Cooperative Extension System: Trends and Economic Impacts on U.S

A publication of the Agricultural & Applied The magazine of food, farm, and resource issues Economics Association 1st Quarter 2014 • 29(1) Cooperative Extension System: Trends and Economic Impacts on U.S. Agriculture Sun Ling Wang JEL Classifications: H4, Q1, O3, O4 Keywords: Agricultural Productivity, Extension, U.S. Agriculture, Land Grant University, Smith-Lever Act

To vitalize rural America and improve rural life, the Mor- rural economy, training tomorrow’s leaders, disseminat- rill Act of 1862 and 1890 established land-grant universi- ing knowledge, and pursuing sustainable agriculture and ties and colleges (LGU) to educate citizens in agriculture, the environment since WWII. Although the contribution home economics, and other practical professions. In 1908, of extension to the farm economy seems to be straight- President Theodore Roosevelt appointed a Commission on forward, the economic benefit of extension is not easy to Country Life to “make rural civilization as effective and quantify. In addition, there has been an ongoing tension in satisfying as other civilization” (Bailey, 1920). Based on the extension regarding its focus on agriculture versus its role Commission’s recommendation of a nationalized extension for broader rural development (Bishop, 1969). service, and built upon the pre-established LGU system, According to USDA’s agricultural productivity es- in 1914, the Smith-Lever Act created a unique U.S. ag- timates in 2011, total U.S. agricultural production was ricultural Cooperative Extension System (extension). The more than 2.5 times its 1948 level with inputs growing extension system established a partnership among a federal by a mere 4% between 1948 and 2011 (USDA Economic partner (the U.S. Department of Agriculture (USDA)), Research Service (ERS), 2013). Therefore, productiv- state partners (LGU and state governments), and local ity growth accounted for nearly all of agricultural output partners (city or county governments). Today, the USDA’s growth in the period 1948 to 2011. While research and National Institute of Food and Agriculture (NIFA), which development (R & D) investment is the major driver of was created through the Food, Conservation, and Energy productivity growth (Alston et al., 2000; Evenson, 2001; Act of 2008 to replace its predecessor—Cooperative State Huffman and Evenson, 2006; Fuglie and Heisey, 2007; Research, Education, and Extension Service (CSREES), and Wang et al., 2013), the new technology or practice provides annual grants—including formula funds based cannot have its intended impact if farmers do not adopt on population-related formulas and funds for specific pro- those skills or techniques. It is widely agreed that exten- grams—to LGU. States are requested to match this for- sion has played an important role in disseminating new mula portion of federal funding. In addition to this major technology and bridging the gap between innovation in the grant, NIFA also provides competitive funding to award lab and practice on the farm (Huffman, 1976; Feller, 1987; projects that target USDA’s priority mission areas. Birkhaeuser, Evenson, and Feder, 1991; and Ahearn, Yee, Since it was first established 100 years ago, extension and Bottom, 2003). has played critical roles in various time periods, including World War I, the Great Depression, and World War II. The Changing Picture of U.S. Extension It helps to secure national food and fiber needs through The U.S. extension system has changed over time in terms education, marketing, and organization. It also has helped of its budget, funding composition, and extension staffs’ USDA implement its main objectives in developing the program focus.

