RuralOrganizing.org polling has shown repeatedly that rural Americans want solutions focused on increasing jobs and wages, decreasing daily expenses, and improving their quality of life; while rural residents rarely use the Beltway jargon, these are outcomes of good economic development policies. Block grants are the gold standard for economic development because they offer maximum flexibility for community-led projects, but they favor metro counties. Rural communities which often lack full time government staff, access to grant writers or folks to handle complex funding administration block grants offer a critical avenue for channeling federal dollars to the local level. However, eight out of ten distressed communities are rural, and 60% of the residents in those counties are people of color. Focusing more noncompetitive block grant funds in rural distressed communities will more equitably distribute federal funding to communities of color that have faced both historic and ongoing disinvestment. The Rebuild Rural America Act introduced by Sen. Kirsten Gillibrand (D-NY) in 2021 is one key opportunity to deliver block grants to rural communities. 

BLOCK GRANTS ARE THE GOLD STANDARD FOR ECONOMIC DEVELOPMENT

Block grants are one of ten forms of grant-in-aid that the federal government uses to provide state and local governments a specified amount of funding. State and local governments typically have greater flexibility in using the funds and are required to meet fewer administrative conditions than under categorical grants. Block grants are traditionally noncompetitive, meaning a community isn’t required to have a robust planning and grant writing team to have a chance at receiving funding. There are currently 22 funded block grants totaling about $59.1 billion in FY2022 (about 4.8% of total federal grant-in-aid assistance).

Block grants were originally designed by conservatives and advocates laud the administrative efficiency of programs being consolidated under a “block grant” umbrella, saying this type of assistance promotes long-term planning by making funding more predictable and reliable, and that it reduces duplication and associated waste.

Partners for Rural Transformation research shows that 80% of the nation’s 395 persistent poverty counties are rural, and 6 in 10 of the residents in these counties are people of color. Further research by Fahe demonstrates that regions of deep persistent poverty were created by design and the current characteristics of distress — high unemployment, underbanking, lack of reliable access to clean water, and lack of small business investment capital — are products of that design. Because of this history of disinvestment and the inherent flexibility of noncompetitive block grants, focusing more block grant funds in rural distressed communities will more equitably distribute federal funding.

AGENCIES TASKED WITH RURAL DEVELOPMENT ARE NOT USING BLOCK GRANTS

An analysis of all block grants deployed by federal agencies from fiscal years 2020-2022 showed that neither USDA Rural Development nor the Economic Development Administration (EDA) (via the Department of Commerce, which as a department, also deployed no block grant dollars), the two key federal agencies tasked with economic development in rural areas, have utilized block grants. Below is the breakdown of USDA grant types during this time.

USDA IS NOT BRINGING BLOCK GRANT DOLLARS TO NON-METRO COUNTIES

Here, block grant funding is charted according to metro (blue shades) and non-metro (red shades) counties using the U.S. Department of Agriculture’s Rural-Urban Continuum Codes (RUCC) classification system. USDA, the primary agency tasked with serving rural communities, is delivering a tiny fraction of block grant dollars to non-metro counties. The Department of the Interior (DOI) is successfully delivering these dollars to non-metro counties. These funds flow through programs designed to serve Native American communities, as denoted by the words “Indian” and “Tribal” in their program titles. Other rural communities lack access to these targeted block grants.

RURAL DEVELOPMENT IS NOT RECEIVING ADEQUATE FUNDING

USDA Rural Development received net negative mandatory funding allocations in the 2018 Farm Bill, and balancing the budget for Farm Bill programs in 2018 came largely from the cuts to Rural Development initiatives. 

In contrast to this meager funding, rural communities hold about 20% of the country’s population, 90% of whom make the majority of their livelihood in non-agriculture industries. The non-agriculture economic development investments that would support this majority of rural residents have been traded away in the past farm bills, leaving rural development under-invested.

EXISTING BLOCK GRANTS ARE NOT ADEQUATELY REACHING DISTRESSED COMMUNITIES

Partners for Rural Transformation research indicates that, of the 395 persistent poverty counties in the United States, 8 in 10 of these counties are rural, and 60% of the people living in these counties are people of color. While RECOMPETE targets distressed communities based on the level of “prime-age unemployment,” the overlap with persistent poverty communities is significant. Only 8% of block grants are reaching persistent poverty counties.

What’s more, most block grants that do make it into distressed counties really only reach one rural county type among the nine defined in the Rural-Urban Continuum Codes (RUCC). The RUCC 6 county type — nonmetro counties that are adjacent to a metro area and that have an urban population of 2,500 to 19,999 — received 83% of the block grant funding going into persistent poverty counties. Most other persistent poverty county types received less than 1% of block grant funding over the three fiscal years considered (2020, 2021, and 2022).  

THE MOST COST-EFFECTIVE ECONOMIC DEVELOPMENT STRATEGIES

Tim Bartik of the Upjohn Institute has done decades of research on which economic development strategies work best for creating good jobs and driving economic prosperity. While tax breaks for corporations are commonly used (and given large amounts of funding), this strategy costs $196,000 per job. In contrast, brownfield redevelopment is the most cost-effective tool, costing just $13,000 per job.

RECOMMENDATIONS

Based on the DOI’s success in deploying block grants to rural communities and the evaluation of this funding type as the gold standard for economic development, we recommend expanding block grants into other agencies, especially those tasked with economic development: USDA Rural Development and the Commerce Department’s EDA.