[House Hearing, 105 Congress] [From the U.S. Government Publishing Office]AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 1998 ======================================================================== HEARINGS BEFORE A SUBCOMMITTEE OF THE COMMITTEE ON APPROPRIATIONS HOUSE OF REPRESENTATIVES ONE HUNDRED FIFTH CONGRESS FIRST SESSION ________ SUBCOMMITTEE ON AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES JOE SKEEN, New Mexico, Chairman JAMES T. WALSH, New York MARCY KAPTUR, Ohio JAY DICKEY, Arkansas VIC FAZIO, California JACK KINGSTON, Georgia JOSE E. SERRANO, New York GEORGE R. NETHERCUTT, Jr., Washington ROSA L. DeLAURO, Connecticut HENRY BONILLA, Texas TOM LATHAM, Iowa NOTE: Under Committee Rules, Mr. Livingston, as Chairman of the Full Committee, and Mr. Obey, as Ranking Minority Member of the Full Committee, are authorized to sit as Members of all Subcommittees. Timothy K. Sanders, Carol Murphy, John J. Ziolkowski, and Joanne L. Orndorff, Staff Assistants ________ PART 5 FARM AND FOREIGN AGRICULTURAL SERVICES PROGRAMS AND FOOD SAFETY PROGRAMS Page Farm and Foreign Agricultural Services........................... 1 Farm Service Agency Foreign Agricultural Service Risk Management Agency U.S. Agency for International Development-- Public Law 480 Food Safety...................................................... 667 Food Safety and Inspection Service ________ Printed for the use of the Committee on Appropriations ________ U.S. GOVERNMENT PRINTING OFFICE 41-052 O WASHINGTON : 1997 ------------------------------------------------------------------------ For sale by the U.S. Government Printing Office Superintendent of Documents, Congressional Sales Office, Washington, DC 20402 COMMITTEE ON APPROPRIATIONS BOB LIVINGSTON, Louisiana, Chairman JOSEPH M. McDADE, Pennsylvania DAVID R. OBEY, Wisconsin C. W. BILL YOUNG, Florida SIDNEY R. YATES, Illinois RALPH REGULA, Ohio LOUIS STOKES, Ohio JERRY LEWIS, California JOHN P. MURTHA, Pennsylvania JOHN EDWARD PORTER, Illinois NORMAN D. DICKS, Washington HAROLD ROGERS, Kentucky MARTIN OLAV SABO, Minnesota JOE SKEEN, New Mexico JULIAN C. DIXON, California FRANK R. WOLF, Virginia VIC FAZIO, California TOM DeLAY, Texas W. G. (BILL) HEFNER, North Carolina JIM KOLBE, Arizona STENY H. HOYER, Maryland RON PACKARD, California ALAN B. MOLLOHAN, West Virginia SONNY CALLAHAN, Alabama MARCY KAPTUR, Ohio JAMES T. WALSH, New York DAVID E. SKAGGS, Colorado CHARLES H. TAYLOR, North Carolina NANCY PELOSI, California DAVID L. HOBSON, Ohio PETER J. VISCLOSKY, Indiana ERNEST J. ISTOOK, Jr., Oklahoma THOMAS M. FOGLIETTA, Pennsylvania HENRY BONILLA, Texas ESTEBAN EDWARD TORRES, California JOE KNOLLENBERG, Michigan NITA M. LOWEY, New York DAN MILLER, Florida JOSE E. SERRANO, New York JAY DICKEY, Arkansas ROSA L. DeLAURO, Connecticut JACK KINGSTON, Georgia JAMES P. MORAN, Virginia MIKE PARKER, Mississippi JOHN W. OLVER, Massachusetts RODNEY P. FRELINGHUYSEN, New Jersey ED PASTOR, Arizona ROGER F. WICKER, Mississippi CARRIE P. MEEK, Florida MICHAEL P. FORBES, New York DAVID E. PRICE, North Carolina GEORGE R. NETHERCUTT, Jr., Washington CHET EDWARDS, Texas MARK W. NEUMANN, Wisconsin RANDY ``DUKE'' CUNNINGHAM, California TODD TIAHRT, Kansas ZACH WAMP, Tennessee TOM LATHAM, Iowa ANNE M. NORTHUP, Kentucky ROBERT B. ADERHOLT, Alabama James W. Dyer, Clerk and Staff Director AGRICULTURE, RURAL DEVELOPMENT, FOOD AND DRUG ADMINISTRATION, AND RELATED AGENCIES APPROPRIATIONS FOR 1998 ---------- Thursday, March 6, 1997. FARM AND FOREIGN AGRICULTURAL SERVICES WITNESSES DALLAS R. SMITH, ACTING UNDER SECRETARY, FARM AND FOREIGN AGRICULTURAL SERVICES GRANT B. BUNTROCK, ADMINISTRATOR, FARM SERVICE AGENCY AUGUST SCHUMACHER, JR., ADMINISTRATOR, FOREIGN AGRICULTURAL SERVICE CHRISTOPHER E. GOLDTHWAIT, GENERAL SALES MANAGER, FARM AND FOREIGN AGRICULTURAL SERVICE KENNETH D. ACKERMAN, ACTING ADMINISTRATOR, RISK MANAGEMENT AGENCY LEN ROGERS, ACTING ASSISTANT ADMINISTRATOR FOR HUMANITARIAN RESPONSE, AGENCY FOR INTERNATIONAL DEVELOPMENT STEPHEN B. DEWHURST, BUDGET OFFICER Mr. Skeen. The committee will come to order. Today we have the Farm and Foreign Agricultural Services programs. We have with us Dallas Smith, the Acting Under Secretary; Grant Buntrock, Administrator of the Farm Service Agency; August Schumacher, Administrator of the Foreign Agricultural Service; Ken Ackerman, Acting Administrator of the Risk Management Agency, better known as crop insurance; and Mr. Dewhurst, as usual. We can't operate this business without Mr. Dewhurst. We also have Mr. Len Rogers with the Agency for International Development to be available to talk about the Public Law 480 programs, and in general, these are agencies most commonly linked to farm programs and considered the heart of agriculture for the Federal Government. Dallas, please go ahead with your introduction and your testimony. We're delighted to have you here today. We're sorry we kept you waiting so long. Under Secretary's Opening Statement Mr. Smith. Thank you, Mr. Chairman. I am pleased to have this opportunity to discuss the 1998 budget and program proposals for the Farm and Foreign Agricultural Services mission area of USDA. You've already acknowledged my colleagues from the Department, so I will not reintroduce them. Statements by the Administrators providing details on their agencies' budgets and program proposals for 1998 have been submitted to the Subcommittee along with my own prepared statement. I would ask that those statements be included for the record. Mr. Skeen. It will be done. Mr. Smith. I will summarize my own prepared statement, after which we will be pleased to respond to any questions you might have. Mr. Chairman, a fundamental goal of the Farm and Foreign Agricultural Services mission area is to secure the long-term economic vitality and global competitiveness of American agriculture by expanding trade and economic opportunities and promoting income growth and development throughout rural America. We are the production agriculture mission area. How we accomplish our mission will in large part be determined by the new policies set in place by the 1996 Farm Bill. One of our primary tasks this past year has been to implement the policy and program changes provided for in the Act. As a result of our efforts, nearly 99 percent of eligible acres were entered into production flexibility contracts last year. Although the new Farm Bill has provided much greater flexibility to our farmers in their production and marketing decisions, it has also increased the risk inherent in farming by reducing the Federal Government's role in supporting income and managing supplies. Consequently, we remain concerned about the adequacy of the safety net for our producers and have been working diligently to expand and improve programs which help producers manage their price and production risk. At the same time, we have continued our efforts to reduce expenses, improve efficiency, and deliver responsive quality service to our farm and rural customers. The Farm Service Agency administers the farm credit programs, several conservation programs, and the domestic commodity price and income support programs of the Commodity Credit Corporation. The farm credit programs administered by FSA continue to serve as a vital source of credit for our nation's farmers and ranchers. The budget continues the trend towards emphasizing guaranteed loans, which are made in partnership with private lenders and have a low subsidy cost for taxpayers. We remain responsive, however, to the continued need for direct loans which are targeted to beginning farmers and members of socially disadvantaged groups who show promise for success but would be unable to obtain credit elsewhere. The Conservation Reserve Program is the major conservation program administered by FSA. The 1996 Farm Bill reauthorized the CRP, set maximum enrollment at 36.4 million acres, and switched the program's financing from direct appropriations to CCC funding. The 1998 budget assumes a competitive bid process will be used to enroll nearly 19 million new and expiring CRP contract acres in 1997. Enrollment in subsequent years is assumed to gradually increase our total enrollment to 36.4 million acres by 2002. The budget also reflects provisions of the 1996 Farm Bill authorizing CCC funding for a number of new conservation programs, including the Environmental Quality Incentives Program, which replaces the Agricultural Conservation Program-- the old ACP. EQIP is administered by the Natural Resources Conservation Service in cooperation with FSA. Reflecting the trend for Federal outlays for farm price and income support programs, total CCC outlays have declined from the 1986 peak of $26 billion to $4.6 billion in 1996. This is the first time CCC outlays have dropped below $5 billion since 1981. Including conservation programs and other programs for which CCC funding was authorized by the 1996 Farm Bill, CCC outlays are projected to total $7.8 billion in 1997 and $9.9 billion in 1998, and decline to about $7.6 billion by the year 2002. Changes made by the 1996 Farm Bill have diminished the traditional role of farm programs as a buffer against fluctuations in production and commodity prices. Our greatest challenge is to find new ways to help farmers thrive in an increasingly risky environment and yet not be involved in the micromanagement of agricultural decisions. The budget reflects legislation that we will be proposing to the authorizing committees to improve the safety net for farmers. Our legislation provides discretionary authority to extend commodity loans for 6 months during periods of depressed market prices or market disruption, allows haying and grazing of CRP acres, increases fruit and vegetable planting flexibility for acres enrolled in production flexibility contracts, and provides for greater flexibility and the timing of contract payments. For the salaries and expenses of the Farm Service Agency, we are requesting a total appropriated level of $954 million, a net decrease of $1.9 million from 1997. Our staffing reductions for 1998 continue to run well ahead of those projected in the Department's reorganization plan. The 1998 budget calls for staffing levels of about 5,900 Federal staff-years and 9,900 non-Federal county office staff-years-- reductions of about 270 and 1,850 staff-years, respectively, from the 1997 levels. We expect to achieve this reduction through a combination of about 530 buyouts and a reduction in force of about 1,600 staff-years. In addition, as a part of the Department's streamlining initiative and reflecting changes made by the Farm Bill, the budget projects that 500 FSA offices will be closed by theend of 1999. This issue of office closures is a very sensitive topic, and I want to take a moment to add to my prepared testimony with the hope of putting the issue in the proper context. First of all, although there are many stories out in the States, and I know that many of you have heard from your constituents on this, the Secretary has not yet approved any plan for how this might be accomplished, and, in fact, has stopped all office closures at this time, except for those that were in place per the earlier plan to reduce down to 2,530 offices. Second, the Secretary has asked each of the involved agencies, including FSA, as well as the USDA Service Center Implementation Team, to give their best advice as to how we can organize within the budget levels. As you know, the Service Center approach means that the number of offices open for our customers relates to the budgets of other agencies in addition to the Farm Service Agency. Third, as USDA develops its approach to meeting the budget requirements over time, it will do so in close consultation with those that will be most affected. In short, while we have made a general commitment that we will reduce the number of our service centers, we have made no decisions about individual offices. We are committed to working with the Congress as we proceed with our review and will keep you fully apprised of our plans. Moving to the Risk Management Agency, the Risk Management Agency and the Federal Crop Insurance Corporation play a pivotal role in fulfilling the mandates of the 1996 Farm Bill while ensuring that American agriculture remains solid, solvent, and globally competitive into the twenty-first century. To accomplish these tasks, the Risk Management Agency intends to refine existing products, create innovative cost- effective tools, educate farmers and the public, and expand its partnership with the private insurance sector and the agricultural community. The Administration's proposal to make revenue insurance available nationwide reflects the strong demand among producers that we've seen for the new revenue insurance products such as Crop Revenue Coverage, Income Protection, and Revenue Assurance. In implementing the revenue insurance programs no additional premium subsidy has been paid, and the expected 1996 loss ratio experienced is within the statutory limits and comparable to the Risk Management Agency's standard multiperil production risk coverage. To offset the additional delivery expenses and the expected growth involved in expanding revenue insurance nationwide, the Administration proposes to reduce the reimbursement rate paid to private insurance companies for delivery expenses, as well as the loss ratio used to establish the premium rate structure. Under this proposal, the reimbursement rate for delivery expenses would be reduced from 28 percent under current law to 24.5 percent of the premium for multiperil coverage. This reduction is based on extensive analysis conducted by the Risk Management Agency and the General Accounting Office. It would reduce discretionary spending for delivery expenses from $203 million under the current law to $150 million under the proposal. Further, our proposal would make a portion of the overall reimbursement rate discretionary and subject to appropriations, whereas current law treats only the sales commission portion of the reimbursement as discretionary. We believe this change offers insurance companies more flexibility for adjusting to the reduced reimbursement rate. The budget provides $68 million in discretionary spending to pay RMA's administrative expenses, which reflects a modest increase of $4 million for full-time staff positions to adjust for recent losses and to improve the Risk Management Agency's ability to service participating private sector companies. Turning now to the international side of the Farm and Foreign Agricultural Services mission area, I'm pleased to report that exports of U.S. farm and food products posted another sales record in 1996. Exports climbed to $59.8 billion, a gain of more than $5 billion from the previous year. With the strong back-to-back gains of the last 2 years, U.S. agricultural exports have increased by some $19 billion, or close to 50 percent, since 1990. As a result, agricultural exports supported 1 million jobs, both on and off the farm, one-third of which were in rural areas. Continued progress in the international arena is crucial to the economic security of American farmers and ranchers. The changes made in domestic farm programs by the 1996 Farm Bill have made U.S. producers more dependent than ever on exports to maintain and expand their incomes. American agriculture is currently twice as dependent on overseas sales as the U.S. economy as a whole, and the sector will be two and a half times as export-dependent by the turn of the century. It is critical, therefore, that we continue our aggressive trade promotion efforts to help U.S. producers and exporters take full advantage of emerging export market opportunities. The 1998 budget continues USDA's commitment to export promotion and growth by providing a total program level of just under $7.7 billion for the international programs and activities. For the Commodity Credit Corporation Export Credit Guarantee Programs, the budget provides a total program level of $5.7 billion. Our proposals continue two initiatives designed to increase the utility of the CCC Export Credit Programs--supplier credit guarantees and facility financing guarantees. The budget provides higher program levels for our two export subsidy programs--the Export Enhancement Program and the Dairy Export Incentive Program. In the case of EEP, we propose to make available $500 million, the maximum level permitted by the 1996 Farm Bill. For the Market Access Program, the budget continues funding at its maximum authorized level of $90 million. For Public Law 480 foreign food assistance, the budget proposes a total program level of $990 million, a reduction of $57 million from the current estimate for 1997. Our 1998 request level is expected to provide for approximately 3.2 million metric tons of commodity assistance, unchanged from the current tonnage estimate for 1997. For the Foreign Agricultural Service, the budget proposes a funding level of $151 million, an increase of $15 million above the 1997 level. Most of the proposed increase will be used to help meet the cost of several FAS activities which are currently supported with CCC funds made available to FAS through reimbursable agreements. These activities include the Emerging Markets Program and the operating costs of the CCC computer facility, which serves as the Department's collection point for international production intelligence and crop estimates. The budget also includes new provisions to address the difficulties in accurately estimating and funding the annual operating cost of FAS overseas offices. First, the budget requests an advance appropriation of $3 million for 1999 to fund documented wage and price increases and/or the exchange rate losses incurred during 1998. Second, the budget proposes that funds appropriated to FAS in 1998 be available for obligation for 2 years rather than 1 year. In closing, Mr. Chairman, Members of the Subcommittee, I'd like to note that today's budget realities mean that the Government must be leaner and more efficient, but the era of a responsive and responsible Government is not over. While there are things that Government can't do, or shouldn't do, there are many legitimate public needs that only Government can meet. When it comes to advancing the stability, sustainability, and economic vitality of American agriculture and of the farmers and ranchers who are the bedrock of our nation's agricultural bounty, the FFAS mission area has a vital role to play. Mr. Chairman, that concludes my statement, and the team will be pleased to answer any questions you may have. [Clerk's note.