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1 CHOICES 1st Quarter 2014 • 29(1) AAEA-0314-465 Shifting Roles of Federal and State 1964, the formula programs account- accounted for 66% of the total ex- Governments in Extension Funding ed for more than 80% of total Federal tension budget. By 1936, this share Over the years, nominal (in current Extension appropriation; this share declined to 41%. Since 1936, the dollars) federal extension appropria- shrunk to below 70% by 2010. share of total funding from the states tion has continued to grow, while Under the Cooperative Extension continued to grow except for declines real total federal extension funding System, in addition to federal fund- in a few short periods, including an (in inflation-adjusted dollars using ing, state and local governments also energy shock period of 1969-1973. ERS’s research price index as the de- provide funding to LGU to support In recent years, overall state funding flator (ERS, 2013)) as well as the real extension activities. The state’s role has grown to account for about 80% formula funding have declined since in funding extension has continued of the total extension budget. While 1980 (Figure 1). The share of formula to grow since 1936 after a decline the state’s role in funding extension programs as a proportion of federal between 1928 and 1935 (Figure 2). has become increasingly important, funding has also been reduced. In In 1928, total funding by the states the total extension spending as well as total number of extension full-time- equivalent (FTEs) staff people are quite diverse across regions. Figure 1: Historical Trend of NIFA Extension Activities Appropriation (in 2000 dollars) Regional Trends of Extension FTEs According to USDA’s “Salary Analysis of Cooperative Extension Service Po- sitions” report, the number of extension FTEs declined between 1980 and 2010 (Figure 3). However, the changes are unevenly distributed between specialists and county extension agents. They are also different among the 10 USDA production regions. Feller (1987) addressed concerns over the uneven decline in the numbers of specialist and county agents as the former shrank much faster than the latter between 1975 and 1984. He cited Con- gress’ Office of Technology Assessment (OTA) that the decline of specialists Figure 2: State Share in Total Extension Funding Continues to Grow was particularly alarming “since the specialist staff has the largest level of training and is the best equipped to educate both county agents and farmers on evolving agricultural technolo- gies,” and indicated that “Extension has opted to protect county agents rather than extension specialists.” Yet this trend seemed to be reversed between 1980 and 2010. In 1980, the number of FTEs for specialists and county agents were 3,714 and 11,441, respectively, accounting for 22% and 67% of total FTEs. In 2010, the number of specialist FTEs increased to 3,972 while that of the county agents declined to 7,974, accounting for 30% and 60% of total FTEs, respectively

2 CHOICES 1st Quarter 2014 • 29(1) (Table 1). Most of the increase in the the declining trend in specialists. therefore, dropped from fourth place number of specialist FTEs occurred While the Appalachian, Corn in 1980 to seventh place in 2010, sur- during the 1980-1990 period. This Belt, and Northeast regions have passed by the Southern Plains, Lake trend may have been a response to an more extension FTEs than all other States, and Delta regions. The Pacific adjustment made to address concerns regions and remained in the top region, including Oregon (OR), Cali- from Congress as well as the public. three in both 1980 and 2010 (Fig- fornia (CA), and Washington (WA), However, the total specialist FTEs still ure 3), their total FTEs still declined had the least FTEs among the 10 re- declined along with county agents in considerably along with that of all gions in both 1980 and 2010. the two decades thereafter, adjusting to other regions. The Southeast region, Extension program portfolio overall budgetary constraints. The split including South Carolina (SC), appointments among extension, re- Alabama (AL), Georgia (GA), and USDA-NIFA identifies national pri- search, and teaching, and nine-month Florida (FL), experienced a much orities for the extension programs, appointments made has also been con- more significant 45% decline in its while funding allocations are still up sidered as one of the factors causing total FTEs. Its FTEs’ ranking has, to each individual university. In addition to formula programs, NIFA also provides competitive grants to LGU Figure 3: Extension FTEs Declined Across Regions to attract proposals that best address NIFA’s priority topics. Formula funding, on the other hand, is more flex- ible and to be used in addressing regional or state’s priority subjects and emerging issues. With various budget conditions and priority preferences, extension program portfolios differ from one region to another. Since extension program areas have changed over time, there is no single classification method that can be used over long periods. For the period between 1977 and 1992, Ahearn, Yee, and Bottom (2003) showed that the program area “Agriculture and Natu- ral Resources” ranked first among four major program areas and accounted for about 45% of total FTEs. On the Table1: FTEs Composition Shifts between Specialist and County Extension other hand, many FTEs have shifted Agent from 4-H and youth, and community programs to home economics program over time. In 1992, 26% of total FTEs were dedicated to home economics programs, which had a 22% share in 1977. After the Agricultural Research, Extension, and Education Reform Act of 1998 (AREERA) required that states submit plans of work (POW) in order to receive federal funding, the program areas have shifted along with changes to NIFA’s reporting system. Therefore, data for the previously reported major program areas no longer exist. Nevertheless, NIFA’s POW reporting system could help to provide information on extension program

