The Hagstrom Report

Agriculture News As It Happens

SPECIAL REPORT | South Dakota team leads key rural development initiatives


Two South Dakotans: Jonathan Adelstein, Rural Utilities Service administrator, left
and Dallas Tonsager, undersecretary for Rural Development. (USDA photo / Lance Cheung)



When Dallas Tonsager is asked how he met Jonathan Adelstein, a fellow South Dakotan and Obama administration appointee, he smiles and says, “I knew his father first.”

And therein lies a tale of how an improbable duo of South Dakotans rose to head two of Obama’s most important initiatives in rural America: encouraging renewable fuels and bringing high-speed Internet service to the most remote areas of the country. Tonsager is Agriculture undersecretary for Rural Development; Adelstein is Rural Utilities Service administrator.

Tonsager did indeed meet Adelstein’s father, Stan, in 2003, when both served on the board of South Dakota Lutheran Social Services. They came from very different backgrounds — at least on paper.

Tonsager was born in Lake Preston, S.D., and grew up on a dairy farm near Oldham. After graduating from South Dakota State University, he farmed and became president of the South Dakota Farmers Union. Tonsager is a Democrat and a Lutheran.

Stan Adelstein is also a South Dakota native, but graduated as an engineer from the University of Colorado and was running his family business, Northwestern Engineering Company in Rapid City. He is a Republican who now serves as a member of that party in the state Senate, and was the first Jew to serve on the Lutheran Social Services board.

Tonsager’s connections to USDA’s rural development division go back to 1993 when President Clinton appointed him the state director of the old Farmers Home Administration. As part of a reorganization of USDA, the Clinton administration took Farmers Home, the old Rural Electrification Administration, which it renamed the Rural Utilities Service, and several business grant and loan programs, and created the rural development mission area. Its goal: to improve the quality-of-living standards and business life in rural America.

Rural development is not as well known as the divisions of USDA that distribute farm subsidies and food stamps, but it is becoming more prominent as the number of farmers declines and nonfarm business becomes more important in rural areas. Former President Clinton recently called rural development “an underappreciated division of USDA that will become more important in the years ahead.”

After Clinton left office, Tonsager headed the South Dakota Value Added Agriculture Development Center before moving to Washington in 2004 to take an appointment on the board of the Farm Credit Administration, which oversees the farm credit system. Tonsager co-chaired the private sector rural advisory group for then-Sen. Barack Obama’s presidential campaign in 2008.

Meanwhile, Jonathan Adelstein, almost decade younger than Tonsager, had left South Dakota to go school. He became a Democrat and forged a career in Washington as a congressional aide, including seven years in the office of then-Senate Majority Leader Tom Daschle, D-S.D. In 2002 he was appointed to the Federal Communications Commission, the U.S. government agency that regulates interstate and international communications by radio, television, wire, satellite and cable.

Their performances in those jobs convinced President Obama to appoint them to their current positions.

Dallas TonsagerThe job at Rural Development
Tonsager’s job is to figure out how to use a variety of grants, loans and loan guarantees to help start and expand businesses and improve housing, health facilities and living standards in rural America. He says he enjoys “the hunt of putting together a package deal for a value-added processing plant, a rural medical center, or a tribal community center.”

The American Recovery and Investment Act that Congress passed in 2009 to try to revive the economy doubled the rural development budget, giving the agency a program that Tonsager said affected 9 million people and saved or created 200,000 jobs. In the last two years, he said, rural development has built or improved 81,000 homes, funded 3,800 water and sewer projects and financed 1,400 community facilities — hospitals, clinics, schools, fire stations and libraries. It also paid for first-responder vehicles and equipment, police cars and fire trucks.

But Tonsager’s most prominent role in the Obama administration has been in renewable fuels. The 2008 farm bill gave his division of USDA the authority to guarantee hundreds of millions of dollars in loans to build commercial-scale facilities to develop emerging technologies for advanced biofuels.

