USDA Rural Development and COVID-19: Supplemental Funding and Agency Actions (IN11391, Version 2)

Summary

A Congressional Research Service Insight, IN11391, dated May 15, 2020 and written by Alyssa R. Casey, on USDA Rural Development's COVID-19 supplemental funding and actions. The CARES Act gave $25 million to the Distance Learning and Telemedicine Program, $100 million for ReConnect broadband grants and a $20.5 million loan subsidy for the Business and Industry Loan Guarantee Program, supporting approximately $1 billion in guarantees. The Act's foreclosure moratorium, forbearance and eviction protections apply to Rural Development housing loans, and lenders may offer 180-day payment deferrals without prior approval. The Insight notes the CARES Act funded Department of Housing and Urban Development rental assistance but not Rural Development rural rental assistance (Section 521).

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INSIGHTi

USDA Rural Development and COVID-19:
Supplemental Funding and Agency Actions

Alyssa R. Casey
Analyst in Agricultural Policy

May 15, 2020
The U.S. Department of Agriculture (USDA) Rural Development agency (RD) administers loan, grant,
and technical assistance programs that support infrastructure, housing, and business development in rural
areas. In response to the COVID-19 pandemic, Congress provided supplemental funding to certain RD
programs. In addition, RD has taken a number of actions to provide relief for current program participants
and assist potential applicants in applying for program funding.

CARES Act Provisions Related to USDA RD Programs
Congress included supplemental funding for, and provisions related to, RD programs in the Coronavirus
Aid, Relief, and Economic Security Act (CARES Act, P.L. 116-136). Division B of this act includes $25
million for the Distance Learning and Telemedicine (DLT) Program and $100 million for grants under the
ReConnect broadband pilot program. It also provides a $20.5 million loan subsidy for the Business and
Industry Loan Guarantee Program, which will support approximately $1 billion in loan guarantees to
businesses in eligible rural areas. The loan subsidy is the estimated cost of providing a certain level of
loans, including administrative costs and the potential costs of borrower defaults.
In January 2020, prior to enactment of the CARES Act, RD began accepting applications for the second
round of ReConnect funding. In March 2020, after President Trump signed the CARES Act into law, RD
announced that it would use the supplemental CARES Act funding to award additional grants under the
second round of ReConnect. The application window for the second round of ReConnect was open from
January 31 to April 15, 2020. In April 2020, RD announced a second application window for FY2020
DLT funding and stated that it will use the supplemental CARES Act funding in addition to unused funds
from the first FY2020 DLT application window. The application window for DLT is open April 14-July
13, 2020. RD accepts applications for the Business and Industry Loan Guarantee Program year-round.

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IN11391

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The CARES Act’s foreclosure moratorium, single-family and multifamily mortgage forbearance
provisions, and eviction moratorium apply to RD rural housing programs, including single-family and
multifamily direct and guaranteed loans and rural rental assistance. Prior to enactment of the CARES Act,
RD had implemented its own foreclosure moratorium and forbearance options as well as more limited
eviction protections for its multifamily and single-family programs.

USDA RD Actions
In addition to the supplemental funding and mortgage and eviction provisions in the CARES Act, RD has
taken a number of actions to respond to COVID-19. RD announced that lenders administering certain
guaranteed loan programs may offer 180-day loan payment deferrals without prior agency approval.
Borrowers of certain RD direct loans may request payment deferrals or other payment assistance. RD also
extended application deadlines for certain loan and grant programs to allow applicants additional time to
prepare and submit applications during the pandemic. On April 13, 2020, USDA published the COVID-19
Federal Rural Resource Guide, a compilation of federal funding and resources potentially available to
rural entities for COVID-19 response. For the most up-to-date information on RD actions to respond to
COVID-19, see their COVID-19 response webpage.

Policy Considerations
As Congress continues to respond to the impacts of COVID-19 in rural areas, it may consider a number of
policy options related to RD programs. The CARES Act provided supplemental funding to Department of
Housing and Urban Development rental assistance programs but not to RD rural rental assistance (Section
521). Some Members of Congress have called for additional funding for rural rental assistance in
anticipation of increased funding needs as tenant incomes decline during the current economic downturn.
In response to economic hardship due to COVID-19 that some RD loan borrowers may be experiencing,
RD has offered some payment flexibilities for current borrowers, as described above. Some stakeholders
have proposed that RD also temporarily defer principal and interest payments on all RD direct loans.
Some RD borrowers provide utilities—such as electricity, water, or broadband—to rural customers. Many
utility providers in rural areas were already facing low profit margins prior to COVID-19 due to few
paying customers in some sparsely populated areas. Deferrals on RD loans could help utility providers
that lack extensive financial reserves provide payment flexibility to customers and potentially avoid
disconnecting utilities for customers struggling to pay their bills due to job losses or reduced incomes
related to COVID-19.
School and workplace closures during COVID-19 have highlighted the so-called digital divide, or the gap
between those with internet access and those without, and its implication for activities such as
teleworking, distance learning, and buying groceries online. Congress may consider additional funding
for RD programs that finance telemedicine facilities and broadband deployment. However, broadband
deployment projects often take years to complete and would not bring immediate relief to rural residents
lacking broadband during COVID-19. (The Federal Communications Commission, which also
administers broadband deployment and adoption programs, has expanded certain broadband and
telemedicine programs to respond to COVID-19.) The current economic downturn is also negatively
impacting state and local fiscal conditions, causing a decline in state and local revenues and a
simultaneous increase in demand for public services, including unemployment insurance and medical
care. Congress could consider providing supplemental appropriations to RD programs that finance local
public infrastructure, such as public utilities or health and safety facilities, to reduce the financial burden
on state and local governments.
Entities eligible for RD programs—such as local governments, nonprofit organizations, and
small businesses in rural areas—often lack the personnel or resources to prepare applications for
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federal funding. Congress may consider providing supplemental funding for RD programs that
provide technical assistance or training to help applicants assess needs and apply for RD funding.
If Congress provides supplemental funding for RD programs, it may also consider providing
additional funding for program monitoring and evaluation to track the distribution of funds and
assess the efficacy of projects in helping rural areas respond to and recover from the impacts of
COVID-19.

IN11391 · VERSION 2 · NEW
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