--Mr. Smith's written testimony appears on pages 325 through 346. Mr. Buntrock's written testimony appears on pages 347 through 364. Mr. Schumacher's written testimony appears on pages 365 through 385. Mr. Ackerman's written testimony appears on pages 386 through 392. Mr. Rogers' written testimony appears on pages 393 through 399. Mr. Smith's, Mr. Buntrock's, Mr. Schumacher's, Mr. Goldthwait's, Mr. Ackerman's and Mr. Rogers' biographical sketches appear on pages 319 through 324. The Farm Service Agency's explanatory statement appears on pages 400 through 508. The Commodity Credit Corporation's explanatory statement appears on pages 509 through 565. The Foreign Agricultural Service's explanatory statement appears on pages 566 through 611. The Risk Management Agency's explanatory statement appears on pages 627 through 651. The Public Law 480 explanatory statement appears on pages 652 through 666.] Mr. Skeen.Thank you for your presentation. It's a very difficult time because the drawdown is not a fun issue to deal with, particularly when it deals with your personnel. However, I'd like to ask this first question to Mr. Dewhurst. irm expenditures There has been a lot of concern over the Department's expenditures related to ADP, automatic data processing, the information technologies, and the other related items. I've always commented on the importance of information technology and the ability of the Farm Service Agency to effectively administer its programs. Up until now, the Department's ability to carry out an effective automation plan has been pretty sorry. In general, where do you spend most of the ADP funding? Mr. Dewhurst. Okay. Let me give you sort of a quick overview, Mr. Chairman, of where we are. Mr. Skeen. Please do. We've gone over this several times, and we're trying to get you ADP perfect. Mr. Dewhurst. Okay. Well, the Department estimates it will spend on the order of $1.2 billion in fiscal year 1998 on what we call IRM related activities. When you look at our table, you will find that 95 percent of that money is spent in about six places. So, as you review IRM in the Department and say where is the big money, there are six places. The largest IRM component in the Department is the Food and Consumer Service. About 27 percent of our total IRM budget is in that agency. The vast majority of that money is pass-through money to the States, and it's being used to implement EBT programs for things like Food Stamps. You've had some testimony here on EBT. Mr. Skeen. Yes, sir, we have. Mr. Dewhurst. The second largest component of our IRM budget is the U.S. Forest Service, which I realize is not within the jurisdiction of this Committee. But the Forest Service accounts for 23 percent of the Department's IRM spending. The Forest Service manages 192 million acres of Federal land. There are 156 national forests. They average 1.2 million acres in size. Essentially, each national forest is the size of the State of Delaware. So, it is a huge management responsibility. There is consensus, I think, among the Congress, the GAO, the OMB, and the Department that the Forest Service needs to vastly upgrade its IRM activities. The Farm Service Agency which you have here today is our third largest IRM spender--about $210 million in fiscal year 1998. Most of that money of course translates into the equipment and software that our county office people have to deliver programs. And I'm sure the folks here can talk to you about that. Our fourth largest spender is the Natural Resources Conservation Service. They are on the conservation side of the county office equation. Most of the investment there is in things like geographic information systems so that land owners and farmers and the NRCS people can work on conservation plans and the other things that have to be done on land throughout the country. Our fifth largest spender is the National Finance Center in New Orleans. Mr. Skeen. New Orleans? Mr. Dewhurst. Yes, sir. We do payroll and personnel work, accounting work, for the Department of Agriculture and a variety of Federal agencies and the arms of the Congress. And they all pay for those services. That's an ongoing operation. Mr. Skeen. A very impressive operation. Mr. Dewhurst. Yes. Mr. Skeen. I think most of us have visited it. Mr. Dewhurst. And the sixth largest spender is the Rural Development area. Of course, most of that investment has to do with a centralized system for the housing programs to improve the management of the $34 billion loan portfolio that we have in housing. The other way to look at this problem is to also understand where, exactly, we spent all this money. We spent about 15 percent of it on equipment. A lot of people think the IRM budget is all for equipment. The vast majority of that budget is for ongoing operations, for software, maintenance, repairs and personnel. So, essentially it's only the top 15 percent of the budget that's buying anything new in the system. Mr. Skeen. So, the upgrades are not included in there. Mr. Dewhurst. If you're not talking about new equipment. Sometimes you do an upgrade involving programming and that sort of thing. Mr. Skeen. In the same vicinity. Mr. Dewhurst. Yes. But most upgrades involve new equipment. That's in that 15 percent. I think we'd have to say in fairness that we have not always done a good job of managing that IRM portfolio. Agencies have tended to do a pretty good job in designing systems to meet their own individual needs. But we have spent perhaps more money than we should have. We've not always coordinated very well between the agencies. The Secretary is determined to fix that problem. We have a Chief Information Officer now who will be appearing before this Committee who has overall responsibility for the coordination of our IRM program.And there is a series of other actions in place, including a current moratorium on major systems acquisition, all of which are designed to help us get a better handle on this issue and make more effective use of this money. Mr. Skeen. Well, I know it's a very difficult thing because it covers such a wide area of operations and is so essential to your basic operation. I just hope that we can get some assurance that we're on the right track with the program you have now for handling it. Mr. Dewhurst. I think we are. I've watched this for 30 years. Mr. Skeen. We've watched it for about 18 years with you. Mr. Dewhurst. I think there is an energy now in getting a handle on this that I haven't seen previously. I think we're going to get the job done right. effect of limiting fsa adp expenses Mr. Skeen. Well, that leads me to the last question in this vein, and that is for Mr. Buntrock. What would be the program impact on the Farm Service Agency if Congress restricted the request for ADP related expenses in the 1998 budget? Mr. Buntrock. Well, Mr. Chairman, I'm really kind of glad you asked that question. As you know, we do have certain restrictions now that we operate under. ADP costs are funded two different ways. One of them is through the Commodity Credit Corporation in which we have a legislated amount of funding that can be used for some of the ADP equipment. We cannot exceed that. Then, the other source of funding is our Salaries and Expenses account. But let me explain a little bit to give you some perspective from an agency standpoint about what all this means to us. Mr. Skeen. We'd appreciate that. Mr. Buntrock. We in the Farm Service Agency have a first- hand look at the importance of merging all of the ADP systems. Right now, we are providing support services for the agencies of my associates here at the table with me, the Foreign Agricultural Service and the Risk Management Agency. Also under the USDA reorganization, we support farm credit activities. We are currently operating with legacy systems. We have some situations where we are delivering programs with equipment that includes some printers that are about 12 years old from the old ASCS system. The 3B2 systems, which are no longer manufactured, were inherited with the farm credit programs. We are currently delivering a lot of programs with these legacy systems. I can't overemphasize the importance of merging all of these different systems into one unit to administer our programs, particularly in view of the budget that we're all looking at, which includes a rather significant reduction in staff. The merging of this equipment into a more efficient system that we can operate with fewer employees than we have today is critical if we are to continue to deliver programs in the manner we have in the past. I might add that we have not been just continuing to rock along with the systems that we have. We will dedicate some of this requested 1998 funding to studies, analysis, some software conversion, and some pilot site work as we move forward to merging a lot of this equipment. So, a part of the funding that we're requesting for ADP includes this investment, as I would like to call it, in future systems through pilot programs, studies, and analysis of the current software. state mediation program in texas Mr. Skeen. This may be a little different issue. The Inspector General has been reporting for over a year that there are problems in the Texas State Mediation Program. I'm sure you're familiar with that. These include improper questionable costs totaling nearly $1 million. Two days ago the IG informed us that Texas and three other States are refusing the IG full access to their records, even though that access is a part of the agreement for Federal assistance. In spite of all of this, the Department released money to Texas for the mediation program. Who authorized this release and why? Mr. Buntrock. Mr. Chairman, first of all I'd like to correct a reference to the release of funds to the Texas mediation program. Mr. Skeen. Clear that up. Mr. Buntrock. We did not release new funds to the Texas mediation program. What we did, based on OIG findings in Texas, was to determine an amount of funding in Texas that was determined to be inadequate. I shouldn't say inadequate; funds that were not related to the mediation program. Mr. Skeen. I see. Mr. Buntrock. So, this amount was identified as ineligible or unwarranted spending. What we did was enter into an agreement with Texas for them to repay this overpayment to the mediation program through mediation services rendered. state mediation program issues In reference to the disclosure issue, I would like to give the Committee, if I might, the current overview of mediation. Mr. Skeen. We'd appreciate that. Mr. Buntrock. Okay. We have 22 States today that are participating in the mediation program. The mediation program was expanded a year ago from credit disputes only to include disputes under many other programs administered by USDA. States, of course, must meet eligibility criteria to receive these grant funds for their mediation programs. Unfortunately, State programs did not duplicate each other. I shouldn't say unfortunately, but that was just a fact. In other words, of these 22 State mediation programs, there are really no two alike. The conditions of eligibility to receive these grant funds required them to have a certified mediation program and matching funds for this grant. Now, when it comes to fundamental issues like definition of mediation, access to records, and so on, there were many variables in these States. And what we learned was that we did not have a uniform set of requirements for all States to receive these funds. We are in the process right now of developing regulations that would provide some uniformity, would provide some specifics for accountability by each of these individual States, and to some degree would address the issue that OIG is currently addressing, which is the confidentiality issue. Most States in their mediation programs do restrict access to these records in accordance with the State laws. Right now, as I understand it, the Office of the Inspector General is currently exercising Federal authority to have access to these records through the subpoena or through the court system. We are waiting for the outcome of that. In the meantime, our Office of the General Counsel advises us that so long as States meet all of the requirements provided for in their State-enacted mediation programs and we have reasonable assurance that those funds were used for that mediation program, we really do not have strong ground to stand on to refuse to continue to authorize those funds. So, with that in mind, plus strengthened requirements for the States in terms of the matching funds and how they're available and how they're allocated, we did allocate the balance of funds to the States. Mr. Skeen. Did you also have a problem in Minnesota, North Dakota, and Michigan? Mr. Buntrock. Yes. Mr. Skeen. They fall under the same umbrella? Mr. Buntrock. I think it's fair to say that of the 22 States that have mediation programs today, North Dakota, Minnesota, and Michigan were the three States, Mr. Chairman---- Mr. Skeen. And then Texas. Mr. Buntrock [continuing].----that had the most restrictive State laws in terms of access and availability of the records. Mr. Skeen. Access. Mr. Buntrock. Yes, sir. And we have worked directly with them. A good part of the disputes that are mediated involve our Federal programs; but some of the cases also include the State banks and lending programs that they have. In our programs we have provided records of all of the credit portfolios, disaster programs, and so on that were mediated. So, we have a pretty good record of how that mediation turned out where it was used for those particular programs. I guess what I'm saying is that for the time being we still feel strongly that we need to run this through the court system for the accessibility questions to be straightened out. We're going to publish the regulations that will provide much more uniformity in those guidelines and so on for the future. Mr. Skeen. Yes, sir. Mr. Smith. Mr. Chairman, could I make a general comment about the mediation program and its value? Mr. Skeen. Yes, sir. Mr. Smith. Certainly as an alternative dispute resolution tool we fully support the mediation program as a way of both cutting costs and avoiding having cases in our system for a number of years and going all the way up through the judicial system when many times it's a matter of lack of communication between the Government and a producer. That's the cost- avoidance side, because we avoid the litigation costs, which are quite expensive. But at the same time we are in a learning curve. We have 22 States that have been approved. We are finding as we implement the program that State laws apply differently in different States, and that there is a need to have flexibility in the program to meet the needs of farm credit and farm program cases in the respective areas. So, as we go through this, the input that we're getting from the OIG involves problems that they are discovering in doing a third-party review of our compliance in such areas as conflict of interest occurring at the local level. They are identifying for us some impediments that we hope to address through the regulations and the definition of what constitutes mediation and how you evaluate success in a mediation. We can work with the report that we've gotten from our OIG and the respective States to have a very strong mediation program in the future. Mr. Skeen. So, what you're doing is you're giving the Federal side where you've got clear access and then restricted, out of respect to the various local and State laws involved. Mr. Smith. For example, in Minnesota, they have very specific State laws in terms of the privacy in providing that information. And the local officials believe this privacy is very important to participation in the mediation process. Yet at the same time we have an obligation to make sure that the Federal funds are being spent appropriately. And at this particular point we have a conflict between those two needs. So, it's our intent to work with the Office of the Inspector General, work within the agency, and with the State officials to attempt through our regulations to define exactly how to go beyond this current impasse. And we think we can. Mr. Skeen. There may be a change in the agreements and things of that kind, but it will be across-the-board then. Mr. Smith. Yes, sir. In fact, it may be something where our contract will recognize in advance that if there are privacy laws, what we expect in terms of those privacy laws. There may be some third party review. We don't know exactly where it's going right now. This will be worked out for that proposed regulation that Mr. Buntrock spoke about. There is the issue of whether there should be Federal preemption of State law. It might not be desirable to do that if it would cause producers and local bankers or others in the credit system to be unwilling to enter into mediation. Mr. Skeen. Could you let us know when you have reached some kind of mediation agreement? Mr. Smith. Yes, sir. Mr. Skeen. We'd appreciate that. Ms. DeLauro. farm loan delinquencies Ms. DeLauro. Thank you, Mr. Chairman. Thank you for your testimony and for being here today. As a Member of the Appropriations Subcommittee on Agriculture in the 103rd Congress I was particularly concerned by the delinquency problems with the loans that were then administered by the Farmers Home Administration, and now overseen by the Farm Service Agency. At that time, more than $10 billion in bad loans had been written off and billions more in bad loans were still carried. Can you tell me something about the changes that have been made to address the delinquency problems, and in particular to ensure that similar problems do not occur in the future? Mr. Buntrock. Thank you, Congresswoman DeLauro. Really I can address this in two ways: one in the short term and the other in the longer term. First of all, I would like to report today that we have made some progress in the last fiscal year in the delinquency problems. You're correct. Delinquencies are just simply too high, particularly in the direct loan program. We currently have a delinquency rate overall in the direct loan program of approximately 19 percent which compares to about 25 percent about a year ago. I'm not reporting that today as something that we're standing on as the bottom line. But I did want to inform you that we have made some progress. We've done that in a couple of different ways. One of them is just simply dedicating staff people to look after these loans that have become accelerated or loans that are in danger of becoming delinquent to try to address them early on. We've found that it is very important to catch these delinquencies early and then follow up with them. I can furnish a little more of a breakdown of the profile of this total delinquency file. It includes cases that run back for many, many years. Loans that have been inactive for as long as 15, 20 years are included in this group. In these cases, it's a matter, quite frankly, of going through to find what security there is or is not and closing the thing out. That's just where some of them are. So, within this total package there are some delinquent loans where you might get some repayments to the Government and some that should be foreclosed. In the Farm Service Agency, we have a staff that is assuming some of these responsibilities that require fairly significant training. We've got new managers who are just taking over this function in a lot of States. So we have planned pretty extensive training and other resources in these States in order to give them everything in-hand to address these delinquency problems. Of course, we have also set goals for each of these States to bring its delinquency rate down for direct lending programs. What I'm really reporting to you today is that we have set up a plan in each of the States to bring the delinquencies down. We have set goals in each of these States, and we have also set longer-range goals in terms of more resources and training in some of these States. Another thing that was referred to earlier and that becomes very, very important to a manager at the local level is the ADP systems that keep track of these loans. Forexample, we have found situations where in the past the agency was issuing checks under the old ASCS programs to producers who had delinquent loans. There was never any merging of ADP systems. We are now taking a comprehensive look at active farmers' files, and we have collected some of these delinquent payments through that process and plan to look into doing more of it. Ms. DeLauro. I appreciate the work that's been done. Let me recap a little bit here. Again, there is a January 1997 GAO report which provides an update on the status of farm loan programs. I'm pleased that the amount of outstanding direct loans owed by delinquent borrowers has decreased between 1995 and 1996. However, I think it is worth noting something that is a real concern to me. It ought to be a concern to all of us, that the amount of outstanding direct loans owed by delinquent borrowers is still $10.5 billion and that the outstanding guaranteed loans by delinquent borrowers actually increased between 1995 and 1996. Now, we've got about a $13 billion pot of money that we can use for discretionary spending for this entire Committee, as I understand it. We've got $10.5 billion in outstanding loans that still needs to be collected in some way. Further, the report indicates that for borrowers