3 CHOICES 1st Quarter 2014 • 29(1) portfolios across regions in more re- under contract increased roughly 10 nutrition and health; strengthen chil- cent years. percentage points between 1991 and dren, youth, and families; revitalize According to reported POWs, in 2007 (O’Donoghue et al., 2011). rural American communities; and 2010, for the 48 contiguous states, There was also a shift of production much more. Yet, the economic per- most FTEs were dedicated to sus- to larger farm operations. The long- formance of extension is difficult to tainable agricultural systems and the term shifts in farm size have been evaluate given the unique nature of family and consumer sciences areas, accompanied by greater specializa- extension as a public good, an edu- which accounted for about a quarter tion—beginning with a separation cational system, and an information each of total FTEs. Youth develop- of livestock farming from crop farm- communicator. Its performance is ment was the third largest compo- ing (MacDonald, Korb, and Hoppe, also subject to extension density. For nent reported in POWs, accounting 2013). Along with these changes, pri- a certain amount of FTEs, extension for 17% of total extension activities vate firms have played an increasing with higher FTE density could be in 2010. Nonetheless, each state has role in providing production-related more productive in reaching out to its own goals and extension priori- information to farmers, such as pest people. FTE density could be mea- ties. Among the 10 regions, the Lake management and other chemical us- sured by FTEs per number of farms, States and Corn Belt dedicated about age (Padgitt et al., 2000). Still, the FTEs per thousand square land miles, one-third of their total FTEs to the public extension system is unique in or even FTEs per million dollar sales. family and consumer sciences area, providing a multi-functional portfo- It depends on the purpose of the with less than one-fifth of their total lio of programs as a public good. measurement. In 2010, based on the FTEs dedicated to the sustainable criteria of FTEs per thousand square agricultural systems. On the other Extension Capacity and Its land miles (Figure 4, Panel A), states hand, the Pacific region dedicated Economic Benefit in the Mountain and Pacific regions had much lower Extension density nearly 40% of its total FTEs to the Although it is widely agreed that ex- sustainable agricultural systems area than states in other regions given the tension has played an important role territory’s wide range. South Dakota and only 12% to the family and con- in disseminating new technology, giv- sumer sciences area (Table 2). For (SD), Virginia (VA), and North Car- en a smaller budget relative to R&D it olina (NC) are the only three states the Corn Belt, Delta, and Southern is difficult to quantify extension’s eco- Plains regions, more than a quarter of with the lowest extension density nomic benefit or separate it from that outside of most states in the Moun- their extension FTEs were dedicated of R&D and other local resources. Its to the youth development program tain and Pacific regions. Yet, based economic impact is also restricted by on the criteria of FTEs per thousand while that share in other regions only its local extension capacity. ranged from 10% to 18%. farms (Figure 4, Panel B), Nevada Extension Capacity (NV), Arizonia (AZ), and Idaho (ID) U.S. agriculture has experienced from the Mountain region are among structural changes in the past few de- Historically, extension has been au- the highest extension density states. cades. Studies show that U.S. farm- thorized and expected to play a lead- Other high extension density states ers have relied more heavily on con- ing role in assisting the diffusion of in- include North Dakota (ND) and tracting with food processors to allow formation in farm practice and home Nebraska (NE) from the Northern risks to be spread over a wider set of economics to improve agricultural Plains; Louisiana (LA) from the Delta stakeholders (the value of production productivity; promote better human region; West Virgina (WV) from the Appalachian region; and Vermont Table 2: Regional Extension FTE Portfolio in 2010 (VT), New Hampshire (NH), Con- necticut (CT), and Rhode Island (RI) from the Northeast region. Besides extension density, there are other local resources, such as R&D or infrastructure, which could influ- ence extension capacity and hence its economic performance. With a combined effect from extension and those local resources, each state and region could perform differently in their agricultural productivity growth, and rural community development.

