Thursday, August 12, 2010

Rural Utilities Service

Here's an interesting half a billion dollar bureau inside the Department of Agriculture that you probably never heard of: The Rural Utilities Service.  Like 4/5ths of the department of agriculture it has very little to do with actual agriculture.  Instead, it concentrates on bringing quality, affordable utility to rural areas.  Utilities such as electricity, clean water, telephone, and even broadband.

In 2009, the department spent 774 million on clean water and sewer projects.  It spent the money on loan guarantees, direct loans, and grants to partially funded projects.  What this means is that the Rural Utilities Service cannot decide to build something.  The local city or Indian tribe must plan it first and then petition for the department's help.  The department gave out more money than usually thanks to the ARRA (American Recovery and Re-investment Act).  They even have a great annual report that it's easy to read through.  Here's a highlight of what the money was spent on:

In FY 2009, WEP funded 1,239 projects for $2.5
billion. The majority (77 percent) of the projects were
funded from the WEP regular loan and grant program
using both FY 2009 appropriated funds and Recovery
Act Funds. The balance of the projects was funded
through several special programs and initiatives.

Another utility that this bureau is trying to provide is broadband Internet.  This one cost us $135 million in 2009.  Not only does it help bring broadband to rural areas it also brings distance learning and medical resources to rural areas.

The Distance Learning and telemedicine Program (DLT) is designed specifically to meet the educational and health care needs of rural America. Through loans, grants and loan/grant combinations, advanced telecommunications technologies provide enhanced learning and health care opportunities for rural residents. The DLT program has funded over 1,050 projects in 48 states and four US territories totaling $350.4 million.

The accounts that track the spending does not differentiate between broadband and the DLT programs.  I guess because it's hard to have one without the other.

The final expense account for the Rural Utilities Service is $100 million dollars for telephone communication infrastructure.  Maybe I'm a city-slicker snob, but this sounds like an awful lot of money for a dying technology.  I think we could eliminate this program, and either pocket the money, or put it into the rural broadband program.

For those paying close attention, you may have noticed that the previous 3 programs added together cost $1,009 million dollars whereas at the beginning I claimed that the department only cost half a billion.  That is because the last utility that the Rural Utilities Service provides actually made money in 2009.  Rural Electrification.

So how does Rural Electrification bring in money?  It's because so many of it's programs are direct loans.

USDA Rural Development makes loans to corporations, states, territories and subdivisions, and agencies such as municipalities, people's utility districts, and cooperative, nonprofit, limited-dividend, or mutual associations that provide retail electric service to rural areas or supply the power needs of distribution borrowers in rural areas.

If more people pay off loans, than new loans are made -poof!- money made that year.  As far I can tell, this is the only utility program run by RUS that offers direct loans.  Of course this means that the program doesn't make money every year, but it did in 2009.  350 million was made which even includes $22 million from the ARRA for High Energy Cost grants.

One more thing that offset the cost of the Rural Utilities Service is $209 million dollar income  leftover from the Rural Development Insurance fund(pdf).  The program winded down in 1987, but money is still being collected on loans it made.

So in conclusion.  If we take away some of the misleading offsets, we can see that about a billion dollars is spent on trying to bring city quality services to rural areas.
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