Tonsager has had trouble finding lenders willing to make loans, even with a government guarantee, on these technologies, but he remains hopeful that the prospects are improving.

“Anecdotally I hear a lot of things are developing. I think there is a burgeoning number that are coming along,” he said. “[The questions are] How will the marketplace respond? Will investors invest? Of course, they’ve got to be economically viable.”

On April 8, Tonsager and Agriculture Secretary Tom Vilsack announced a program to provide grants and loans to help install 10,000 flexible fuel pumps around the country so more Americans can have access to ethanol and other renewable fuels. That program starts to fulfill a goal that Jeff Broin, the South Dakota ethanol plant builder and founder of Growth Energy, an ethanol lobbying group, says is vital for the industry’s future.

Rural development did not have a program to finance blender pumps, but Tonsager is adapting the Rural Energy for America program (REAP) to provide the aid. USDA has not released details of the program, but said that the 2008 farm bill provided $70 million for fiscal years 2011 and 2012 and $25 million per year, from fiscal year 2009 through 2012. The program will cover 25 percent of eligible project costs for grants, a USDA source said, with 75 percent of eligible project costs for guarantees. USDA participation is limited to a maximum of 75 percent of the construction cost.

As Tonsager recently told the National Farmers Union, he sees biofuels development as the “intersecting point” between agriculture and other rural development programs.

“It helps producers with markets and rural development with jobs,” he said, adding, “I will continue to be a significant advocate for biofuels.”

Jonathan AdelsteinThe job at Rural Utilities Service

Meanwhile, Jonathan Adelstein has been focusing on using the powers of the Rural Utilities Service to bring water and sewer service to some of the poorest places in rural America, to continue financing electric and telephone co-ops and, most boldly, to try to finish the job of bringing the Internet to all parts of the country.

RUS is a division of rural development, and although Tonsager technically is his boss, Adelstein has a lot of authority to operate on his own. Like Tonsager, he was confirmed by the Senate, and if RUS were included in rankings of banks and other financial institutions, it would rank 30th, with $60 billion in loans.

Adelstein’s resume at first appears urban. He grew up in Rapid City, but says he was “shipped off” to Phillips Academy, in Andover, Mass., the same prep school President George W. Bush attended. He went to Lewis & Clark College in Portland, Ore., before finishing at Stanford University in California, where he also earned his master’s degree.

He was headed for law school at Harvard when he decided to take a year off and work on Capitol Hill. He never made it to law school, and joked that he has been working in the legal field ever since, “first helping to write laws and then helping to interpret them as a member of the commission and now executing them as a member of the executive branch. I've had a 23-year legal career, all without a license or degree.”

Despite Adelstein’s out-of-state education, his family has rural South Dakota roots as deep as the Tonsagers. His great-grandmother homesteaded near Interior, S.D., on land that is now part of the Grasslands National Monument. She was an Orthodox Jew and managed to keep kosher by getting meat by rail from Omaha.

“It was quite a challenging life for a pioneer woman like her,” Adelstein said, noting that she proved up the homestead on her own after splitting up with her husband in Iowa and coming to South Dakota with her children. Later she moved to Kadoka, S.D., and started a general store.

“She was a true pioneer on the Plains," he said. "This was a tough lady. I'm lucky to be here, because there was one night when there was a big winter storm, and she went out to make sure that the cattle were taken care of, and she might have never gotten back. There was a white-out. She managed miraculously to find her way back to the little cottage she had there.”

She also made a name for herself by treating the Indians fairly in business, Adelstein said.

“As a Jew, somebody who is familiar with discrimination and bigotry, she saw the way the Indians were treated, felt that she had no prejudice at all and became one of their great trading partners. The Indians would come to her, and she would provide them credit. She cashed their [Bureau of Indian Affairs] checks and gave them actually what they wanted [while] other merchants in the area might take a cut or not treat them fairly. Actually it turned out good for business because the Indians would all come to her store where they knew that they could get a fair shake.”