who owed more than $1 million in outstanding principal, the delinquency rate was an astounding 88 percent. Again, and I don't know if it's the same answers, but the questions here are how does the Department of Agriculture view the outstanding loans and loan guarantees? What kind of action are we going to take? How are we going to account for the delinquency rate for large borrowers? And how does the Department intend to collect what these large borrowers owe? There are another couple of points in here. It says during fiscal year 1996, $1.1 billion in principal and interest was lost by reducing or forgiving the debt of delinquent direct loan borrowers. And about $45 million in losses was incurred on guaranteed loans. This is not chump change here. We talk in this Committee a lot about fraud and abuse, and in the Food Stamp Program that is about $1 billion worth of what we view. And I'm not suggesting that we allow this; that we need to deal with it in some way. This program serves 23 million people in this country. I just picked out one of the bad loans, any one of these, in terms of the charts in this report, and it happens to be Arizona. I just picked it up. It's $98 million in outstanding loans. It's 518 borrowers. We're talking about people who owe millions of dollars to the Federal Government. The question is the question I started with. How and when-- I understand you have them from many years back--how and when are we going to collect these loans and these delinquencies so that there is the return to the Federal Government? We don't want to guarantee bad loans. FDIC guaranteed the savings and loans and we know what happened. Why is the Federal Government being put in this position and what are we going to try to do about it? delinquency of large loans Mr. Smith. Let me make a general response to your earlier reference to the large loan situation. There has been a number of different things done to address the issue of outstanding delinquencies, as well as the large loan issue that we are now wrestling with. As a result of some of the concerns about the million dollar loans and the delinquencies on them, Congress has also addressed that issue subsequent to the GAO report. Those loans are now capped at a much lower level; at $700,000 for the guaranteed loans and $200,000 for the direct loans. So, we can no longer make those large loans that were made earlier. However, we are still working through those loans that were made at higher levels earlier, within the regulations and within the law. There are many steps that the individuals have available once they're delinquent on their loan, including multiple appeal rights. The Department has been working with those individuals that are delinquent to enable them to repay the debt as opposed to taking collateral that's inadequate and then writing off the balance of the loan. That's not to say there aren't some that we've had to foreclose on and take the collateral that's available and sell that collateral in order to recover as much of that loan as possible. But the problem that we were facing with the large loans has been resolved by limiting the ability of the Department to make those multi-million-dollar loans. So, we're not adding to the problem as we're working off the old problems that you referred to in the GAO report. Ms. DeLauro. Just a final question. I appreciate the steps that have been in place. But what is it further that we can do? Is there something that we can do to make it possible for you to do better on these loans? I'm very serious. What will it take for us to recoup this money? Mr. Buntrock. I'm not trying to be facetious, but good prices in farm country will help facilitate repayment of some of these loans. Let me give you a little bit more perspective on what we're dealing with, though, in terms of our expectations. The $1 billion in delinquent large loans you referred to are the million dollar-plus loans. By the way, close to half of that was interest after a number of years, so that gives you an idea of the age of these loans. When we talk about millions of dollars, we are talking about interest plus the principal. To give you an idea of what kind of results we're getting on these cases, from the 515 accounts we've closed so far out of 900, we got about $131 million. That was out of a principal outstanding of about $566 million. That doesn't count any interest. We're getting about 23 cents on a dollar out of these old loans that are 10 or more years old. Now, it's all relative I guess. That isn't good at all, but we'd estimated getting maybe 10 cents on a dollar on this portfolio of very old loans. I'd like to add a little bit more to all of this. It's true, we do have new provisions in place. There are a lot of restrictions. There are a lot more requirements today to get a loan or to get an extension and so on than there have been in the past. On direct loans to producers who do not qualify at the bank, we're probably not ever going to get to the point where we have a delinquency rate similar to a commercial bank. It's probably going to run a bit higher. That doesn't mean that 19 percent is acceptable. In prior years we've had it under 10 percent; as low as 4 percent and 5 percent in some years when prices were better. So, I wasn't being facetious in my remark about crop prices because it does follow--farm income and repayment of farm loans do correlate. My point is simply this. We're generally not dealing with individuals who don't pay their bills. We're generally dealing with individuals who can't pay their bills. Ms. DeLauro. Well, that may be true now, but earlier on, there were a lot of television shows about the folks who decided you have to take it out of farm income versus non-farm income, et cetera, et cetera, et cetera. That's not too long ago that we were dealing with that situation. Mr. Smith. That's right. Ms. DeLauro. There are a heck of a lot of people in this category who absolutely have the wherewithal to pay their bills, particularly those older loans that you're talking about, versus what we may be doing now which is to thegood. But nevertheless, we ought to be looking at those people who can, who have the wherewithal to pay-up. Mr. Smith. I believe it will continue to improve every year. Ms. DeLauro. That's what my hope is. We will continue to talk to you. Thank you, Mr. Chairman. Mr. Skeen. Mr. Kingston. Oh, he's gone. Mr. Nethercutt. Mr. Nethercutt. I will yield to Mr. Latham. Mr. Skeen. Fine. Mr. Latham. Production Flexibility contracts Mr. Latham. I guess first of all I just would like to get the Administration's position as far as the contracts in the Farm Bill, whether you would oppose any kind of reduction in the contracts themselves that we have under the FAIR Act. The Secretary spoke a little bit to it the other day. I want to reconfirm. Mr. Smith. Yes. We feel that there is a commitment for the 7 years on the payments to the producers. And as you know that commitment also involves major changes in the historical supply management programs. Because of those changes we feel that the producers absolutely must be able to depend on these payments over the next 7 years. FSA County Office Closings Mr. Latham. Thank you. And I'm sure you're well aware and you stated here the Department's plans to close the FSA offices. That caused a lot of conversations out in farm country. I understand your information system is well in place because it gets to the offices quicker than anything else gets out and around. They have a very good network somewhere anyway. In Iowa, the State Director has submitted here to Washington, I think, a list of 50 offices for closing out of the 100 that we have. Can I get a copy of the list, of the proposal? Mr. Smith. Let me reiterate my earlier statement with regard to the list that many have referred to at the local level. We currently do not have any plans that are approved by the Secretary to close any offices, other than those that were already in the mill per the previous reduction down to 2,530. Our budget does refer to reducing or closing another 500 offices by 1999. And it was in response to the proposal to reduce offices by another 500 for 1999 that the Farm Service Agency took a look at how it would deliver its programs if in the future it had to close another 500 offices. So, on the first cut, using geographical distance to travel and convenience to the producer, the State offices put together a preliminary plan. It was that plan that was distributed as being an official plan and as being tied to the 1998 budget, and not the 1999 year. It was a very preliminary report and one that does not take into consideration all of the factors that we believe must be taken into consideration, but it is a good start. Although we will be reducing about 1,850 employees at the county level per the 1998 budget, at this particular point we do not anticipate that reduction causing 500 offices to be closed. There will be some offices that would have to be reviewed as a result of that reduction in employees; but certainly nothing of the magnitude that has been discussed at the field level. Mr. Latham. You're saying that you do not plan to give me the list. Obviously your answer is no. I'm not going to get a list. I would still like to have the list anyway if we could. But you're saying you're not going to close 500 offices as proposed in the budget? Mr. Smith. We will be looking at closing additional offices by 1999. But the concern that we've heard from the field was that we were going to close 500 offices by September 30th of this year and that the decision had already been made. What I'm saying to you is that we have no plans to close 500 offices by September 30, 1997. The plan I described to you was the first cut of a long range plan targeted at January 1999, not September 30, 1997. And before we move to the second phase, it is our intent to evaluate the criteria for closing offices that would look at a lot of other things besides geographical distance. And I would also point out that our field structure is moving toward service centers. And those service centers consist of three agencies, not just the Farm Service Agency. We have Rural Development, the Natural Resources Conservation Service, and the Farm Service Agency. In many cases they will be colocated in a USDA service center. Then there will be instances where you would perhaps have the Farm Service Agency and NRCS colocated. And then there may be locations where you have only NRCS. The FSA's budget is being driven a good deal by changes in the Farm Bill that may not have equally affected the other partners in the field. So, we will have to revisit our USDA service center plan that we have right now which reflects about 2,530 offices, and reconsider it in light of the Farm Bill and per budget cuts in one of our other partners, Rural Development. As we revisit the question of FSA's presence in those offices by 1999, might find that we would be at 500 fewer locations. That could mean that other partners will still be at those locations, but not the Farm Service Agency. Mr. Latham. Well, I guess I'm getting a lot of conflicting information because I've got a memo here from the State Executive Director to all of the State and county employees of FSA. This is dated February 20th. He says, according to a fax received yesterday, we are tentatively looking at 35 offices closing by 10/1/97, and an additional 15 offices by 10/1/98. And I just will point out also I think the 500 offices would be about 20 percent of the total number of offices. And in Iowa you're looking initially at cutting--there are 100 offices in Iowa; cutting 35 percent of the offices. And then next year another 15 to go to 50 percent. Apparently this memo is written in response to a fax from you. Mr. Smith. I can assure you that it does not reflect the policies of the Secretary in terms of where we are right now. We're in a planning phase with no plans for cuts of that magnitude between now and September 30th. Mr. Latham. And maybe that should be communicated to somebody rather than responding to what you have faxed to the State offices. Mr. Smith. Mr. Buntrock and I have plans following the hearing today to communicate that. FSA Staffing Reductions Mr. Latham. If you can start in Iowa, I would appreciate it. In the budget you propose to reduce Federal staffing by 4.6 percent, and non-Federal, the county staffing, by 18.7 percent. It seems a little bit heavy on the non-Federal or the county side. Has the Department done everything it can to trim the Washington bureaucracy here before cutting people out there who are actually delivering services? Mr. Smith. Let me ask Mr. Buntrock to respond to that. Mr. Buntrock. We've heard that one before. Let me assure you that that has been our ongoing policy for the last 4 years. As you know we've been doing some downsizing over the last 4 years and have tried our best to keep all of our resources on the front lines in the States and counties. We have reduced the Washington headquarters staff over the last 4 years by about 27 percent. We have reduced the non- Federal county office field staff by about 22 percent over that period. But in terms of the county versus the Federal staffing levels, there are three factors involved in that. First, our Federal staff includes State employees as well as county employees who administer the farm credit programs. Most of the people who work with farm credit programs today are Federal employees. And of course, as you know, our credit programs are funded at a level very close to what it was last year. We have not had the reduction in our credit programs that we've had in some of the other areas. So, as in the last reductions that we made, when we reduce field staff again, we will probably reduce fewer people who work on credit programs than on others. I'm not saying that they will be left out of the reduction, but the number of people who are delivering farm credit programs will be reduced proportionately less than people who are not, simply because of the workload and what they're doing. That's a part of it. Another factor that enters into the Federal employment level is that a lot of it is made up of the support side. Those numbers for our Federal staff include support for the Foreign Agricultural Service and Crop Insurance. I'm sure that some of my associates here would not be too pleased if we reduced that employment, since they're paying us for some of these people. That has some bearing, though not a lot, on this number too. And the last thing is simply this: that you have fixed overhead in some of the support staff such as automation under the old legacy systems and other things. We have already cut that, as I've said, and it's getting more difficult without new automation equipment and some other things to cut that much further. But the bottom line is we will continue to put the emphasis and priority on keeping field people over headquarters people. Mr. Latham. Okay. You're going to eliminate I think about 269, 270 Federal full-time equivalents between the headquarters, State, and field offices. Could we get a breakdown of where those individuals are--whether it's headquarters or whether it's State or whether it's local where those Federal employees will come from? Mr. Buntrock. We do not have the precise number right now. We have a task force working on that now to break that among the States, counties, Kansas City, and Washington, DC. It's probably going to be minimal percentage-wise in the field compared to the total, but I don't have exact numbers. We ought to have them in the next couple of weeks. Mr. Latham. Could we have that when it is available? Mr. Buntrock. Yes. [Clerk's note.--There is no list by location of the proposed reduction of 269 FTEs in FY 1998.] FSA Operating Expenses Mr. Latham. In the budget you have a decrease of $2.75 million in operating expenses at the county offices, I guess in anticipation of the reduction of staff there. There doesn't seem to be any reduction on the operating expenses in the Federal offices. There is no reduction here. Why is that? In the budget there is no reduction as far as operating expenses in Washington. Mr. Smith. While Mr. Buntrock is looking for that, let me make one comment in terms of the Federal, non-Federal issue. It used to be when we were referring to non-Federal within the old ASCS system it reflected the county office system. However, with the combining of the old ASCS and Farmers Home Administration into the FSA structure, now when we look at reductions in Federal staffing, some of those Federal employees are at the county level running the farm credit programs. So, we have a situation here where now when we look at the non- Federal versus Federal we have to realize that some of those are at the county level, and that Federal side at the county level is not being reduced as much because the Farm Bill affected the historical supply management programs that the old ASCS ran through the non-Federal system. As far as that reduction in operating expenses, what that is, stated simply, is that at the local or county level we anticipate paying for less space due to this 1,800 staff-year reduction that we will have. At the Federal level, you do not have those---- Mr. Latham. On the Federal level here in Washington there is no reduction in operating expenses. But you're going to have a reduction in staff here also. Mr. Smith. The point here is that we're still going to have to pay rent for the whole building in Washington. At the local level you will have less rent. FSA/NRCS management Studies Mr. Latham. You should have that paid for by now. Okay. I think both of your testimonies say that USDA may contract for a study of FSA and NRCS offices for the proposed closing and consolidations. If this independent study is to be commissioned, why was the initial internal FSA study done? Was there any corresponding study done at the NRCS before? Why wasn't it coordinated before? You did an internal study in FSA; right? Mr. Smith. That's why it's important to put in perspective that this office closure issue is one that is beyond September 30, 1997, because the Department did commit to do an independent study. We expect to have the benefit of the results of that study, looking at the other partners out in the field, in particular NRCS and FSA, prior to having to make a decision for the January 1, 1999, date. We would not have been able to conduct a study and have input into that study prior to October 1, 1997. Nonetheless, if we are going to meet a January 1999 date, it's important for NRCS as well as FSA to start looking at its own internal programs and what the situation is in terms of delivering the programs so that information can feed into the multi-agency study once it is commissioned. So, the preliminary preparation that FSA, NRCS and others are doing, including Rural Development, in my opinion would be a part of the overall study. FSA IRM Expenditures Mr. Latham. I guess, Mr. Buntrock, in your testimony you talked about $104 million request for the computer and telecommunications which is in addition to, what, $109 million in 1997. There is a moratorium. What was the money spent on, the $109 million in 1997, knowing that there is a moratorium on? Mr. Buntrock. Well, a part of this funding was for some updating or some changes in terms of software and even hardware in the old legacy system to keep going. In other words, what we have done in some of these instances is we have replaced computers of the System 36. We've upgraded it. But that was in 1996. I am also informed that we have not spent much of the 1997 computer money yet because of this moratorium. Mr. Latham. How much was spent? Mr. Buntrock. We don't have the exact number at hand. Let me give a little bit of background on the automation and the moratorium. We looked from the standpoint of our agency at about 825 USDA service center locations where we know Rural Development is going to be with their new system. We're moving ahead with installation of wiring and equipment in those locations where we know the Farm Service Agency is going to be collocated with them because under any proposed plan you would want to use, we're going to be there. Mr. Latham. Have you made determinations where they're going to be for sure? Mr. Buntrock. I believe for Rural Development, they have, yes. We've started wiring in some States. And I think those are all identified, yes. Mr. Latham. Okay. Mr. Buntrock. And it's from there on that we've got the moratorium on how many we can wire. We talked at one time about wiring a total of 2,700-something offices across this country. We are proceeding up to the 825, and from there we're kind of holding. The amount we've spent up to this point I don't have available here but we can get it. That's where we're at. Mr. Latham. Doesn't that conflict with the moratorium to having spent any money? With the moratorium in place, you're not supposed to be spending money; right? Mr. Smith. Let me see if I can shed some light on what is being done. There are provisions even under the moratorium for waivers. But those waivers are not given unless the expenditure will support the overall concept of service centers. With the partnership, Rural Development is expecting to be in about 825 locations. Rural Development is expecting that they will have a cost avoidance of about $230 million if they are able to proceed. The other partner agencies, NRCS, and FSA, are in positions where they have to determine whether they will be able to collocate with Rural Development at those locations in order to allow that agency to move ahead and achieve that cost avoidance. So, we were able to prioritize areas where FSA was most likely to be collocated in service centers, up to the 825 locations that Rural Development would be in, so that we could move ahead with the LAN/WAN system to support their initiative; because without the LAN/WAN and without the employees and without the funding for it, their programs would have been in jeopardy. So, we did look at partial implementation of the requirements during the time of the moratorium. Mr. Buntrock. Just to add to what Mr. Smith has indicated, most all of the work that we're doing now was work that was contracted for in fiscal year 1996. The moratorium actually applies to new business in 1997, where we're at right now. And the work that's going on right now, most of that local area and wide area network wiring, was contracted for in 1996. Mr. Latham. Thanks. Could we get a list of the 800-and something offices that you know are going to be there? Mr. Smith. We can give you a list of those that Rural Development has identified. [Clerk's note.