Loan Aid for Disadvantaged Farmers

A Small Piece of Aid Package Causes Controversy Over Fairness

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Fiscal year 2019 FSA loans and loan guarantees by state for socially disadvantaged farmers. With a large Native American farmer population, Oklahoma was the largest state for FSA loans to minority farmers. The aid package in Congress would eliminate FSA farm debt for those farmers, addressing long-standing financial challenges for Black farmers going back to the Pigford settlements. (Correction: An earlier version of the chart incorrectly omitted the state of South Dakota.) (DTN chart from USDA data)

OMAHA (DTN) -- An agricultural debt-relief provision that amounts to two-tenths of 1% in spending out of the $1.9 trillion aid package in Congress is becoming one of the most controversial parts of the bill because it sets aside specific aid exclusively for minority farmers.

Among the pieces for agricultural aid, the bill would provide payments of up to 120% of farm-loan indebtedness for USDA direct or guaranteed loans for farmers considered socially disadvantaged -- defined as Black or African American, American Indians or Native Alaskans, Hispanics, Asians and Native Hawaiians or Pacific Islanders. The bill would allow USDA "such sums as may be necessary" to pay off the loans. The extra 20% is built in to pay off expected tax debt from the loan.

The Congressional Budget Office projects the loan forgiveness for socially disadvantaged farmers to cost about $4 billion.

The Senate passed the $1.9 trillion aid package on Saturday on a party line vote. The Senate made changes to the bill that force the House to again vote on it.

WRITTEN TO ADDRESS FAILURES

The aid for socially disadvantaged farmers was written to address failures of the Black farmers' case known as Pigford v. Glickman. While the second Pigford case was settled a decade ago, Black farm organizations cite there are still more than 17,000 legacy Black farmers being hit with garnished Social Security and tax refunds from delinquent USDA farm loans, some going back 30 years. Little of the Pigford settlement went to paying off those old loans.

Tracy Lloyd McCurty, executive director of the Black Belt Justice Center, was serving on a council for the second Pigford settlement when she learned from some Black farmers that they were facing foreclosure proceedings because of delinquent USDA loan debt. McCurty said legal moves were made in the Pigford settlement by plaintiff attorneys that didn't protect the clients.

"I was astounded because I didn't understand how you have this historic class-action racial discrimination lawsuit that resulted in serious debt with USDA and threat of foreclosure, with no legal recourse for the farmers to save their land," McCurty said.

Many of these farmers have been unable to effectively recover from the ruined credit, McCurty said. Now that this bill is close to being passed by Congress, she said, "The farmers are so excited about the possibility of this debt being canceled."

The aid provisions for minority farmers were led by freshman Sen. Raphael Warnock, D-Ga. The bill also includes another $1 billion to address "heirs property" challenges for Black farmers.

CRITICISM OF PROVISION

Sen. Patrick Toomey, R-Pa., criticized the provision on the Senate floor and tried to have it removed. His amendment lost on a 50-49 vote before the Senate passed the full bill.

Sen. Lindsey Graham, R-S.C., in an interview Sunday on Fox News, said the farm-loan relief was one provision that bothered him about legislation. "In this bill, if you're a farmer, your loan will be forgiven -- up to 120%, not 100%, but 120% of your loan -- if you're socially disadvantaged. If you're African American, some other minority," Graham said.

"But if you're a white person, if you're a white woman, no forgiveness," Graham said. "That's reparations. What has that got to do with COVID? So, if you're in the farming business right now, this bill forgives 120% of your loan based on your race."

Sen. Chuck Grassley, R-Iowa, said he had helped work on the Pigford aid settlements and added he doesn't find fault with people who want to help Black farmers. But when it comes to congressional aid, "It ought to be based on what their own individual needs are, and not the color of their skin," Grassley said.

Grassley added there may be a constitutional question of equal protection of the law under the 14th amendment, though the provision is tied to language coming directly from the definition of socially disadvantaged in the 1990 farm bill.

USDA AID TO WHITE FARMERS IN PAST

McCurty pointed to the multiple rounds of aid USDA provided by Congress and the Trump administration over the past year going almost exclusively to white farmers. Environmental Working Group reported last month that white farmers received nearly 97% of the first round of Coronavirus Food Assistance Program funds (CFAP), amounting to about $9.2 billion in fiscal year 2020.

"So, with the pandemic, it's been 12 months of economic suffering, and President (Donald) Trump responded right away," McCurty said. "We're finally getting relief that other American farmers are receiving -- after 20 years."

AID FOR OUTSTANDING DEBT

The language in the bill provides aid for outstanding debt for socially disadvantaged farmers as of Jan. 1, 2021, and covers both direct loan and loan guarantees. The language indicates all loans to those minority farmers would be eligible for forgiveness.

In fiscal year 2019, the last year of data published, FSA had 6,556 outstanding loans totaling $789.36 million in direct loans and guarantees for farmers classified as socially disadvantaged. Loans to farmers classified as socially disadvantaged make up just under 14% of FSA's $5.74 billion in outstanding loans overall.

Oklahoma is the largest state for FSA lending for socially disadvantaged farmers, with 1,080 loans totaling just under $134 million. California has more loan volume, but Texas (423 loans for $64.9 million) and Arkansas (314 loans for $58.3 million) come in higher than California's 509 loans worth $41.5 million. Louisiana rounds out the top five states with 210 loans to socially disadvantaged farmers totaling $38.9 million. Those five states make up nearly 43% of all FSA loans and loan guarantees to socially disadvantaged farmers and ranchers.

Oklahoma also was the top state for FSA loans in 2018, topping $150 million -- $100 million more than any other state.

Jerry McPeak, a former Oklahoma state representative, served on a USDA council for Native Americans formed after the Keepseagle settlement for Native American farmers. McPeak said a high percentage of farmers in the state are Native American (about 14,000, according to the USDA Ag Census). McPeak also credited the former FSA state administrator, Scott Biggs, under the Trump administration for aggressively working with the Native American farmers in Oklahoma.

BOON FOR OKLAHOMA

Asked what it would mean if USDA were to forgive loans for Native American farmers in Oklahoma, McPeak said, "It would be an economic bonanza, not necessarily for the individual farmer, but it would be a significant boon for Oklahoma," McPeak said.

Coronavirus Aid packages passed by Congress during the past year have provided the potential for loan forgiveness. The SBA Paycheck Protection Program, which has provided 7.5 million loans for $687 billion, offers loan forgiveness if the aid is for payroll or certain other expenses.

USDA did not respond to questions Monday from DTN about the most current farm loan data for socially disadvantaged farmers or exactly how much delinquent debt USDA holds from socially disadvantaged farmers.

Chris Clayton can be reached at Chris.Clayton@dtn.com

Follow him on Twitter @ChrisClaytonDTN

Chris Clayton