A Synopsis of the History of the Rural Rehabilitation Fund

The Emergency Relief Appropriation Act of 1935 (49 Stat. 115) authorized the use of certain of the funds appropriated thereunder for “rural rehabilitation and relief in stricken agricultural areas.” The State Rural Rehabilitation Corporations were organized in 1934 and 1935 to assist the Federal Government in administering Federal Emergency Relief Administration (FERA) funds. The reconstruction Finance Corporation was authorized to make available $500,000,000. An amount not in excess of $250,000,000 of this sum could be made available to the States. In order for the states to receive the grants, it was necessary for the Governor of the State of make application to the Federal Farmers Home Administration (FFHA). The FFHA administered both rural and urban funds. Therefore, under the direction of the Federal Government, the Rural Rehabilitation Division was set up as a division of federal government and funds for rural rehabilitation were administered by State Rural Rehabilitation Corporations set up within the individual states. The funds were granted for special purposes such as loans and grants to people within the state for goods, livestock, equipment, additional lands, training in farm and home management and relocating displaced farmers.

The State of Maine established The Farm Rehabilitation Corporation of Maine on April 23, 1935.

After passage of the Emergency Relief Appropriation Act of 1935, the President, by Executive Order 7027 dated April 30, 1935, established the Resettlement Administration as an independent agency of the Government, and placed the rehabilitation program in that agency. At that time it was anticipated that the rehabilitation program although under the direction of the Resettlement Administration, would continue to be financed by grants to the states and administered by the state rural rehabilitation corporations in substantially the same manner as was done under previous Emergency Relief Acts. On June 22, 1935, an informal ruling of the Comptroller General advised the Resettlement Administration that it is was not permissible to carry out the programs authorized under the 1935 Act through grants to the states or agencies thereof, including the rural rehabilitation corporations, and it became necessary to administer the programs as a direct Federal activity. Therefore, it was necessary to make arrangements with the various state Corporations to transfer all of their assets to the Administrator of the Resettlement Administration.

In the fall of 1936, the Maine Rural Rehabilitation Corporation transferred approximately $260,000 in assets (including notes, mortgages, personal property and cash) to the Resettlement Administration under a Transfer Agreement and the State of Maine’s Attorney General, on November 17, 1936, certified that the Farm Rehabilitation Corporation of Maine had ceased to transact business. The transferred assets were to be used in trust capacity within the State of Maine.

The Resettlement Administration changed to the Farm Security Administration in 1937 and continued to be the agency designated to administer the rural rehabilitation funds for the states. In 1946, the Farmers Home Administration abolished the Farm Security Administration and transferred all its functions back to the Secretary of Agriculture. Therefore, as of 1946, the designated agency was once again the Federal Department of Agriculture. The Secretary of Agriculture, in turn, designated the responsibility to the Farmers Home Administration (FHA).

Section 2(f) of the Farmers Home Administration Act of 1946 (62 Stat. 1964: 7 U.S.C. 1001 note), required the Secretary of Agriculture to “liquidate as expeditiously as possible trusts under the transfer agreement with the various State Rural Rehabilitation Corporations.” The Secretary of Agriculture, in 1947, suggested to the Congress that this section be clarified to the extent that the Secretary would be given further directions with respect to the method of liquidation and final disposition of the corporate assets. As a result, the Congress enacted the “Rural Rehabilitation Corporation Trust Liquidation Act” (Public Law 499, 81st Congress, approved May 3, 1950.)

Briefly, this Act authorizes, upon appropriate application: (1) the return of the assets to each state rural rehabilitation corporation, or if a rural rehabilitation corporation of any state has been dissolved and is not revived or reincorporated, to such agency or state official as may be designated by the state legislature, subject to the authority of the Secretary to determine the legality of proposed use of the funds and to approve or disapprove any annual administrative expenses above three percent of the value of the assets, or (2) return of title to the assets to the corporation or state agency or official, with authority for the Secretary of Agriculture and the corporation or state agency or official to make a new agreement for the administration of the assets by the Secretary.

In each state where the Rural Rehabilitation Corporation was dissolved, appropriate legislation by the state legislature was enacted which enabled a state agency or state official to make application for return of the trust assets, or to enter into an agreement with the Secretary of Agriculture for administration of the assets pursuant to section 2(f) of Public Law 499, as outlined in (2) above. In Maine, the legislature enacted 1951 Private and Special Law Chapter 142, empowering the State Department of Agriculture to apply for and accept the trust assets and to continue to administer the program through a trust agreement. This agreement has been referred to as Liquidation Agreement, as Agreement for Administration of Assets of the Farm Rehabilitation Corporation of Maine and as Use Agreement.

This arrangement has continued through several extensions and two amendments and is still enforce today.

The FHA continues to carry out the Government’s responsibility of seeing that the assets continue to be used for purposes authorized by Public Law 499 and that administrative expenses do not exceed three percent of the value of the total assets annually without proper justification and approval.

Current Use Agreement

Rural Rehab Scholarship Application [PDF or Word]

Commissioner's Office

A Synopsis of the History of the Rural Rehabilitation Fund