--The information was too lengthy to print and has been retained in the Committee's files.] Mr. Latham. Okay. I've got some more questions I'd like to ask. It'll go faster. You know, we talk a little faster in Iowa sometimes than in other parts of the country. Do you want me to continue? Mr. Chairman, I yield and let someone else. Mr. Skeen. Mr. Nethercutt. Foreign Market Development Program Mr. Nethercutt. Thank you, Mr. Chairman. I've been a strong advocate of the Foreign Market Development Cooperator Program. I think it's a good program, especially from an export State like Washington State which I represent. I notice that there was a carryover of about $27 million from last year. Can you explain for the record why that is? Mr. Smith. I'd like to ask Mr. Schumacher to respond. Mr. Nethercutt. Sure. Mr. Schumacher. Well, Mr. Chairman and Mr. Nethercutt, we also feel strongly that the Cooperator Program has since 1954 performed an outstanding service in promoting our exports overseas. I think some of the charts you have in front of you give you some of the flavor of the progress we've made with the strong support of the Congress during this period. Especially in recent years we've done well and we can do better. But first, just a little bit of background. We have some difficulties this year in the budget. Mr. Dewhurst can assist me in this. We have been using funding for some activities from mandatory funds--particularly for the Emerging Markets Program and the cost of supporting the CCC Computer Facility. The President's budget requests funding for these activities using discretionary funds. That has put a lot of pressure on discretionary funding of which the Cooperator Program is an important part. Maybe Mr. Dewhurst can explain a little bit more on mandatory and discretionary funds because this is certainly going to impact the Cooperator Program. A part of the need for the carryover is because, in the past, the cooperators in overseas offices have long-term leases and contracts with staff. The cooperators need to have some assurance that if there were really serious problems with Cooperator Program funding, they would have some forward funding to cover the cost of closing these overseas offices. So, they put some in the carryover. That is going to be substantially reduced according to this budget. Mr. Dewhurst may want to further amplify on the issue of mandatory and discretionary funds. Mr. Nethercutt. I hear what you're saying. I guess I'm looking at the breakdown, actual versus estimated 1994, 1995, 1996, 1997, 1998, 1999. I see $44.1 million in 1994, a carryover balance. And then for fiscal year 1997, $28.7 million; fiscal year 1998, $27.2 million. I realize there has to be some forward funding. I'm just wondering if it is necessary to have that much carryover and are we using the FMD program to the maximum. Mr. Schumacher. Well, these are multi-year programs and they're contingent liabilities. The cooperators have done their budgeting on a forward funding basis, they need to have some forward funding for these contingent liabilities. And as you noticed, in the budget, the carryover balance has been reduced from $44 million to $27 million. That is a very substantial drop in the carryover. Mr. Nethercutt. Well, Mr. Dewhurst, do you wish to try to add to Mr. Schumacher's remarks? Mr. Dewhurst. I don't know that I can add anything to Mr. Schumacher's explanation. The program functions with long-term commitments. So, you enter a contract at the front end for a number of years and then you spend the money over the lifetime of the contract. So, you always have an unliquidated balance for the program. The question is, what should that balance be? Butthe cooperators have always felt strongly they needed some assurance of a continuing flow of money through the terms of the agreement. Mr. Nethercutt. What would be the ideal carryover, given the consideration for the obligations of the program? Mr. Dewhurst. I'd just have to be honest and tell you I don't know that answer. Mr. Nethercutt. It would be an arbitrary answer, probably? Mr. Schumacher. You know, the cooperators would certainly like 6 months for the contingent liabilities. That's been dropping quite a bit. So, they are concerned if it drops any further. EEP FUNDING Mr. Nethercutt. I heard the testimony about export enhancement and EEP funding. I know that the request is for $500 million. I think we've had $100 million in the past. How much has been used this year of EEP; any? I know it's early. Mr. Goldthwait. This fiscal year so far we have not spent any funding on EEP because of the rather unusual market circumstances. Mr. Nethercutt. I guess perceptions can differ about how much we need to have. I know it's an important program. It's an important component of our export enhancement strategy obviously, but I guess I wonder why we need $500 million when we have used only about $2 million on wheat last year. And I understand the differences, I mean, what the market conditions dictate. In a time of tight budget, I just wonder if this is the best way to spend taxpayer dollars. Maybe $200 million would be enough. Mr. Goldthwait. May I comment? Mr. Nethercutt. Sure. Mr. Goldthwait. I think the need for having this in the budget as a very important deterrent as well as a potential expenditure is demonstrated by the current behavior of the European Union. They are continuing to subsidize their wheat exports under market conditions where they would probably be selling just as much without subsidization. Today when we have rather limited stocks to sell, European subsidization is not hurting us other than on a price basis. In other words, they're not constraining our market share. But if we see in the new marketing year that we have ample supplies, in a number of locations, we very well could be in a situation where we would need to draw on the Export Enhancement Program in order to maintain market share. Mr. Nethercutt. But $500 million is what you feel is necessary to draw on? Mr. Goldthwait. We believe we need the full funding. That level is already considerably below the level we could spend under the GATT agreement. If you look at the chart closest to you, you will see that the ability of the Europeans to subsidize goes far beyond what we would be able to do, in the event that they wish to become more aggressive. Mr. Nethercutt. I appreciate your answer. We're going to be looking at it, watching it and hoping that if it's there it will be used under proper circumstances. We don't want to have too much or too little. I guess I'm looking for the optimum amount. One final question in my time. I notice that the President wants to take money from Public Law 480. I think it's Title I. I think that's what the testimony said to offset supplemental requests for WIC. I have a little bit of a parochial interest in the subject of Public Law 480. But on the other hand, I'm thinking that we do have obligations that can be met by American farmers around the world through Public Law 480. I'd like to have your comment for the record on your justification for the President's proposal to take funds from the Public Law 480 program. Mr. Smith. Chris. PUBLIC LAW 480 REDUCTIONS Mr. Goldthwait. We are not pleased that we have to put forward a budget request that suggests a cut in our food aid resources. We, unfortunately, must make some trade-offs and this is one of the ones that we've found it necessary to include in the budget. Perhaps to put it in a little better perspective, I would note that the most recent projections released by the Economic Research Service suggest that the total world need for food aid in the time corresponding to roughly fiscal year 1997 will drop by about 5 million tons to a relatively low, 9 million tons, because of changes in prices. We believe that the total Public Law 480 budget that we are suggesting will supply the same level of roughly 3.2 million tons that we are able to supply with a little more money in the current fiscal year. So, we will in effect be able to meet more than one-third of that projected world need with the budget that we are proposing despite the reluctantly suggested cut in Title I. Mr. Nethercutt. Well, thank you. I would urge caution with regard to that proposal. I would personally rather see it come out of the Food and Consumer Services or something under which WIC has some major jurisdiction. Certainly I think it would be more advisable. I thank you. Mr. Skeen. Mr. Dickey. Mr. Dickey. How are you, Mr. Smith? Mr. Smith. Fine. Thank you. FSA WORK MEASUREMENT SYSTEM Mr. Dickey. The panel. This has to do with the FSA proposed cuts. The way they are distributed between the States and within the States will no doubt be a great controversy. And apparently there will be hearings on the issue at the authorizing committee level. In deciding how to distribute the cuts, it seems that workload levels should be the determining factor. Just exactly, Mr. Smith, how is workload measured? Mr. Smith. I'd like to ask Mr. Buntrock to explain that system, although I have some general familiarity with it, having been in the old ASCS for a number of years. As it relates to the new Farm Bill, the change in the mission of the Farm Service Agency, and the reorganization of that agency, I'd like to ask Mr. Buntrock to respond. Mr. Buntrock. Mr. Dickey, the old ASCS for many, many years had a pretty sophisticated workload system; one that's been recognized at USDA for a number of years. Very simply stated, it measures a unit count of work items, which can be anything from how many program applications are processed to how many farm records are maintained in the county. And of course, the workload measured by that system reflects a significant impact in terms of geographic distribution as a result of the 1996 Farm Bill. Let me explain. Mr. Dickey. Say that again. fsa workload Mr. Buntrock. I said, the workload distribution has been impacted in terms of the 1996 Farm Bill compared to the 1990 Farm Bill. Without question, the geographic distribution of the workload has been impacted, and the changes shown up in the system. And let me just generally explain. Let me take for example the Midwest, where you fundamentally have grain crop production. In administering the old commodity programs for wheat, feed grains, and soybeans, we had a heavy workload in acreage reporting and a lot of other associated work items that were performed in the county offices. Under the 1996 AMTA, the 7-year contracts that we entered into eliminated or reduced that particular workload item compared to the old programs. So the workload was without question impacted there. Mr. Dickey. Is it less or more? Mr. Buntrock. Less under the 1996 Act. Now compare that, for example, to the conservation workload. Under the old farm bill, we had a $75 million Agricultural Conservation Program administered by the county offices of the old ASCS. We currently have the CRP as well as a role in assisting the Natural Resources Conservation Service with a $200 million conservation program. So, where you have heavy participation and orientation toward conservation in the Northeast and some of the other areas, you did not have nearly the significant reduction in the workload that you did in some of the other areas. It's a combination of these things that is going to determine the distribution of workload. Mr. Dickey. Can it be accurately estimated on a county-by- county basis? Mr. Buntrock. Yes, I think it can be. One of the things that I might indicate here is that there are a lot of different opinions and different perceptions of what the Farm Service Agency is doing today versus what they were doing in the past. Most folks of course agree that overall the workload is less than it was before. It's the degree of decrease that has been the subject of a lot of conversations and a lot of meetings that I've held with managers in the agency. I'm talking about State directors. I'm talking about county office people who are out there. And there is a lot of difference of opinion in terms of how that is. And I think a lot of it has to do with this regional impact that I've talked about and how that affects them. So, this is not a real easy budget process, because what we're really faced with in FSA in the coming years as I see it is not just a matter of reducing across the board, but there will be some impact on the distribution of resources in the program delivery system. Mr. Smith. Mr. Dickey, there is one other point I'd like to make too. And that's with regard to the enrollment in the Conservation Reserve Program. In our budget baseline we anticipated that we'd get 19 million acres enrolled in 1997. But we won't know until we complete the signup that began this past Monday how many acres will be enrolled during this time period. And obviously that is a major workload item at the FSA county level, to the point that our county offices are going to be very taxed with their current resources to be able to implement it. Under the previous CRP signups the most that we enrolled in any one year was around 9 million to 10 million acres. So, if enrollment were to draw out into subsequent signups going into additional fiscal years, it's difficult for us to pin down at this point what level of workload will be there and when it will be there, impacting the 1998 budget or subsequent budgets. county office closure criteria Mr. Dickey. Okay. Thank you. Compare that reference, the workload to the 25, which I think is an arbitrary 25-mile limit basis. Can one of you all tell me why the 25-mile limit basis is better than a workload comparison? Mr. Smith. We do not believe that we can use any single entity, workload or mileage, to evaluate----I'm assuming you're referring to office closures. Mr. Dickey. That's correct. Mr. Smith. We cannot limit the criteria to either workload or mileage. The report that came in from FSA took an initial look at convenience to the producer, and mileage was used as a basis of convenience to producers. But in the previous decision on which offices to close, there were a number of additional factors that we looked at. Many of those were derived through consultation with Members of Congress and with the public in general. And we anticipate that as we establish the criteria for closing offices by January 1, 1999, the 500 that we referred to in the budget, in addition to the geographical or the mileage criteria, there will be additional criteria that will be factored in. The Secretary has made a commitment that as he develops these criteria, they will be developed in conjunction with those who are affected, including Members of Congress. Mr. Dickey. Okay. I'm going to have to rush. I've got one more question. Let me say what I said to Mr. Glickman. He said he was going to bring these things up and review them with Congress. And I said there was no need to review it with me if he was not going to cut any in the Fourth District of Arkansas and the same holds true to y'all. You understand, just don't worry with me if you're not going to do anything there. fsa county committees All right. I need one more comment about replacing the county committees. Can one of you gentlemen talk about what we would lose or what we gain? I can't imagine any gain, but what would we lose by eliminating the county committees that we would eliminate in a closure? Mr. Smith. Well, one of the recommendations coming out of the Civil Rights Action Team review suggested a modification in the county committee structure. But I don't believe we have an active recommendation to eliminate the county committee structure at this point. Mr. Dickey. In other words, it's a merger of two; that there would be two county committees that would come in there? Now, I'm talking about county committees, not area committees. Mr. Smith. Right. I understand what you mean now. Perhaps you can answer the question, Mr. Buntrock. Mr. Buntrock. Let me answer the question this way. And of course, I'm going to predicate my comments too on the fact that this is all in the discussion stage and there is nothing that has been proposed. But if, for example, we closed 500 FSA county offices, we've still got some options and a choice in terms of county committees. We could leave the same number of county committees as we've got today and operate as we currently do in offices where we've already got two or three counties that we're servicing out of one office. The 1994 USDA reorgnization legislation provided that we go to area committees as opposed to county committees. And there has been a mix in terms of how we have done that. We have cases now where we have merged two county offices and have one county committee, but we've gone from three to five committee members in that case. Or if we merge three county offices, we go to more members. But we do not necessarily have to go to fewer committees if we've got fewer county offices. I think we probably would overall go to fewer county committees, but we've got discretion in terms of how we do that, depending on distance and size of counties and so on. Mr. Dickey. Thank you. Mr. Skeen. Thank you, Mr. Dickey. Let's go to Mr. Rogers. Mr. Rogers, I understand you have a statement that you'd like to put into the record. Would you like to abstract it, read it? Mr. Rogers. I will summarize the statement. Mr. Kingston. Mr. Chairman, would you yield