4 CHOICES 1st Quarter 2014 • 29(1) can also be affected by infrastructure Figure 4: Extension Capacity Varies Across States and Regions and extension (Paul et al., 2007; and Wang et al., 2012). Therefore, when Panel A: Extension FTEs per Thousand Square Land Miles (2010) measuring the economic performance of extension we need to be cautious about distinguishing its contribution from other factors.

The Economic Benefit of U.S. Agricultural Extension While the contribution of extension to disseminating technology, shortening the period of technology adoption, bridging the gap between findings in the lab and practices on the farm, and enhancing the return of research funding are widely agreed upon, only in recent decades have researchers tried to quantify the economic impact of U.S. agricultural extension by identifying its indepen- dent influences and untangling its Panel B: Extension FTEs per Thousand Farms (2010) combined impacts with other sources. NIFA has designed an extension performance evaluation system based on desired outcomes and program areas. The indicators include the number of people reached, number of preferred tasks implemented, number of policy changes, number of environmental changes, and so on (USDA-NIFA, various years). Those outcomes and evaluation results could help to direct LGU and other local partners in implementing USDA’s goals and performing extension activity more efficiently. From a different aspect, researchers have tried to measure the economic benefit for U.S. agricultural extension using either a combined research and extension capital stock (the accumulation of investment in Indeed, as shown in the Appendix during the 44-year period, Michigan R&D and extension based on dif- table for the 48 contiguous states for (MI), Oregon (OR), Rhode Island ferent assumptions on their lagged 1960 and 2004, there were only three (RI), Massachusetts (MA), and In- impacts in each time period) (Alston states—California (CA), Florida (FL), diana (IN) were among the top five et al., 2010 and 2011), or by creating and Iowa (IA)—that were ranked in states with the highest productivity separate variables for R&D stock and the top four by productivity level in growth rates. In 1960, each had a extension stock to analyze individual both 1960 and 2004. On the other ranking of 47, 46, 35, 28, and 27, economic impacts from each (Huff- hand, with extraordinary productiv- respectively, and performed at rank- man and Evenson, 1993; and Yee ity growth, some states have signifi- ings of 28, 15, 8, 10, and 7 by 2004. et al., 2002). There are also studies cantly improved in their ranking be- While productivity growth is mainly evaluating extension’s contributions tween 1960 and 2004. For example, driven by innovation from R&D, it

