DEPARTMENT OF AGRICULTURE APPROPRIATIONS FOR 1951 HEARINGS BEFORE THE SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS EIGHTY-FIRST CONGRESS SECOND SESSION SUBCOMMITTEE ON AGRICULTURE JAMIE L. WHITTEN, Mississippi, Chairman WILLIAM G. STIGLER, Oklahoma H. CARL ANDERSEN, Minnesota Ross P. POPE, Executive Secretary to Subcommittee 521 .Z165 COMMITTEE ON APPROPRIATIONS CLARENCE CANNON, Missouri, Chairman JOHN H. KERR, North Carolina ANTONIO M. FERNANDEZ, New Mexico LOUIS C. RABAUT, Michigan DANIEL J. FLOOD, Pennsylvania CHRISTOPHER C. MCGRATH, New York FOSTER FURCOLO, Massachusetts EDWARD H. KRUSE, JR., Indiana II JOHN TABER, New York RICHARD B. WIGGLESWORTH, Massachusetts ALBERT J. ENGEL, Michigan KARL STEFAN, Nebraska H. CARL ANDERSEN, Minnesota GEORGE Y. HARVEY, Clerk 64 MONDAY, JANUARY 30, 1950. RURAL ELECTRIFICATION ADMINISTRATION WITNESSES CLAUDE R. WICKARD, ADMINISTRATOR, RURAL ELECTRIFICATION ADMINISTRATION GEORGE W. HAGGARD, DEPUTY ADMINISTRATOR, REA WILLIAM C. WISE, ASSISTANT ADMINISTRATOR, REA ROBERT T. BEALL, EXECUTIVE OFFICER, REA EVERETT C. WEITZELL, PROGRAM ANALYST, REA ROBERT MacCLINCHIE, ADMINISTRATIVE OFFICER, REA K. WILDE BLACKBURN, ASSOCIATE SOLICITOR, OFFICE OF THE SOLICITOR RALPH S. ROBERTS, DIRECTOR OF FINANCE AND BUDGET OFFICER, DEPARTMENT OF AGRICULTURE Mr. WHITTEN. The committee will come to order, please. We are glad to have with us today Mr. Wickard, head of the Rural Electrification Administration, and his associates. At this point in the record, I would like to have inserted page 468 of the justification, pages 1, 2, and 3 of the supplemental justification material, and the tables on pages 384 and 387 of the committee print. (The material referred to is as follows:) PURPOSE STATEMENT The Rural Electrification Administration was established by Executive Order 7037 of May 11, 1935, to make loans for the extension of central station electric service to unserved rural people. The agency was continued by the Rural Electrification Act approved May 20, 1936, and became a part of the Department of Agriculture, effective July 1, 1939, under Reorganization Plan II. Although on June 30, 1949, service had been extended by REA borrowers to 2,778,180 farms and rural establishments, approximately 3,400,000 rural dwellings and an additional number of other rural establishments did not have central station service, and it is expected that about 85 percent of these will be electrified through the rural-electrification loan program. Loans for construction of electric facilities are self-liquidating within a period of not to exceed 35 years, and they bear interest at the rate of 2 percent. Loans for consumer facilities are also at 2-percent interest but for shorter periods. Fifty percent of the funds available for loans in any given year are reserved for loans in the various States on the basis of the proportion that each State's unelectrified farm bears to the total number of farms in the country which are without central-station electric service. The other 50 percent and unobligated balances from prior years may be loaned at the discretion of the Administrator, but not more than 10 percent may be loaned in any one State or all of the Territories. The principal borrowers of this Administration are cooperative associations formed solely for the purpose of making electricity available in rural areas. The Administration gives technical review and approval to construction plans and approves the completed construction of the electric systems. Selective (969) guidance and assistance on business-management matters are rendered to borrowers where necessary. Periodic audits are made to the records of all borrowers except those which have attained a certain level of financial responsibility. These latter are required to engage public accountants for this purpose. On October 28, 1949, the Administration, was authorized to make loans for the purpose of the improvement and expansion of telephone facilities in rural areas. These loans are authorized to be made on the same terms as the electrification loans. The Rural Electrification Administration has no field offices. Relations with borrowers are maintained primarily through regional offices in Washington and a staff of full-time field employees working directly with the borrowers. The Rural Electrification Administration on December 31, 1949, had 1,174 full-time employees, 888 of whom were in Washington, and the balance in the field. Rural telephone program supplemental estimate, fiscal year 1950, and supplemental estimate, fiscal year 1951 PURPOSE OF ESTIMATE The purpose of this submission is to request for the rural telephone program an additional $235,000 for administrative expense for fiscal year 1950, and $2,100,000 for administrative expense for fiscal year 1951. Loan funds in the amount of $50,000,000, as was indicated in the President's budget message, are requested for this program for the 1951 fiscal year. This estimate also includes $120,000 for the increased costs of personal services provided by Public Law 429. DEVELOPMENT OF PROGRAM The recently established rural telephone loan program is meeting with widespread interest and approval. The initial 21⁄2-month period of the program has been high lighted by the following: A flood of inquiries from rural telephone organizations-existing concerns and proposed new groups-from 45 of the States and one of the Territories. The establishment of loan requirements and procedures for carrying out the purposes of the new legislation. The beginning of recruitment of rural-telephone specialists to supplement the existing REA staff in administering the new program. Applications.