to me one minute? market access program Mr. Skeen. I will yield to the gentleman. Mr. Kingston. I wanted to ask one question that I have in writing for the record. But the other one I don't have for the record. On page 19 of Mr. Smith's testimony it talks about MAP works through State regional trade groups, private companies and so forth. One of the biggest criticisms we have as supporters on this committee of MAP, and you get bipartisan support, is that large private companies benefit from MAP. What I would like to see and I think other Members of the subcommittee would like to see is what is the breakdown of that? How can we combat this corporate welfare charge? That's just for the record. If you could reply to the whole Committee it would be very helpful. [The information follows:] [Pages 27 - 28--The official Committee record contains additional material here.] Mr. Kingston. I have another question, Mr. Chairman, I'll leave with you. Thank you and Mr. Rogers. Mr. Skeen. We will submit it for the record. public law 480--titles II and III food aid Mr. Rogers. Thank you, Mr. Chairman, Members of the Subcommittee, it's an honor for me on behalf of AID to appear today to testify on Public Law 480, Title II and Title III Food Aid Programs. If I might, I would like to submit a written statement and then just begin with some brief oral remarks. Mr. Skeen. It will be done that way. Mr. Rogers. Thank you sir. At the outset, I would like to express my appreciation for the close and collegial working relationship we have with the Farm Service Agency and the Foreign Agricultural Service. They are both essential to the success of our Title II and Title III programs. Mr. Chairman, food aid has always had strong support from the American people and bipartisan support in Congress. For many years these programs have effectively served important humanitarian, economic development, and foreign policy interests of the United States. Now, we must recognize we are in a period of change. Food aid levels have declined sharply. In 1986 total U.S. food aid from all sources amounted to 8.3 million metric tons and rose to 9.1 million metric tons in 1993. Fully funding the budget request for food aid in 1998 will provide, in comparison, 3.2 million metric tons. A part of this decline results from budget reductions. But a significant share comes because section 416(b) surplus commodities are no longer available. These surplus commodities were especially important to our overseas disaster feeding programs, supplying over one million tons for that purpose in 1993. We have absorbed food aid reductions by ending programs in countries where good progress was being made on food security. Indonesia, the Philippines, and Morocco are examples. We have also focused our programs more tightly in the remaining countries, concentrating on assisting those most in need, especially women and children. However, we've remained very concerned about the food security of the poorest countries of the world. In Africa, the number of chronically malnourished is expected to grow to over 300 million people; more than any other region. Since Africa is prone to drought and also to civil strife, this growing insecurity will place millions more vulnerable people at risk. Our Title II and Title III programs have a successful track record in promoting food security. They remain critical to an effective U.S. response to a changing world. For Title II, we are proposing $837 million in 1998. This is the same level appropriated in fiscal year 1997. Title II Programs are the backbone of U.S. humanitarian assistance overseas. Title II food reaches over 40 million poor people each year. Much of it goes to grassroots development programs to support maternal and child health and to improve the productivity of small farmers. These programs are run very capably by U.S. private voluntary organizations such as CARE and the Catholic Relief Services. Title II also funds Emergency Assistance Programs. With the elimination of section 416(b) surplus commodities, and with the growing number of complex disasters we confront, emergency feeding under Title II has become increasingly important. Here again we are fortunate to have strong partners. U.S. private voluntary organizations manage emergency feeding. The World Food Program headed by Catherine Bertini is also a major implementing partner. For Title III, we are requesting $30 million in fiscal year 1998. This is essentially the same level appropriated in fiscal year 1997. Title III is focused on the poorest countries of the world where over 70 percent of the population earns its living from subsistence agriculture. It is no secret that poor farmers, like all farmers, will not produce if their output is heavily taxed to support city dwellers or if they can't get input like fertilizer at a fair price. Title III, which as proven itself very successful in Asia and Latin America, helps very poor countries to implement needed agricultural policy reforms. To complement these efforts, AID is also proposing a multi-year African Food Security Initiative to be funded from the Development Assistance Accounts. I would also like in closing to note our continued strong support for the Farmer-To-Farmer Program which funds U.S. volunteers to provide short-term technical assistance to developing countries. These volunteers, U.S. farmers, and small agribusinessmen have come from 49 of the 50 U.S. States. Farmer-To-Farmer draws funding from all titles of Public Law 480 and is budgeted at $11.3 million in fiscal year 1998. Mr. Chairman, I'd like to close by stressing again how important our food aid programs are to our national interests overseas. They are essential to successful humanitarian and development assistance programs. As such, they are critical to a successful U.S. foreign policy. I'd be happy to answer any questions, Mr. Chairman. Mr. Skeen. Thank you, Mr. Rogers. I tend to agree with you in minute detail because I think this is one of the worst things we have going on in this world today, the lack of food causes more strife and activities of a warlike nature. food aid to north korea I see that the Administration has announced a food aid donation to North Korea in cooperation with the World Food Program. Now, I understand this is going to come from Title II of Public Law 480. Could you give us the details of the types of commodities, the tonnage, and the time table and so forth? Would you also give us what steps the Administration is taking to make sure that the aid gets to the people who need it? I'd like the same comment for the distribution in Africa. Mr. Rogers. Yes, sir, Mr. Chairman. Mr. Skeen. It is a very serious problem. We give all this food, but it winds up in the hands of the wrong people or it has. Mr. Rogers. Sometimes it does. Effective monitoring is essential. I would agree with you 100 percent. Mr. Skeen. How do we get effective monitoring? Mr. Rogers. Well, in the case of North Korea, Mr. Chairman, we have followed that situation for the past 2 years. We do believe that they are approaching a true famine in North Korea. They, of course, have a very authoritarian government. We've provided $8.2 million for food last year. We've been very concerned that any food we might provide not be diverted to the North Korean military in particular. Mr. Skeen. Yes, sir. Mr. Rogers. And we have been able to convince ourselves, from the various resources that the U.S. Government has in this regard, that the North Korean military is not bulking up and that they are not diverting our food for their purposes. Beyond that, we have in North Korea a partner in the World Food Program. And that partner has personnel on the ground that will monitor our food as it goes to the people who are the intended beneficiaries. So, we are convinced that the monitoring system is adequate. Last year we sent in two separate groups of U.S. Government employees to watch the World Food Program as we monitored our food and are convinced that in fact our food is reaching the intended beneficiaries. Mr. Skeen. That's in Korea. Mr. Rogers. That's in Korea. food aid in africa Mr. Skeen. What about Africa? Mr. Rogers. In Africa we follow similar procedures. Africa is a very difficult place to work. There is not the same sort of discipline that there is in North Korea. And so, as we have experienced in the past, we expect that we will continue to experience some diversion of our food. We do the best that we can by financing monitors and tracking it when we do uncover diversions and we attempt to either recover the food or to seek out compensation for the food that is stolen. Mr. Skeen. How difficult is it to arrange for the on-ground transportation? Mr. Rogers. In Africa? Mr. Skeen. In Africa or in North Korea? I would imagine Africa is a far more difficult problem. Mr. Rogers. Africa is far more difficult. We do private contracting. It's quite expensive of course because the logistics in Africa are very difficult for truckers. It's expensive to move food to emergencies in places like Rwanda or Eastern Zaire, which are land locked countries or land locked regions of Africa. The food has to be hauled for a long distance over a very difficult logistical course. Mr. Skeen. You talked also about some of this food being kept by those either transporting it or arranging for the delivery and it being siphoned off for personal gain for one or many administrators. Mr. Rogers. That is one of the concerns that we have to monitor, yes sir, Mr. Chairman. food aid to africa and north korea Mr. Skeen. It's a very tough and a very difficult problem. I hope we can come up with a solution. What types of foodstuffs are we sending over there; grain? Mr. Rogers. To North Korea? Mr. Skeen. North Korea and to Africa. Mr. Rogers. In North Korea the World Food Program has appealed for 100,000 tons of food. We have decided to contribute $10 million. Other donors such as the South Koreans have also agreed to make a contribution. Our contribution will consist of corn-soy blend, which will be directed at children under 5 years of age; a very high nutritional level. Rice, 6,000 metric tons and bagged corn, 15,400 metric tons. All of these commodities will go in with the standard U.S. Government markings, ``This is a gift of the people of the United States.'' Mr. Skeen. Is it coming from American agricultural producers? Mr. Rogers. Yes, sir. Mr. Skeen. All the food? Mr. Rogers. The tenders were let out of Kansas City. It's expected to be shipped I believe out of Houston. chinese food aid to north korea Mr. Skeen. Well, I know there is more corn going through the Panama Canal than ever before in history headed for China. I didn't know whether China is one of our cooperatives, sending in, since they love the North Koreans so well. Mr. Rogers. Actually, the Chinese have contributed. They don't contribute through the World Food Program. They contribute on a bilateral basis. But they have contributed to the North Koreans. Mr. Skeen. They have. Mr Rogers. Of course, they're more interested than anyone else in the stability of North Korea. They don't want a disaster on their borders either. Mr. Skeen. That's a strategic position for them I think. Mr. Rogers. Exactly. Yes, sir. Mr. Skeen. But at least the folks are getting fed. Mr. Rogers. They are starving now is the only way to put it. The ration that we believe they are getting now is 100 to 150 grams of food a day which is about a quarter of what you need to subsist. It is less than a fist of rice a day. So, they are very hungry people. Mr. Skeen. Well, it's a well-intentioned program. We've had some trouble in the past, particularly in North Africa and other places. We appreciate the hard work you folks do to make sure it gets delivered there. I know it's a tremendous responsibility. We hope we can help get this situation alleviated. Mr. Rogers. Thank you, Mr. Chairman. Mr. Skeen. Thank you. I'm going to let Mr. Latham chair and I'm going to go help out the folks in Interior. Would you take over Mr. Latham? Mr. Latham. Yes, Mr. Chairman. Mr. Skeen. I want to thank all of you for your testimony. Your responses have been good. We've kept you on the griddle here for quite awhile. Mr. Latham is a good man and this is a good way to break him in, in taking this responsibility and so forth. One of these days he's going to wind up chairing this thing. Mr. Latham [presiding]. Thank you, Mr. Chairman. We can have real fun now. model farm project in russia Mr. Rogers, there is a I think it's called Model Farm Project in St. Petersburg in Russia. How long has that been going on and how much have we spent on that? Mr. Rogers. I confess, Mr. Chairman, I'm not familiar with the project. Mr. Latham. All right. Mr. Goldthwait. That project is actually a USDA project which was founded at the suggestion of one of the former members of the House Agriculture Committee, Mr. Madigan. It has been going on now for years and is currently in the last year of its funding. The project started off with the idea that we were not going to build ``a showcase model farm,'' like most people. Rather, we would take a couple of American farm families to Russia and put them on the ground there and let them teach small Russian farmers exactly how to manage farms and try to be able to do this with the kinds of equipment and the kinds of supplies that were available locally in the economy without dependence on a lot of input that they would not have access to once the American contingent left. And as I say, this is probably the last year that the American farm families will be working. About 28 of the 32 farms that were established as a part of this project are making it. That is, they are breaking even or making a profit. Mr. Latham. How much have we spent on that? Do you know? Mr. Goldthwait. I can supply the precise number for the record. Probably a couple of million dollars in total. Mr. Latham. I guess I've heard estimates higher than that. Mr. Goldthwait. It may be somewhat higher. We will supply you with the exact number. [The information follows:] Cost of Model Farm Project The Model Farm Project in St. Petersburg, Russia, began in fiscal year 1992 and should be completed by the end of fiscal year 1997. We estimate that costs will total $2,470,000 for this multi-year project. Mr. Schumacher. Jim and I have actually visited the farm in November of 1994. And it's rough. The American farm families live in very simple housing and they're working very, very hard under very difficult conditions. When I was there it was in Leningrad. It wasn't St. Petersburg. Thank you. fsa irm expenditures Mr. Latham. I want to go back just a little bit on the computer and telecommunications. The $104 million in the request, is that assuming that you're lifting the moratorium? Also, where in the budget is the $104 million? Mr. Buntrock. Let me find a specific reference. Mr. Latham. Just to get you thinking too; does the Agency have an information technology architecture plan in place? Could we see it if you do? Mr. Buntrock. Let me answer the first part of the question first. The $104 million is in the Commodity Credit Corporation budget. In other words, it's not an appropriated amount. The second part of your question about whether we have a specific plan--what we have is a short-term kind of plan for ADP support to operate our programs for the next 2 to 3 years. Yes, we have that, and we'd be glad to share that with you. That does not include contingency operating plans if we do not get the merged system in place over the next 2 or 3 years, but we've been working on the plan for the merged system. Mr. Latham. Are we going to be spending this money and then having to do it all over again with the overall plan if it's not compatible? Isn't that the problem now that every agency has their own system? Mr. Buntrock. Let me give you an example. I'll just use one scenario. This doesn't directly answer your question. But I think I can do that. I made reference earlier to upgrading the old legacy system of the ASCS. I'm more familiar with that one. We've got the other systems for farm credit and others too. We were spending, for example, about $40 million a year to maintain the ASCS system. That's just to keep it running; keep the doors open; keep things going. We replaced every computer in the country in every county office. The cost involved, contract and all, we paid for and installed in about 18 months. The point is that all of these old systems cost a lot of money to maintain, with your contracts, your maintenance, et cetera. And then also as you get new programs and new responsibilities, you've got to develop new software in order to implement them with the old systems. What we were in effect doing, I would describe it this way, is to take the 3B2's from the farm credit system, the old System 36's, some of the AS-400's and some of the other old systems and link them together within these existing budgets. In answer generally to your question I'm pretty confident in saying no, I don't believe that we are spending an unusual or unreasonable amount of money on these old legacy systems while we are preparing to go to something else. And I think we can establish that pretty well. That's been, I know, a concern. But I think I can honestly say that we have not. I'll give you one other example. As you know the Department and the folks in Rural Development have designed the DLOS system. We went out and looked at that, and we could see some application of that system for agricultural credit; not all of it, but some application. I would envision that we would use some of that for our programs as opposed to going off on our own. That's the kind of planning that I'm talking about. We could furnish you some of the actions that we have taken concerning our systems and some of the determinations that were made. Mr. Smith. Mr. Chairman. Mr. Latham. Yes. Mr. Smith. If I may, let me make a comment about the process overall in terms of the moratorium and where we are going. We do not anticipate that the moratorium will be lifted until we have in place plans to make sure that we aren't spending money which can't be justified as contributing to the overall USDA system as opposed to the so-called stove-pipe systems of the past. Currently, we have an Executive Information Technology Investment Review Board, which is chaired by the Deputy Secretary, and which is in place to help the CIO, whom Mr. Dewhurst mentioned earlier, to assist in making sure that whatever expenditures we make are consistent with the Department's overall architectural change in the telecommunications systems. One of the things that would certainly be most beneficial for us would be to have some stability while we're trying to design this new architecture for information systems. As you know, the Farm Service Agency has been substantially impacted by the Farm Bill. Their mission and the products that they are delivering to their clients have been substantially in flux since the 1994 reorganization. So, once we have made progress, then there are other changes that we must fold in. But having said that, we feel we have in place now at the Department, at the highest level, with the Deputy Secretary as the Chair, the organizational structure to ensure that whatever expenditures are made are consistent with the overall objectives of having a single support system. Mr. Latham. You understand my concern. I think a few years ago we spent $115 million to try and get everything put together and they finally threw up their hands. And with the Secretary here the other day, the fact of the matter is you can't e-mail directly from the Whitten Building to the South Building. I mean the system is so piecemeal right now. And to keep throwing money at that system is not good management. I just want every agency to work together and finally get the thing coordinated. We've wasted an awful lot of money. Mr. Smith. I might also add anecdotally, however, that I was in South Africa recently and I was able to read my e-mail from my hotel room and