5 CHOICES 1st Quarter 2014 • 29(1) from the aspect of its interaction with tension density (extension FTEs Yet extension’s overall contribution local research capital stock (Wang et per farm) could help to amplify to agricultural productivity growth al., 2012) or its impacts on produc- the benefits of public research and has been well recognized. Neverthe- tion efficiency (Schimmelpfennig, enhance productivity by reducing less, there are challenges awaiting O’Donnell, and Norton, 2006). Ac- production costs. extension in its second century, in- cording to the literature, the econom- cluding the changing roles between ic impacts of extension can be sum- Extension’s Roles and Challenges state specialists and county agents, marized into two main points: Ahead budget constraints, and emerging is- 1. Extension investment has high re- sues—such as climate changes’ im- Under the Cooperative Extension pact on production, and greenhouse turns in terms of its internal rate System, extension has helped improve of return (IRR) or benefit-cost ra- gas emissions, as well as its focus on agricultural productivity growth, agriculture versus a broader role ad- tio (B-C ratio). Using alternative strengthen the rural economy, edu- measures of extension activities, dressing rural development, youth, cate youth, promote better human and human health and nutrition. reported IRR from literature rang- health, sustain the environment, and es from 16% to 110% for U.S. much more since 1914. Yet, the pri- For More Information agricultural extension, and ranges orities of extension’s mission have from 7% to 110% for a com- varied through time and among states Ahearn, M., Yee, J. and Bottom, J. bined extension-research knowl- and regions. While extension is built (2003). Regional trends in exten- edge capital stock (Birkhaeuser, on a unique partnership among fed- sion system resources. Washing- Evenson, and Feder, 1991; and eral, states and local governments, ton, D.C.: U.S. Department of Huffman and Evenson, 2006). and LGUs, over the past decades, Agriculture, Economic Research The estimated B-C ratios are also extension funding has relied more Service. Agricultural Information high and ranged between 13 and heavily on sources within the states. Bulletin No. 781. 69 to 1 for a combined own-state Extension funding in constant dollars Alston, J., Chan-Kang, C., Marra, research-extension (R&E) knowl- has declined and led to the number of M., Pardey, P. and Wyatt, T. edge capital stock (Alston et al., extension FTEs declining significant- (2000). A meta-analysis of rates of 2010 and 2011). ly over time and across regions. Given return to agricultural r&d: ex pede 2. Extension has contributed to pro- the downsized extension, its program herculem? Research Report No. ductivity growth. Extension has portfolio has changed to address the 113, International Food Policy been evaluated as a direct contrib- evolving priorities of extension mis- Research Institute, Washington, utor to agricultural productivity sions and in adjusting to tightening D.C. growth or a diffusor that enhances budget constraints. Alston, J.M., Anderson, M.A., James, the impacts of research knowledge U.S. agriculture continues to ex- J.S., and Pardey, P.G. (2011). The stock. Alston et al. (2011) shows perience structural and organizational economic returns to U.S. public that extension accounted for 7.3% changes. Over time, farmers have re- agricultural research. American of annual productivity growth di- lied more heavily on contracting to Journal of Agricultural Economics rectly for the period 1949-2002. manage their risk and agricultural 93:1257-1277. Yee et al. (2002) proposes that a production has shifted to larger and 1% increase in extension stock per Alston, J.M., Anderson, M.A., James, more specialized farm operations, J.S., and Pardey, P.G. (2010). farm could increase productivity while the number of small farms has by 0.12% in a Southeast region Persistence pays: U.S. agricultural grown. Although private firms have productivity growth and the benefit study for the period 1960-1996. played an increasing role in provid- On the other hand, Schimmelp- from public r&d spending. New ing production-related information York, N.Y.: Springer. fennig, O’Donnell, and Norton to farmers along with those structural (2006) suggests that extension changes, the public extension system Bailey, LH. (1920). The country-life contributes to productivity growth still has its irreplaceable role of pro- movement in the United States. The through improving a farm’s providing a multi-functional array of Macmillan Company, New York. duction efficiency that could help programs as a public good. Ball, E., San-Juan-Mesonada, C., and to reduce the gap between a farm’s The economic benefit and return Ulloa, C.A. (2013). State pro- actual production and its possible ductivity growth in agriculture: production using the most up-to- on investments of extensions are not easy to measure nor to be distin- catching-up and the business cy- date techniques or practices. Wang cle. Journal of Productivity Analy- et al. (2012) finds that higher ex- guished from those of public research funding and other local resources. sis. July.