-Distribution of an application form for the use of prospective borrowers began in the last week of December. Since then prospective borrowers, telephone and cooperative organizations, legal and engineering firms, and farm and rural leaders have requested 20,000 copies of the form. In the first 3 weeks that the form has been available, 120 official applications have been filed with REA. These applications represent loan requests of approximately $16,750,000. The initial estimates presented in these applications indicate plans for extending service to approximately 49,554 new subscribers and improving service for an additional 24,358. Of the 120 applicants, 43 are commercial corporations, 43 are individual ownerships, and 34 are mutual telephone associations. to Program inquiries.—In the 11 weeks since the telephone bill was signed by the President on October 28, 1949, REA has received more than 1,600 letters of inquiry from individuals and organizations expressing interest in the new program. Numerous telephone-company representatives also have come Washington in person. In all, approximately 950 existing or proposed new telephone organizations have already communicated with REA with regard to the possibility of obtaining loans. Of these, about 800 are individuals or companies at present operating telephone systems serving rural areas. In addition to the inquiries received directly by REA, numerous farm and trade organizations have obtained information in behalf of their members. Agricultural extension services have sought information in behalf of rural people in their areas. The Arkansas Extension Service, for example, has requested program information for 2,000 groups and individuals in that State, Information has been requested for 400 mutual telephone companies in Wisconsin. Development of program framework.—One of REA's first jobs was to develop the broad framework of the new program. This has been done, and a bulletin setting forth the general loan standards and requirements that should be considered by prospective borrowers has been published (copy attached). The development of those standards has emphasized several definite indications of severe administrative problems. A major concern will be to assure that loans contribute to the goal of area coverage established by Congress. It is apparent that this will be considerably more difficult to achieve than in the rural electrification program. Studies to date indicate that loan needs of telephone applicans will be much smaller per system than has been the case in rural electrification. At the same time it is evident that the loan work involved in handling each application will be more extensive and complex. It is also clear that difficult problems will arise in connection with the appraisal of existing facilities-a problem that scarcely exists in the rural electrification program but will be involved in nearly every rural-telephone loan. This arises from the fact that telephone-loan applicants will be required to provide equities as a margin of loan security. Another basic requirement, which will require a substantial amount of assistance to the small telephone companies, is that of planning and designing systems that will adequately serve the pattern of community interests that may be involved. Many of the present systems will require extensive rehabilitation and conversion. These and numerous other problems that must be solved, if the program is to achieve its objective, will necessitate a larger amount of pre-loan analysis and appraisal than has been experienced in the rural electrification program. Personnel situation.-The rural telephone program is being administered within the same administrative framework established for rural electrification. To date, approximately 40 new employees have been added to the rolls in accordance with the recruitment schedule established on the basis of the present administrative appropriation. This includes both technical and clerical personnel. One of the most urgent problems is to recruit a qualified field staff to work with loan applicants. Present indications are that evaluation of loan applications and telephone-system planning will involve a higher proportion of field work in connection with each loan than in rural electrification. Since personnel trained in telephone work are not readily available, it is apparent that REA will have to undertake a substantial program of training in this field for its old and new employees. In addition to the 40 people already employed, recruitment is half completed of a group of 20 young (GS-5) electrical engineers, who will be trained as telephone engineers--a specialization not offered by any engineering school. PROJECT STATEMENTS The estimates presented in the following tabulations reflect the forecasts of the Bureau of the Budget. As the program develops, experience in the development of the program may indicate that supplementary loan and administrative funds will be needed to keep the program moving forward in an efficient and orderly manner. |