stay abreast of what was happening back here in Washington, which was very helpful. Mr. Latham. That's fine if you're not in the South Building. It depends on which building you're in if you want to talk to each other there. fsa staffing reductions I don't want to take a lot of time here. Could you give me some idea, just submit it sometime. There is a decrease, I think from 196 to 188 in Iowa. Where are those people going to come from? Break that down. Mr. Buntrock. I don't have a specific answer. I will just give you some general background on this. I'm going to refer back to just about 8 months ago or less than that. When we went through the reduction in Iowa as well as in other areas, of course workload was a factor as it is always going to be in any downsizing that you're going to be doing. But I can tell you that we gave the State directors a lot of discretion as opposed to directing from Washington that you will use some formula across the board. We did not do that. And what we did last time, I suspect, will be done again. You could do it under this kind of a scenario involving office closings or keeping offices open. It has some bearing on this. Let me tell you what I'm talking about. We do have some offices with maybe three people in there. If you were going to do an across-the-board cut in people and take, say, one out of every county office, then in an office with seven or eight people that would have one kind of impact. In an office with three people, it would have a different kind of impact. That's a consideration in terms of why you would not exclusively do it across the board, because if you did it that way, you might lose one in that three-person office. So, you may not want to do that if in fact you wanted to keep an office open there, just from the logistics of it. I can tell you that we also have made progress in merging our farm credit program delivery with the other activities of the Farm Service Agency. Under reorganization, during the transfer of the farm credit function to this agency, in some instances we had adequate staffing who came with the program to administer and deliver the program, and in other States, we did not. There was a need for cross training. What I'm saying is that in some States we may do a proportionate reduction in people who are administering farm credit programs as well as everything else. In other States we may not be able to spare any of them because we're short in terms of the folks that we've got with experience and capable of delivering credit programs without training. I say this to you because it's going to be a combination of all of these things. But the bottom line will be that we will try to distribute the cuts as broadly as we can. We will go through a buyout offer first to find out how many folks want it. We will probably offer the buyout across the board as opposed to targeting offices that are to close, even though it may mean in some offices we may have to fill vacancies. But we get more people taking the buyout by offering it across the board. It is still less than we have to reduce, and you do not get the right distribution to handle the workload, but you do get more takers, so that there's less of an impact on people. So, it is all of those factors that I'm talking about that will be used for this downsizing. Mr. Latham. As far as the offices themselves, I guess obviously I've got a concern. Thirty-five was the target number out of the 100, which is 35 percent of our offices--that's a tremendous number of offices to begin with when the overall goal is the reduction of 20 percent. It seems disproportionate as far as the offices. That's obviously a concern. I have a couple of other questions that I'll submit for the record. explanation of rma fte increase Just one thing more. On the Risk Management Agency, there is a request I think for 30 full-time equivalents. In the Farm Bill we're going to phase in the private delivery of crop insurance. I'm just wondering, how do you justify 30 more people? Mr. Ackerman. Thank you for asking me a question this afternoon. Mr. Latham. We've more if you want to stay. Mr. Ackerman. We work in a very close partnership with the private sector. The small increase for the Risk Management Agency is an adjustment. We have gone through a significant process of downsizing over the past several years during which our program staff has been reduced significantly. We want to use these new staff positions to help us support the private sector. The Federal Crop Insurance Program has undergone a great deal of growth in the past 3 years. It has more than doubled in size. Working with the private sector, we have introduced revenue insurance this year as a major item. There are quite a few expectations that risk management will expand both in quantity and quality to fill a lot of the gaps left by changes in other farm programs. To do that takes a certain amount of staff. And we have found that with the reductions we have had in the past several years, we've needed to adjust in order to support the workload and to support the private sector. Mr. Latham. I'm a very big supporter of the revenue assurance type of policies and getting them into the private sector. Philosophically--I certainly don't want the Government competing with the private sector. I guess it's a little confusing why if you're moving that out, you need more staff. Do you have a good explanation about why you'd need more people to do less down the road. Mr. Ackerman. Well, for example, approving the revenue insurance products that were recently approved this year required a significant amount of economic and rating analysis. It also required computer reengineering and software development to enable our system to work with these new changes. Mr. Latham. Very good. I've a couple of questions I'll submit, but we've been here a long time now. Thank you all very much. I appreciate your candor and good answers. Thank you. We're adjourned. [Clerk's note.--The following questions were submitted to be answered for the record:] Farm Services Agency staffing Mr. Skeen. We continue to hear from Members of Congress who say cut some more money out of the Farm Service Agency. This in general is because there have been major shifts in work due to the enactment of the Farm Bill. What has happened to the staffing of the FSA in the last 3 years? Response. The FSA and other USDA agencies have made significant staffing reductions over the past several years. For the 3 years from FY 1995 to the current mid-year FY 1997 level, FSA reduced total staffing 11 percent. These reductions reflect an overall 7 percent reduction in Federal staff years, including 9 percent at Headquarters, and a 13 percent reduction in non-Federal staff years. Since fiscal year 1993 through FY 1997 to date, Federal staffing has declined 19 percent--including 27 percent at Headquarters--and non-Federal county staff years have decreased 22 percent. Total staffing is down 21 percent. Mr. Skeen. What happens if we appropriate everything you ask for in the President's budget? Response. For FY 1998, the President's Budget fully funds an FSA staff-year level of 5,877 Federal and 9,879 non-Federal county staff years. This represents an additional decrease of 2,119 staff years from the current FY 1997 levels of 6,146 Federal and 11,729 non-Federal staff years, and would be accomplished through buyouts and RIF's that are funded in the budget request. Mr. Skeen. Last year, you stated you hoped to reach the proposed reductions in staff years through attrition. But we know that you had a buyout this year. What are the staff-year reductions you attribute to reorganization and which to the Farm Bill changes? Response. It is difficult to characterize the precise staff-year reductions attributable to reorganization and streamlining and Farm Bill changes. However, all of the staffing reductions prior to 1996 were related to reorganization and streamlining. For FY 1996 and future years, the reductions are attributable to a combination of streamlining and the programmatic impacts of the 1996 Farm Bill. Mr. Skeen. Give us a projection for the next 5 years on FSA staffing. Response. Following is a table that reflects staff-year estimates for FSA for the next 5 years based on the 1998 President's Budget. Farm Service Agency Staff Years--FY 1998 Through FY 2002 ---------------------------------------------------------------------------------------------------------------- FY 1998 FY 1999 FY 2000 FY 2001 FY 2002 Staff years Est. Est. Est. Est. Est. ---------------------------------------------------------------------------------------------------------------- Federal....................................................... 5,877 5,877 5,877 5,877 5,877 Non-Federal................................................... 9,879 8,879 6,879 5,879 4,879 Total staff years....................................... 15,756 14,756 12,756 11,756 10,756 ---------------------------------------------------------------------------------------------------------------- equipment purchases Mr. Skeen. Would you provide a table for the record, showing the amount of CCC funds used for equipment purchases and other ADP related costs for the last 10 years, including estimates for fiscal year 1997 and 1998. Response. A table showing the actual amount of CCC funds used for equipment and other ADP related costs in support of CCC programs for the last 11 years and estimates for 1997 and 1998 follows. [Page 39--The official Committee record contains additional material here.] the farm bill's impact on ccc funding for adp and other expenses Mr. Skeen. The Farm Bill proposed a cap on CCC salaries and expenses. Tell us how that provision has impacted the agency. Response. The final version of the Farm Bill restricted the CCC's authority for spending on salaries and expenses and on automated data processing (ADP) equipment. The Farm Bill limits spending for ADP and CCC reimbursable agreements to definitive levels over the FY 1996-2002 period. I would point out that CCC spending on salaries and expenses was not direct CCC spending for salaries, but rather payments to other agencies that assisted in carrying out the Corporation's programs. These payments were made under reimbursable agreements. Section 161 of the 1996 Act significantly limits the use of CCC funds for operating expenses. CCC no longer has authority to purchase personal property, except within authorized limitations. CCC spending for equipment or services relating to automated data processing (ADP), information technologies or related items (including telecommunications equipment and computer hardware and software, but excluding reimbursable agreements), was limited by the 1996 Act to $170 million in fiscal 1996, and $275 million for the 6-year period including fiscal years 1997 through 2002, unless additional amounts for such contracts and agreements are provided in advance in appropriation acts. The amount actually obligated in fiscal year 1996 was $144.0 million. The 1996 Act also requires that CCC submit to Congress on a quarterly basis an itemized report of all expenditures over $10,000, excluding program payments. Section 161 of the 1996 Act also amended section 11 of the CCC Charter Act to limit the uses of CCC funds for reimbursable agreements and transfers and allotments of funds to State and Federal agencies. Starting in fiscal year 1997, the total of CCC fund uses under that section in a fiscal year, including agreements for ADP or information resource management activities, may not exceed the total of such allotments and transfers in fiscal year 1995. CCC obligations for Section 11 activities in fiscal year 1995 were $45.6 million, and obligations in fiscal year 1996 were $49.4 million. Obligations for Section 11 activities are projected at $41.2 million for fiscal year 1997 and $35.6 million for fiscal year 1998. Mr. Skeen. The one issue that continues to irk some of our colleagues, is the spending for computers and equipment. Since the new Farm Bill finished, have you had a chance to reevaluate your field office computer needs? Are you able to quantify the percent of usage of computers for crop insurance, agriculture credit loan activity, and farm payments? Response. The missions that USDA must execute under the Farm Bill and other recent legislation hold promise for increasing service and reducing cost to the taxpayer. It is equally true that revised responsibilities assigned to the FSA require an on-going infrastructure to deliver services. These revised responsibilities include crop insurance reform initiatives such as the nationwide non-insured crop disaster assistance programand catastrophic insurance coverage in under-served States, the Conservation Reserve Program, administrative support for the Environmental Quality Incentives Program, and realigned farm loan activities. With the merger of legacy agencies to form FSA, and the consolidation of administrative support, FSA inherited many diverse computer platforms of varying ages, software and application systems. The former ASCS State and county offices mainly rely on mid-1980 information technology to deliver program benefits. Farm loan programs are supported by 3B2 computer systems, personal computers and laptops. The 3B2 computer systems are no longer manufactured. FSA has begun converting farm loan applications resident on the 3B2 systems to the Advanced/36 Systems. This step is necessary to establish a single delivery system for FSA program responsibilities, an absolute must when faced with reduced staffing. Recent engineering upgrades to minicomputers supporting the remainder of FSA programs have stabilized an important piece of the support structure necessary to sustain operations required by the Farm Bill. However, workstations in excess of 12 years old, along with printers near the end of their useful life, increasingly risk disruptions of service to the customers and will need emergency attention. The challenge before FSA is to synthesize this enormous set of changes into a plan which properly positions the right information systems in the right place at the right time consistent with congressional intent. Efforts are underway to replace this technology through the USDA Service Center (SC) Initiative, a collaborative project involving several USDA agencies--NRCS, RD and FSA. During the first quarter of FY 1997, the placement of the technical infrastructure (integrated telephone and data communications) needed to support SC's was started. Target completion of this phase is December 1997. After all agencies complete business process reengineering/improvement projects which will streamline and improve program delivery, the next phase will involve the establishment of a common computing environment for Service Centers supporting those business functions. This common computing environment will improve delivery of mission-critical programs to FSA and other SC agencies' producers, and advance USDA initiatives of reduced customer burden, better customer service, and easier and more timely information sharing. limits on adp and ccc reimbursable agreements Mr. Skeen. Has there been an impact on the ability of FSA to do its work because of the limitations placed on expenditures in the Farm Bill? Response. The legislated caps for CCC spending for ADP-related expenses instituted for the fiscal year period 1997-2002 have already impacted FSA. The ADP-related amounts in the 1998 Budget needed for FSA to support farm credit programs, conservation programs, and CCC programs represent significant changes in ADP spending from previous budgets. For example, FSA has reduced its planned purchases of digital orthophotography of $12 million in each of the fiscal years 1997-1999 to a total of only $14 million for those fiscal years. The purchase of this photography is a cooperative effort with other USDA, Federal, State and local agencies to increase efficiency by eliminating duplication in acquiring such data. new ccc-funded conservation programs Mr. Skeen. There were several new programs authorized in the Farm Bill--Environmental Quality Incentives Program, Conservation Farm Option, and others. For the record, give us a general description of each and the status of implementing rules and regulations for each. [The information follows:] new ccc-funded conservation programs Conservation Farm Option Conservation Farm Option (CFO) is a pilot program for producers of wheat, feed grains, cotton, and rice. The program's purposes include conservation of soil, water, and related resources, water quality protection and improvement, wetland restoration, protection and creation, wildlife habitat development and protection, or other similar conservation purposes. Eligibility is limited to owners and producers who have contract acreage enrolled in the Agricultural Market Transition Act program, i.e., production flexibility contracts. The CFO is a voluntary program. Participants are required to develop and implement a conservation farm plan. The plan becomes part of the CFO contract which covers a 10-year period. CFO is not restricted as to what measures may be included in the conservation plan, so long as they provide environmental benefits. During the contract period the owner or producer (1) receives annual payments for implementing the CFO contract and (2) agrees to forgo payments under the Conservation Reserve Program, the Wetlands Reserve Program, and the Environmental Quality Incentives Program in exchange for one consolidated payment. The CFO is funded with CCC funds, and is administered by NRCS. Status of CFO: The CFO Request for Proposals for Fiscal Year 1997 is undergoing agency clearance. The expected date for Federal Register Publication is April 1. This request for proposals includes a proposal submission form, guidance for completing the form, and a scoring sheet by which the proposals will be rated. Environmental Quality Incentives Program The Environmental Quality Incentives Program (EQIP) provides technical, educational, and financial assistance to eligible farmers and ranchers to address soil, water, and related natural resource concerns on their lands in an environmentally beneficial and cost- effective manner. The program provides assistance to farmers and ranchers in complying with Federal, State, and tribal environmental laws, and encourages environmental enhancement. The EQIP is administered by both NRCS (lead agency) and FSA, and is funded through the CCC. The purposes of the program are achieved through the implementation of a conservation plan which includes structural, vegetative, and land management practices on eligible land. Five- to ten-year contracts are made with eligible structural or vegetative practices, such as animal waste management facilities, filter strips, tree planting, and permanent wildlife habitat. Incentive payments can be made to implement one or more land management practices, such as nutrient management, pest management, and grazing land management. Fifty percent of the funding available for the program will be targeted at natural resource concerns relating to livestock production. The program is carried out primarily in priority areas that may be watersheds, regions, or multi-state areas, and for significant statewide natural resource concerns that are outside of geographic priority areas. Section 1240(G)(c) of the 1996 Act prohibits the payment of expenditures that are obligated in the first fiscal year of an EQIP contract until the subsequent fiscal year. Status of EQIP: The final rule is expected to be cleared through the Department by March 12. Farmland Protection Program The Farmland Protection Program (FPP) provides funds to help purchase development rights to keep productive farmland in agricultural uses. Working through existing programs, USDA joins with State, tribal, or local governments to acquire conservation easements or other interests from landowners. USDA provides up to 50 percent of the fair market easement value. To qualify, farmland must be part of a pending