6 CHOICES 1st Quarter 2014 • 29(1) Bishop, C. E. (1969). Urbanization ic Information Bulletin No. 88, Paul, C., Ball, V. E., Felthoven, R. of rural America alters extension December. and Nehring, R. (2001). Public responsibilities. Journal of Coop- Padgitt, M.,Newton, D., Penn, R., infrastructure impacts on U.S. erative Extension. Fall. and Sandretto, C. (2000). Pro- agricultural production: panel Birkhaeuser, D., Evenson, R.E., and duction practices for major crops in analysis of costs and netput com- Feder, G. (1991). The economic U.S. agriculture, 1990-97. Wash- position. Public Finance and Man- impact of agricultural extension: a ington, D.C.: U.S. Department agement 1, 2, 183-213. review. Economic Development and of Agriculture, Economic Re- Schimmelpfennig, D.E., O’Donnell, Cultural Change, 39, 607-650. search Service,Statistical Bulletin. C.J., and Norton, G.W. (2006). Evenson, R. (2001). Economic im- No. 969. Efficiency effects of agricultural pacts of agricultural research and Pardey, P.G., Craig, B., and Halla- economics research in the United extension. In Gardner. B. and way, L. (1989). U.S. agricultural States. Agricultural Economics 34: Rausser, C. (eds) Handbook of research deflators: 1890-1985.Re - (273-280. Agricultural Economics, Volume search Policy 18: 289-296. 1, Part A, Elsevier Science, New York, 573-628. Feller, I. (1987). Technology transfer, Appendix Table: State Agricultural Productivity Indices and Growth: Rankings public policy, and the coopera- and Changes (1960-2004) tive extension service-OMB im- broglio. Journal of Policy Analysis and Management, Vol. 6, No. 3 (Spring), pp. 307-327 Fuglie, K., and Heisey, P. (2007). Economic returns to public agricultural research. Washington, D.C.: U.S. Department of Agriculture, Economic Research Service, Eco- nomic Brief No. 10. Huffman, W. E. (1976). The productive value of human time in U.S. agriculture. American Journal of Agricultural Economics 58, no. 4: 672-83. Huffman, W.E., and Evenson, R.E. (2006). Science for agriculture: a long-term perspective (second edi- tion). Blackwell Publishing. MacDonald, J., Korb, P., and Hoppe, R. (2013). Farm Size and the organization of U.S. crop farming. Washington, D.C.: U.S. Depart- ment of Agriculture, Economic Research Service ERR-152August. O’Donoghue, E. J., Hoppe, R.A., Banker, D.E., Ebel, R., Fuglie, K., Korb, P.,Livingston, M., Nicker- son, C., and Sandretto, C. (2011). The changing organization of U.S farming. Washington, D.C.: U.S. Department of Agriculture, Eco- nomic Research Service, Econom-

7 CHOICES 1st Quarter 2014 • 29(1) U.S. Department of Agriculture, productivity growth, in agricul- Sun Ling Wang ([email protected]) Economic Research Service. Ag- tural productivity: an international is an Economist with the USDA’s Eco- ricultural productivity in the perspective, Fuglie, K.O., Wang, nomic Research Service in Washington, United States. Available online S.L., and Ball, V.E. (eds.), CABI. D.C. at http://ers.usda.gov/Data/ Wang, S. L., Heisey, P., Huffman, AgProductivity/ W., and Fuglie, K. (2013). Public The views expressed are those of the au- U.S. Department of Agriculture, Na- r&d, private r&d, and U.S. agri- thor and do not necessarily correspond to tional Institute of Food and Ag- cultural productivity growth: dy- the views or policies of ERS or the U.S. riculture. Salary analyses of state namic and long-run relationships. Department of Agriculture. The author extension service positions. Vari- American Journal of Agricultural thanks Mary Ahearn, Keith Fuglie, and ous years (a.) Economics 95(5): 1287–1293. two anonymous reviewers for their help- ful comments. The author also thanks U.S. Department of Agriculture, Na- Yee, J., Huffman, W.E., Ahearn, M., USDA-NIFA’s Barton Hewitt, Laurie tional institute of food and agri- and Newton, D. (2002). Sourc- Fortis, Falita Liles, and Sonny Barber culture. AREERA State Plans of es of agricultural productivity for providing relevant data and use- Work. Various years (b.) growth at the state level, 1960- ful suggestions, as well as ERS’s David 1993. In Ball, V.E., and G.W. Wang, S.L., Ball, E., Fulginiti, L., Marquardt for helping design the U.S. Norton, Agricultural productivity: and Plastina, A. (2012). Account- states’ maps. ing for the impacts of public re- measurement and source of growth, search, r&d spill-ins, extension, Norwell, Mass.: Kluwer Academic and roads in U.S. agricultural Publishers, 187-209.

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