People to Become Farmers: Becoming a successful farmer is a lifelong endeavor. Barack Obama and Joe Biden will establish a new program to identify the next generation of farmers and ranchers and help them develop professional skills and find work that leads to farm ownership and management…”
Program: Beginning Farmer and Rancher Individual Development Account Pilot Program
Agency: Farm Service Agency
Recommendation – Budget Proposal
Include $5 million each year for the Beginning Farmer and Rancher IDA program in the President’s Budget Request for fiscal years 2010 through 2012.
Background in Brief
The Beginning Farmer and Rancher IDA program is a competitive grant program available to non-profits, tribes, and local government agencies to be administered by USDA’s Farm Services Agency. The program would enable beginning farmers and ranchers to open an Individual Development Account (matched savings account) in order to save for a farming-related asset including, farmland, farming equipment, breeding stock, trees, or similar expenditures permitted by USDA. It is authorized by Section 5301 of the Credit Title of the 2008 Farm Bill (P.L. 110-234).
BFRIDA allows up to $3,000 of an individual farmer or ranchers’ savings to be matched by local IDA providers at up to a 1:2 rate. Thus, farmers and ranchers can receive up to $6,000 annually in match, totaling $9,000 in leveraged savings. Program participants are required to complete financial training programs and develop a savings plan before the funds may be withdrawn for asset purchase.
The legislation authorizes up to $25 million – or five million a year over a five year period – for the program. While any tribe, non-profit, or local or state government can submit an application to receive a grant, a 50% local match is needed to obtain the federal grant which may not exceed $250,000.
If fully funded, BFRIDA could administer at least 20 grants. With up to 40 IDA accounts at each site and 800 IDA savers in 15 states annually, 4,000 agricultural entrepreneurs could receive matched savings over the tenure of the pilot program.
This program contains both the infrastructure as well as the incentives for individuals who might not historically be able to save towards retirement or make intermediate, asset-building purchases. Funding has been authorized, but still needs to be appropriated. FSA staff is developing regulations now in anticipation of funding.
“Encourage Young People to Become Farmers: Provide a capital gains tax break for landowners selling to beginning farmers and a first time buyers’ tax credit for new farmers.”
“Establish a Small Business and Microenterprise Initiative: Establish a small business and microenterprise initiative that includes a 20 percent tax credit on up to $50,000 of investment in small owner operated businesses.”
Recommendation – Legislative Action
Create a Beginning Farmer and Rancher Tax Package
Provide a 100% exemption on up to $500,000 of capital gains for sellers of agricultural land to qualifying first time farmers, as defined under the Internal Revenue Code, who are certified as being not larger than family-size farms by the USDA Farm Service Agency.
Establish a Microenterprise Investment Tax Credit for first time farmers who operate not larger than family-size farms and owner-operated businesses with fewer than ten employees in population loss counties.
Background in Brief
Capital Gains Exemption on Land Sold to Beginning Farmers – The $500,000 capital gains exemptions on land sales to beginning farmers has been introduced by Senator Byron Dorgan. Beginning farmers could use the exemption to negotiate a price from land sellers below the bids of large established farms. Beginners could also use the exemption to entice investors to buy land and lease it back to them with an option to purchase.
Microenterprise and Beginning Farmer Tax Credit — A microenterprise tax credit has been enacted at the state level (Nebraska). The concept has also been included in Senator Byron Dorgan’s New Homestead Act. The credit should apply to the increase in business investment (expenses) over the prior year or the average of the prior three years, whichever is higher. Non-farm taxpayers would be eligible if they materially participate in microenterprises, as defined in the Internal Revenue Code, and farm taxpayers would be eligible if they qualify as first time farmers under the Internal Revenue Code and are certified as not larger than family size farms by the Farm Service Agency. Allowing the credit to be applied to prior years’ taxes is critical for the measure to provide effective economic stimulus. Most microenterprises are cash strapped and many show no profit in their initial years or during severe recessions. A credit that they can carry back to reclaim taxes paid in prior years would free up cash to start or expand and thereby grow the rural economy out of recession.