offer from a State, tribe, or local farmland protection program; be privately owned; have a conservation plan; be large enough to sustain agricultural production; be accessible to markets for what the land produces; have adequate infrastructure and agricultural support services; and have surrounding parcels of land that can support long- term agricultural production. Depending on funding availability, proposals must be submitted by the government entities to the appropriate NRCS State Office during the application window. The FPP is funded with CCC funds, and is administered by NRCS. Status of FPP: During fiscal year 1996, 53 entities from 20 States submitted proposals requesting Federal matching funds of $130 million for 628 farms with 176,000 acres of farmland at an estimated easement value of $330 million. $14.5 million of CCC funds were provided to match 37 government entity programs. This allocation will lead to the protection of approximately 76,000 acres of farmland on 203 farms with an estimated easement value of $116 million in 17 States when all easement acquisitions have been completed. For fiscal year 1997, $2 million in CCC funds was approved by Congress to purchase development rights from farmers and ranchers. Fiscal year 1997 allocations are pending. Flood Risk Reduction Program Section 385 of the Federal Agriculture Improvement and Reform Act of 1996 authorizes the Flood Risk Reduction Program (FRRP) for producers of frequently flooded farmland. The FRRP is available to a producer on a farm with frequently flooded land currently under a production flexibility contract or expiring CRP contract. The participant will receive a one-time payment, not to exceed 95 percent of the estimated PFC payment the participant would otherwise have received. FRRP is administered by FSA and is funded with CCC funds. If a producer receives a flood risk reduction payment, the producer must forgo a production flexibility contract payment and the amount made available for production flexibility contracts must be reduced by an amount that is equal to the contract payments that producers forgo. In addition to forgoing production flexibility contract payments, producers who enter into a flood risk reduction contract must also forgo loan eligibility, crop insurance indemnities, disaster payments, and conservation program payments. Status of FRRP: Regulations are currently being drafted to seek comments on program implementation. It is anticipated that the program will be offered beginning October 1, 1997. Wildlife Habitat Incentives Program The Wildlife Habitat Incentives Program (WHIP) provides financial incentives to develop habitat for fish and wildlife on private lands. Participants agree to implement a wildlife habitat development plan and USDA agrees to provide cost-share assistance for the initial implementation of wildlife habitat development practices. USDA and program participants enter into a cost-share agreement for wildlife habitat development. This agreement generally lasts a minimum of 10 years from the date that the contract is signed. WHIP is administered by NRCS and funded with CCC funds. Status of WHIP: A proposed rule has been published. All comments were received and the final WHIP rule is now in the process of being drafted. conservation program expenditures by state Mr. Skeen. Please provide a table showing expenditures by State for each of the CCC-financed conservation programs. [The information follows:] [Pages 44 - 47--The official Committee record contains additional material here.] flood risk reduction program Mr. Skeen. One of the programs in the Farm Bill was the Flood Risk Reduction Program. The budget justifications indicate an expenditure of $10,000,000 for this in the current fiscal year and nothing in fiscal year 1998. Explain how this program is supposed to work. Response. The 1996 Act authorizes the Secretary to offer flood risk reduction contracts to producers on farms that have frequently flooded acreage under production flexibility program contracts. Producers can receive in advance up to 95 percent of the projected production flexibility contract payments the producer would otherwise have received from the time of enrollment in the Flood Risk Reduction Program through September 30, 2002. In return, producers must terminate their production flexibility contract with respect to the enrolled acreage, comply with swampbuster and conservation compliance provisions, and forgo future disaster payments, crop insurance payments, conservation program payments, and loans for contract commodities, oilseeds, and extra long staple cotton. The 1996 Act provides that the Secretary shall carry out the program through the Commodity Credit Corporation. technical assistance costs for conservation programs Mr. Skeen. For each of the new authorized programs, how much of each may be used for salaries and expenses or other technical assistance? Response. No CCC funds will be used for FSA salaries and expenses for the new programs, but funds will be used for NRCS and FS technical assistance. The following table reflects the amounts and source of funds for each new program and the Conservation Reserve Program. [Page 49--The official Committee record contains additional material here.] conservation reserve program Mr. Skeen. The Conservation Reserve Program has become very controversial as the Department looked at what conservation criteria will be used to set new contracts. Now that the rules allow over 200 million acres of land to be eligible for enrollment, how will you assure that only the highest quality environmental benefits get into the program? Response. Based on provisions of the final rule, approximately 230 million to 240 million acres are eligible to be offered for enrollment. This larger pool of eligible acreage allows the Department to be more selective in the acreage it enrolls. USDA selects acreage through the use of an Environmental Benefits Index (EBI). The EBI is a relative measure of the environmental benefits of a CRP offer compared to the cost of the offer. The EBI utilizes 6 environmental factors that include (1) wildlife, (2) water quality, (3) on-farm benefits of reduced erosion, (4) long-term retention, (5) air quality, and (6) benefits of enrollment in conservation priority areas. It also utilizes a cost factor. The sum of the six environmental factors and the cost factor comprise the EBI. Each offer into CRP is scored and competes with every other eligible offer in the country. Only the highest ranked offers are selected. After the signup concludes, USDA will review the data to develop a minimum EBI threshold to ensure all offers enrolled into CRP provide significant environmental benefits. The benefits of the CRP will be based on the quality of the offers that are accepted rather than the average quality of all offers. Those offers with low environmental benefits will not be accepted. state and county office leases Mr. Skeen. You can use the authority of CCC to lease space directly and not go through GSA. For fiscal years 1996 and 1997, tell us how much space you leased directly and how much you leased through GSA, including the cost of each. What will change in fiscal year 1998? Response. Following is a table that reflects State and county office leases and costs for FY 1996, FY 1997 and FY 1998. COST INFORMATION FOR STATE AND COUNTY OFFICE LEASES [Cost in millions of dollars] ---------------------------------------------------------------------------------------------------------------- FY 1996 FY 1997 FY 1998 ----------------------------------------------------------------------------- Lease type Space (sq. Space (sq. Space (sq. ft.) Cost ft.) Cost ft.) Cost ---------------------------------------------------------------------------------------------------------------- State Office Leases: FSA........................... 425,877 $5.72 383,289 $5.36 344,960 $5.02 GSA........................... 384,429 5.76 345,986 5.39 311,387 5.05 County Office Leases: FSA........................... 6,019,677 50.60 5,417,709 47.39 4,875,938 44.37 GSA........................... 158,312 1.63 142,481 1.52 128,233 1.43 ---------------------------------------------------------------------------------------------------------------- agricultural conservation program Mr. Skeen. Are there any unobligated balances left from the old Agricultural Conservation Program? Response. As of September 30, 1996, there was an unobligated balance of $2.4 million in the Agricultural Conservation Program account. These funds may not be used by States for any new approvals but will remain available for approved producer appeals, errors, and omissions. water quality incentive projects Mr. Skeen. Provide a table showing the average cost per acre of land treated and the number of producers participating in the Water Quality Incentives Program since the program began in fiscal year 1992. [The information follows:] WATER QUALITY INCENTIVE PROJECTS ------------------------------------------------------------------------ Number of Average cost Year participants per acre ------------------------------------------------------------------------ 1992.................................... 219 $7.02 1993.................................... 1,192 7.51 1994.................................... 2,559 7.88 1995.................................... 3,588 7.87 1996.................................... 4,630 5.69 ------------------------------------------------------------------------ Mr. Skeen. How were Water Quality Incentive Program (WQIP) funds allocated to the States in fiscal years 1995 and 1996? Response. An ACP Notice was issued in both fiscal year 1995 and 1996 which provided the guidelines to be used in developing a WQIP proposal as a first step in making WQIP funds available. Project proposals were then compiled, reviewed, and rated at the national level by an interagency team comprised of the Farm Service Agency, the National Resources Conservation Service, the Cooperative State Research, Education, and the Extension Service, the Economic Research Service, the United States Geologic Survey, and the Environmental Protection Agency. The projects were then prioritized according to their ratings. The highest rated projects were funded based on the funds available, after considering congressional directives regarding certain individual projects contained in the respective fiscal year appropriations act conference reports. Mr. Skeen. Provide a list, by State, of projects that received funding and how much each received. [The information follows:] [Pages 52 - 55--The official Committee record contains additional material here.] conservation reserve program Mr. Skeen. Provide a table, for the record, showing the number of acres of conservation land planted in trees, wildlife plantings, native grasses, and other grass species as a result of cost sharing through USDA programs. [The information follows:] CRP Acreage by Type of Cover--Program since Inception Cover Acres Wildlife planting....................................... 1,895,193 Trees................................................... 2,230,241 Native grasses.......................................... 8,127,540 Other grasses........................................... 20,547,026 -------------------------------------------------------- ____________________________________________________ Total............................................. 32,800,000 Mr. Skeen. Please update the table that appears on page 167 of last year's hearing record showing the Conservation Reserve Program (CRP) signup periods, the eligibility criteria used, and the number of acres enrolled. [The information follows:] [Pages 57 - 58--The official Committee record contains additional material here.] Mr. Skeen. Also update both tables that appear on page 169 of last year's hearing record showing the technical assistance costs and ASCS/ FSA administrative costs. [The information follows:] [Page 60--The official Committee record contains additional material here.] Mr. Skeen. For the record, please provide a table that shows the CRP carryover balances for each of the years the program has been in operation. Response. It should be noted that, generally, carryover balances were applied to subsequent years' program costs to reduce appropriation requests. [The information follows:] Conservation Reserve Program--Carryover unobligated balances, fiscal years 1986-96 Fiscal year: Carryover balance 1986................................................ \1\ $0 1987................................................ \1\ 0 1988................................................ 794,282,776 1989................................................ 1,149,617,269 1990................................................ 647,502,996 1991................................................ 320,374,550 1992................................................ 272,198,054 1993................................................ 131,002,896 1994................................................ 138,689,597 1995................................................ 121,820,920 1996................................................ \2\ 110,987,113 --------------------------------------------------------------------------- \1\ Conservation Reserve Program payments were authorized to be made directly from Commodity Credit Corporation funds in fiscal years 1986 and 1987. There were no appropriations made for the program in these fiscal years. \2\ Funds remaining at the end of fiscal year 1996 will be used for conservation technical assistance performed by USDA agencies. The year- end fiscal year 1996 carryover balance is net of transfers to the Agricultural Credit Insurance Fund ($16,400,000) for funding emergency disaster loans and to the FSA Salaries and Expenses Account ($51,270,000) for financing employee separation costs. Both transfers were made under the Secretary's 7 percent interchange authority. --------------------------------------------------------------------------- dairy indemnity program Mr. Skeen. Have any payments been made from the Dairy Indemnity Program for fiscal year 1996? Response. Yes, during fiscal year 1996, 22 dairy farmers in 7 States filed and received payment for claims totaling $207,867 under the Dairy Indemnity Program. These farmers' claims resulted from losses incurred due to aflatoxin contamination discovered in their cattle's milk. emergency conservation program Mr. Skeen. For the record, please provide an update of the table that appears on page 175 of last year's hearings showing the Emergency Conservation Program (ECP) expenditures. [The information follows:] [Page 62--The official Committee record contains additional material here.] Mr. Skeen. What is the current backlog of requests for ECP funding? Response. As of today, March 6, the amount of unfunded requests is $24.9 million. This amount does not include any funds that will be needed for States affected by the most recent severe flooding along the Ohio Valley, the tornados in several southern States, and other natural disasters occurring in other States. Winter storms in several western States have caused severe flooding and extensive damage to farmland, farm equipment, levees, homes, and businesses in those areas affected. Mr. Skeen. For the record, please provide a listing and short description of each approved ECP practice. [The information follows:] Emergency Conservation Practices Practice EC1, Removing Debris from Farmland. This practice provides assistance to remove debris from farmland damaged by natural disasters and return that farmland to productive agricultural use. Practice EC2, Grading, Shaping, Releveling, or Similar Measures. This practice provides assistance to grade, shape, and relevel farmland damaged by natural disasters and return the land to agricultural use . Practice EC3, Restoring Permanent Fences. This practice provides assistance to restore or replace farmland or ranchland fencing damaged by natural disasters. Practice EC4, Restoring Structures and Other Installations. This practice provides assistance to restore structures and installations such as dams, terraces, and waterways damaged by natural disasters. Practice EC5, Emergency Wind Erosion Control Measure. This practice provides assistance to apply emergency wind erosion control measures such as contour or cross-slope chiseling, or deep plowing on similar measures, to farmland damaged by natural disasters. Practice EC6, Drought Emergency Measures. This practice provides assistance to provide water conservation and enhancement measures to permit grazing of range or pasture, emergency water for livestock, or emergency water supply for existing irrigation systems for orchards and vineyards, on land suffering from severe drought. Practice EC7, Other Emergency Conservation Measures. This practice is to allow other emergency conservation practices not covered above. Mr. Skeen. For the record, please provide a list of the ECP expenditures for each of the past 10 years. [The information follows:] ECP Expenditures Fiscal year Outlays 1987.................................................... $4,656,594 1988.................................................... 4,763,344 1989.................................................... 7,893,738 1990.................................................... 12,256,527 1991.................................................... 13,245,469 1992.................................................... 8,854,177 1993.................................................... 27,431,669 1994.................................................... 34,139,167 1995.................................................... 27,206,940 1996.................................................... 25,406,741 -------------------------------------------------------- ____________________________________________________ Total............................................. $165,854,366 object class 41 Mr. Skeen. Object Class 41, Grants, Subsidies, and Contributions, includes county office staff year costs and conservation program obligations. Provide a detailed breakout of this object for fiscal years 1997 and 1998. Response. Object class 41 also includes appropriated subsidy amounts and grant accounts for farm credit programs. Following is a table depicting all components of this object class. OBJECT CLASS 41--GRANTS, SUBSIDIES AND CONTRIBUTIONS--FY 1997-FY 1998 [$000] ------------------------------------------------------------------------ FY 1997 FY 1998 Program estimated estimated ------------------------------------------------------------------------ Emergency Conservation Program................ 44,086 12,230 Dairy Indemnity Program....................... 292 100 Rural Clean Water Program..................... 956 729 Agricultural Credit Insurance Fund program account...................................... \1\ 163,202 97,590 Agricultural Credit Insurance Fund non- recoverable loan costs....................... 12,600 10,000 State mediation grants........................ 2,000 4,000 Salaries and expenses (non-federal County offices)..................................... 