By Stan Keasling, RCAC chief executive officer
As we have reported, Rural Development (RD) has announced a pilot to use the “banded” method to determine low- and very low income status in 23 states and territories across the country. Arizona, California, New Mexico, Oregon, Utah and Washington are the six western states where this pilot will be tested for the next two years. There is no question that this new method of determining income eligibility will make it much easier to identify and qualify smaller very low-income households. In banding, families of one to four persons are all measured on the income of four person households, and families of five to eight persons are measured on the income of eight person households.
On its face, this sounds like a great way to make sure that all 502 very low-income funds are used. But, I have one major concern with Rural Development’s implementation of banding, and that relates to banding for low-income households. My concern is the fact that one and two person low-income households can qualify with incomes that are greater than the area median income, and five and six person households can qualify with incomes greater than 90 percent of the area median, if the median was adjusted normally. As a result, 502 direct funds will go to families who do not really need assistance. In fact, funds will go to households that, absent banding, would not even be eligible borrowers.
I have been supportive of efforts to broaden the income eligibility of very low-income households, and I don’t really have a problem saying that a family at 60 or 65 percent of median is very low-income—it helps to ensure that all of the section 502 direct funds are spent. But it seems to me that the change in the low-income definition could begin to erode the income targeting of the direct program and make it look more like the guarantee program. I know that grantees cannot arbitrarily decide not to serve income eligible families, but this new rule makes it even more important, for both the 502 and self-help programs, for grantees to meet and exceed the 40 percent very low-income target.