Her son, Adelstein’s grandfather, studied engineering, won a battlefield commission in World War I, and came back to South Dakota and started a construction company in 1925. Adelstein’s father and brother still run the company, although his father spends a lot of time on his Republican legislative duties at the state capitol.

“His idea of retirement is spending the winter in Pierre,” Adelstein quips about his father.

Although raised in a Republican family, Adelstein joined the Democrats, feeling that they “were always fighting for the underdog out here [in South Dakota], for people that need assistance in rural areas, low income people, working families.

“I got the sense that we were on the side of working families, people that were struggling to make it, when the market didn’t work,” he said. “The market is a remarkable thing, and it works for people most of the time, but it doesn't always work. The Democrats were more likely to be able to solve great social problems that the market otherwise wouldn’t solve.”

Adelstein is tasked with tackling one of those problems: reaching rural areas with high-speed Internet service. He acknowledged that some areas are difficult to reach.

“The areas that have the lowest population density are the hardest to serve because you have to put the most miles in for less revenue," he said. "Mountainous or desert type terrain can be very, very difficult. It is hardest to deliver terrestrial broadband where geography is the most rugged. It presents the most obstacles that equipment can’t overcome, and that is both for wire line and wireless."

Adelstein said tribal areas are a particular problem. "Particularly remote tribal areas tend to have some of the lowest levels of service anywhere in the country," he said. "Low-income rural areas where, again, it is harder to make a business case for private companies [that] need assistance as well.”

Using Recovery Act money, Adelstein has approved more than $3.5 billion in 300 broadband projects that are expected to provide Internet access to 2.8 million households, 364,000 businesses, and 32,000 institutions across more than 300,000 square miles of rural America.

”You can’t have young people in rural areas not have access to broadband,” he said. “They won’t stay there, and if they do stay there, they won’t have the opportunity to grow and develop and make their contribution to society as much as they would if they are completely plugged into broadband networks.”

The nation, he said, cannot afford to waste young rural talent.

“The next Bill Gates or Steve Jobs — maybe they’ll be out in a rural area somewhere, and there will be broadband that will enable them to realize their dreams, to realize their talent, and to bring them to fruition for our whole national economy. We don’t have a person to waste in this country. We’re up against China with a billion people. They train their people in math and science, but we have always been a more innovative country.”

Being administrator of RUS, Adelstein said, is a great pleasure — “a great education — to know how this place works, and to be able to make a difference in the lives of people from the place I came from, going back to my roots in South Dakota.”

Focusing on the farm bill

Tonsager and Adelstein are beginning to focus on the 2012 farm bill, in which the battle over the budget is likely to make it difficult for them to retain resources for their agencies, much less get money for more projects. They are also beginning to think about President Obama’s re-election campaign, although as appointed officials their role in the campaign will be limited.

A key question for the Obama team is whether rural America will reward them for their efforts. Obama did better in 2008 than any Democratic presidential candidate since Bill Clinton, although he did not win in South Dakota or elsewhere in the Plains.

In decades past, rural America did reward politicians for bringing them modern infrastructure. Robert Caro, the biographer of Lyndon Johnson, says that the one phrase that Texans said to him over and over again was, “He brought the lights. No matter what Lyndon was like, we loved him because he brought the lights.

The Texans were referring to the fact that when Johnson became the congressman from the Hill Country in 1937, there was no electricity there, but that by 1948, when he was elected to the Senate, most of the district had electricity.

Rural Americans’ gratitude to President Franklin Roosevelt for bringing electricity and to President Harry Truman for bringing the telephone, as well as to lawmakers like Johnson, were key factors in assembling Democratic coalitions for decades.

Whether such efforts can help Obama in rural America in 2012 is unclear. But it is equally clear that whatever happens to Obama, Tonsager and Adelstein will be proud of the efforts they have made to develop the rural America from which they came.