Rising to meet the economic challenges of the rural Midwest

Stateline Midwest Vol. 20, No. 9: September 2011

The Midwestern Legislative Conference and The Council of State Governments were represented at a recent meeting of the White House Rural Council in Washington, D.C.

Formed in June by presidential executive order, the council is being led by U.S. Secretary of Agriculture Tom Vilsack and is focusing on how the federal government can help foster economic growth in rural areas. 

The challenges of our rural communities have been overshadowed of late by deep troubles in the overall economy.

In fact, much of the rural Midwest has fared relatively well in recent years: land values have been skyrocketing, and key industries such as agriculture and oil and natural gas helped many communities weather the national recession.

Yet the economic forecast for many rural towns and regions remains uncertain.

Many are already older and poorer. Seniors represent 15 percent of the population in nonmetropolitan areas, compared to 12 percent in metro areas, while the poverty rate is 16.6 percent compared to 13.9 percent.

And income levels in the Midwest’s nonmetropolitan areas lag those in metro areas by some 23 percent.

Budget cuts at all levels of government could lead to a further widening of these income disparities.

According to Jason Henderson, vice president of the Federal Reserve Bank of Kansas City, rural communities rely more on the influx of revenue and jobs from the public sector. In some Midwestern rural counties, earnings from state and local government jobs exceed 30 percent of total earnings, compared to 10 percent in metro areas.

Rural communities, too, often rely more heavily on intergovernmental transfers from state government (see table) and, as a result, are particularly sensitive to state budget cuts.

At the recent listening session, Vilsack told participants that the new White House council is serving as a coordinating body for existing cabinet agencies to better deliver services and to work toward a common goal — accelerating economic activity in rural communities.

The council, for example, has been charged with developing new strategies to increase the flow of capital to rural areas, expand biofuels production capacity and renewable energy projects, and build up the broadband infrastructure.

The idea of a rural council is not new.

The Rural Development Act of 1972 led to the creation of state rural development councils across the country. (Every state in the Midwest except South Dakota has one.) Federal, regional, tribal, state and local governments, along with the nonprofit and for-profit sectors, all play an important role in the work of each state council.

The priorities and work of each council varies from state to state. For example, the North Dakota Rural Development Council has helped address housing shortages in areas experiencing a spike in economic activity due to the booming oil and gas industry. In Nebraska, the council is part of the state Department of Economic Development and oversees agriculture innovation grants, while Minnesota Rural Partners just completed a study on the interconnectedness of the state’s rural and urban economies.

As the White House Rural Council begins its work, some of these state councils can provide a model for how to better coordinate the work of various rural interest groups.