542,797 543,537 ------------------------- Total................................... $765,933 $668,186 ------------------------------------------------------------------------ \1\ Includes $28,939 thousand in the FY 1996 emergency supplemental. commodity credit corporation guarantees Mr. Skeen. The Commodity Credit Corporation guarantees loans made by U.S. banks to finance the sale of agricultural products to foreign governments. Would you please provide, for the record, the amount of loan guarantees currently outstanding, by country, and indicate the current status of each of these loans. [The information follows:] [Page 65--The official Committee record contains additional material here.] Mr. Skeen. According to last year's list, six countries were in arrears. What is the current status of each of these? [The information follows:] Update on countries reported behind in their payments last year Dominican Republic: CCC is working with the Dominican Republic to clear up its arrears. The Dominican Republic made a total of $9 million in payments since March 1996 as a good faith payment towards its outstanding rescheduling arrears of $109 million, to show its commitment for resolution. Jamaica: As of January 31, 1997, Jamaica is current on all GSM loans. Peru: As of January 31, 1997, Peru had arrears of $75,332 which is not being rescheduled. Russia (FSU): As of January 31, 1997, Russia has principal arrears of $307,529,330 which will be rescheduled under the Paris Club Agreed Minute dated April 29, 1996. Sudan: As of January 31,1997, Sudan's principal and interest arrears have increased to $96,183,470 from $91,326,839 reported last year. CCC continues to bill but has not received a payment from the Government of Sudan in many years. No current GSM program is available for Sudan. Zaire: As of January 31, 1997, Zaire's principal and interest arrears have increased to $13,534,999 from $12,869,069 reported last year. CCC continues to bill but has not received a payment from the Government of Zaire in many years. Other countries currently in arrears Honduras: As of January 31, 1997, Honduras has principal arrears of $1,337,317 which will be rescheduled under the Bilateral Agreement dated December 4, 1996 not yet in force. Mr. Skeen. What is being done to collect on these loans? Response. We employ a number of collection techniques to collect on defaulted payments. Billing notices are sent to obligors, and meetings are occasionally conducted between the staff of the agricultural attaches and the defaulting institutions, as well as between USDA, Washington representatives, and representatives of foreign governments. We coordinate our collection effort with our U.S. government creditors such as the Export-Import Bank and private sector creditors such as U.S. commercial banks. In the case of Iraq, we are monitoring the activities of the United Nations Compensation Commission for Iraq, related to the liquidation of frozen assets in theUnited States. CCC is on the creditors' committee related to the liquidation of Rafidin Bank of Iraq's subsidiary in London. CCC also informs Treasury's Office of Foreign Asset Control of its outstanding Iraqi claims. In addition, CCC frequently participates in official reschedulings of the Paris Club. Such reschedulings are often our best recourse to collect the hundreds of million of dollars in previously defaulted public sector payments. commodity credit corporation guarantees Mr. Skeen. Are we still selling agricultural products to these countries under guaranteed loans? Response. It is our policy to suspend programming for significant arrears totaling more than $250,000. Nearly all of the arrears under CCC export credit guarantees are public sector, the bulk of which is in countries considered the poorest or in countries where we have legal or political constraints. As of January 31, 1997, the four countries with arrears of over $250,000 that have not been rescheduled were the Dominican Republic, Zaire, Sudan, and Honduras. However, the arrears for Honduras will be rescheduled under a Bilateral Agreement dated December 4, 1996, not yet in force. The other three countries do not have current GSM programs. ccc interest rate Mr. Skeen. What is the current interest rate Treasury charges on CCC borrowings? Response. The rate varies monthly. The current interest rate Treasury charges on CCC borrowings is 5.50 per annum for March 1997. ccc inventory Mr. Skeen. Would you please provide a list of the availability of commodities held in CCC inventory, giving both quantity and dollar values, for fiscal years 1995 and 1996, and the most up-to-date totals for fiscal year 1997. [The information follows:] [Page 67--The official Committee record contains additional material here.] ccc donations and sales Mr. Skeen. Also, would you provide a detailed description of commodities provided from CCC inventory to other government programs, including the quantity provided and its market value. Response. The entire value of CCC domestic and export donations is charged off as a loss. Therefore, no reimbursement is received, except that the value of export sales to the Department of Defense is partially offset by limited recoveries. The donation of surplus dairy products to the Veteran's Administration and the Department of Defense is authorized by section 202 of the Agricultural Act of 1949, as amended. Section 210 of the Agricultural Act of 1956 authorizes the donations of surplus commodities in CCC inventory to Federal penal and correctional institutions. Institutional donations to Research and Other include miscellaneous donations as authorized in Section 505 of the Agricultural Act of 1958, as amended. Surplus commodities are also distributed to charitable institutions, nonprofit school lunch programs, food banks, soup kitchens, and similar nonprofit agencies. Section 416 of the Agricultural Act of 1949, as amended, is the statutory authority for making donations to State, Federal, or private agencies in the United States, including areas of jurisdiction or administration in the United States. The Emergency Food Assistance Act (TEFAP) authorizes the release of commodities to relieve situations of emergency and distress to needy persons, including low-income and unemployed persons. The export donation of surplus commodities is accomplished through foreign governments and public and nonprofit private humanitarian organizations for the assistance of needy persons outside the U.S. These donations are authorized by Section 416 of the Agricultural Act of 1949, as amended, and includes Public Law 480 Food for Progress donations. [The information follows:] [Page 69--The official Committee record contains additional material here.] ccc tefap donations Mr. Skeen. Provide a list of all commodities that have been donated to The Emergency Food Assistance Program since it was established as a temporary program in 1981. Include the quantity and dollar value of each commodity. [The information follows:] [Pages 71 - 73--The official Committee record contains additional material here.] budget request for the credit guarantee program Mr. Skeen. How much did USDA request from the Department of Treasury for the GSM-102 and GSM-103 Export Credit Guarantee programs for fiscal years 1996 and 1997? Response. For fiscal year 1996, USDA requested $423.7 million in subsidy to cover the estimated cost of loan guarantees entered through September 30, 1996. Of the $423.7 million in subsidy, $49.4 million is for costs associated with fiscal years 1994-1995. For fiscal year 1997, USDA did not request any subsidy from Treasury because the fiscal year 1996 negative subsidy reestimate of $571.8 million, resulting from lower costs associated with the 1992 and 1993 programs, will be used entirely to finance the program account. The 1997 President's Budget estimated that $390.3 million in subsidy will be needed to cover the costs of loan guarantee agreements entered into during fiscal year 1997. The balance of this reestimate, $181.5 million, will be used to partially fund GSM program costs in 1998. In addition to the above amounts, $3.381 million and $3.820 million were appropriated by Congress in fiscal years 1996 and 1997, respectively, to cover the cost to administer these guarantee programs. county office employees Mr. Skeen. Please update the table that appears on page 190 of last year's hearing record showing the number of FSA county employees by State, to include fiscal year 1997 and estimates for fiscal year 1998. Response. Following is a table that reflects the number of FSA non- Federal county employees by State for actual fiscal year 1996 and current fiscal year 1997. We do not have FY 1998 estimated non-Federal county office employment levels available by State, since no specific plans have been established at this time regarding the FY 1998 distribution of FSA non-Federal county employees. [Page 75--The official Committee record contains additional material here.] ccc hazardous waste program Mr. Skeen. Describe the fiscal year 1996 and 1997 activity in the hazardous waste account. Response. During fiscal year 1996, CCC completed site characterizations at Leoti, Agenda, and Hilton, Kansas, and the first phase of site characterization at Clay Center, Nebraska. Feasibility studies were completed for Humphrey, Nebraska, and Agra, Kansas. During fiscal year 1997, site characterization will commence at Raymond, Walton, and Wymore, Nebraska. Site characterization studies at Ramona, Kansas, have yet to be completed in fiscal year 1997 due to access agreement problems with the affected railroad. Remedial selection and design have been completed at Hordville, Utica, and York, Nebraska, and Navarre, Kansas. Hordville, Nebraska, and Navarre, Kansas, are sites for which the No Action Alternative under the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA) has been selected by CCC. However, these sites will be monitored to ensure the accuracy of plume predictions and to ensure the protection of the public health. Negotiations with Region VII of the Environmental Protection Agency (EPA) and Nebraska resulted in the selection of a No Action Alternative for Murdock, Nebraska, a site currently under an Order on Consent Agreement between CCC and EPA. A long-term monitoring program was initiated at Murdock, Nebraska, to ensure the protection of the public health. We proceeded to install two new public drinking water wells at Hordville, Nebraska, and completed air stripper construction at Shelby, Nebraska. At Waverly, Nebraska, the only CCC site listed on the National Priorities List for Uncontrolled Hazardous Waste Sites (NPL) commonly referred to as ``Superfund,'' the final remedy outlined in the Record of Decision signed between CCC and EPA has been achieved. Since April 1995, the supplementary groundwater extraction well (SGWEX) has been pumping alone and has captured the contaminant plume. The site will be proposed for delisting from the NPL in fiscal year 1997. It is anticipated that the necessary data will be available during fiscal year 1997 to enable establishment of a timeframe regarding shutdown of the Waverly facility. CCC is working with Nebraska and Kansas to establish a data base and protocols for proposed sampling of private drinking water wells in fiscal year 1997 in both States at sites near former grain storage facilities. Neither State samples private drinking water wells on a regular basis, and both States are concerned that communities that are served by private wells could be contaminated with carbon tetrachloride. As part of this initiative, CCC has solicited bin site survey data from Kansas and Nebraska. This information will be compiled during fiscal year 1997. CCC continues to work with Argonne National Laboratory, Department of Energy (Argonne), to improve site characterization methodologies as well as develop realistic and dynamic methods for risk-based decision making for remedial option selections. Through CCC's sponsorship, Argonne's efforts have resulted in increased savings in site characterization costs compared to EPA's traditional approaches while improving the technical product for correct decision making. During fiscal year 1996, Argonne and CCC produced the first dynamic risk assessment for plume migration that allows risk to be evaluated over time with plume movement. This allows exact delineation of risk-based populations and communities and enables regulators to realistically assess the impact of no action and partial containment alternatives, a major goal of projected Superfund reauthorization legislation. CCC and Argonne also established a broad-based community relations program to ensure community involvement throughout all environmental investigations conducted by CCC. Mr. Skeen. What is the known backlog of site investigations and clean-up? Response. As CCC continues to complete site investigations and feasibility studies, the number of sites scheduled for remediation or long-term monitoring increases. Remedy selection at Utica and York, Nebraska, is complete, and construction should begin in fiscal year 1997. Six sites in Kansas and Nebraska are anticipated to be evaluated for remedy selection in fiscal year 1997. It is also anticipated that these sites will have remedial costs in the vicinity of $500,000 to $2,000,000 for design and construction. Operation and maintenance of these sites may well increase the cost by several million dollars per site depending on the type of remedial system required and the length of time necessary for operation. Even for sites with proposed No Action Alternative selection such as Hordville and Murdock, Nebraska, and Navarre, Kansas, operating adequate monitoring can be expected to vary from $50,000 per year to $75,000 per year. There are at least 18 new site investigations to be conducted in Nebraska, and at least 11 sites in Kansas remain to be characterized. The number of potential sites that may require characterization has increased due to submission to CCC from Nebraska of a list of sites with potential drinking water problems. The number from Nebraska is now 73 sites based on an inventory that includes private drinking water wells. Kansas is expected to submit a similar number this year. Therefore, there are approximately 150 sites to be monitored for the need for complete site characterization. CCC is also working with Nebraska and Kansas to implement sampling of private drinking water wells near former CCC grain storage locations. CCC will carry out a program of sampling such wells for carbon tetrachloride contamination in both States. There are potentially 73 towns in Nebraska and a similar number in Kansas. These wells may require long-term monitoring until site characterization is completed to ensure that no health threat exists. CCC is currently negotiating with the two States to establish such a program. When contamination is found to exist in a private drinking water well, CCC immediately offers the individual an interim clean drinking water supply option such as bottled water or a charcoal filtration system. During fiscal year 1997, CCC will finalize an agreement between USDA and EPA regarding private well testing in Nebraska and Kansas. This agreement will encompass prioritization of sites, sampling methodology, and data sharing. The bin site survey mentioned in response to the previous question is part of this cooperative effort. Obviously, the results of this survey will lead to an increase in the number of sites to be addressed in the future. status of export guarantee programs Mr. Skeen. Of the $5 billion available for the short-term credit guarantee program how much do you expect to use in fiscal year 1997? Response. For 1997, we anticipate total GSM export credit guarantees to be about the same or slightly higher than the 1996 level. As of February 21, 1997, USDA has made available $3.7 billion in credit guarantees. Of this amount, $1.8 billion of sales have been registered to date. Mr. Skeen. What did you use in each of the past 5 years? [The information follows:] EXPORT CREDIT GUARANTEE PROGRAMS, GSM-102 FROM 1992 TO 1996 ANNOUNCED AND REGISTERED AMOUNTS ------------------------------------------------------------------------ Export Announced applications Year allocations received (million $) (million $) ------------------------------------------------------------------------ 1992.............................. 6,074 5,596 1993.............................. 4,592 3,643 1994.............................. 4,213 3,080 1995.............................. 4,066 2,772 1996.............................. 4,134 3,079 ------------------------------------------------------------------------ tobacco program Mr. Skeen. How much was spent for administrative costs in support of the tobacco program in fiscal year 1996? Response. Administrative costs of approximately $14.3 million were expended in support of the tobacco price support program in FY 1996 by FSA in the county offices for direct salaries and expenses. fsa debt write-off Mr. Skeen. How much debt did FSA write off during fiscal years 1995 and 1996? Response. The Farm Service Agency wrote off $982,951,000 during fiscal year 1995 and $1,286,221,000 during fiscal year 1996 for debt related to the farm credit programs. direct farm operating loans Mr. Skeen. How many requests for direct operating loans did you have in fiscal year 1996? Were all of them able to be filled? Of the total amount available to you, how much was obligated? Response. There were 15,216 direct operating loan applications received in fiscal year 1996. A total of $566.6 million of direct operating loan funds were obligated in fiscal year 1996. Demand for direct operating loans was able to be met with the available allocations. A total of $73.5 million of the appropriated $75.1 million program subsidy authority was utilized. direct and guaranteed operating loans Mr. Skeen. Please provide for the record the number and dollar amount supported by direct and guaranteed operating loans, by year, for each of the past 10 years. [The information follows:] FARM SERVICE AGENCY DIRECT AND GUARANTEED FARM OPERATING LOANS OBLIGATED FISCAL YEARS 1987 THROUGH 1996 [Dollars in Thousands] ---------------------------------------------------------------------------------------------------------------- Direct Guaranteed --------------------------------------------------------------- Fiscal year Number of Number of loans Amount loans Amount ---------------------------------------------------------------------------------------------------------------- 1987............................................ 32,096 $1,298,281 13,614 $1,240,738 1988............................................ 23,167 899,501 9,853 892,578 1989............................................ 20,517 856,018 9,863 879,174 1990............................................ 16,600 733,291 9,954 908,748 1991............................................ 10,679 489,890 10,745 1,040,555 1992............................................ 13,784 570,737 10,976 1,107,915 1993............................................ 13,144 545,173 9,783 1,013,341 1994............................................ 15,737 650,965 12,297 1,300,067 1995............................................ 10,712 437,854 12,788 1,378,323 1996............................................ 12,992 566,583 11,445 1,315,848 ---------------------------------------------------------------------------------------------------------------- rescheduling loans Mr. Skeen. Please provide for the record a table showing the number of farms assisted, by State, through rescheduling, consolidation, or reamortization by deferral or by the Interest Assistance Program for fiscal year 1996. [The information follows:] [Page 79--The official Committee record contains additional material here.] Mr. Skeen. Please provide for the record a table showing the same information on a national basis for each of the past five years. [The information follows:] NUMBER OF BORROWERS ASSISTED WITH RESCHEDULING, CONSOLIDATION, REAMORTIZATION AND/OR DEFERRAL [In fiscal year] ---------------------------------------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 Total ---------------------------------------------------------------------------------------------------------------- 8,008 8,146 6,313 4,823 4,974 32,264 ---------------------------------------------------------------------------------------------------------------- GUARANTEED INTEREST ASSISTANCE ONLY [In fiscal year] ---------------------------------------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 Total ---------------------------------------------------------------------------------------------------------------- 1,452 1,244 2,009 1,790 1,208 7,703 ---------------------------------------------------------------------------------------------------------------- Mr. Skeen. How many of these borrowers are again delinquent? Response. There were 5,625 borrowers delinquent as of October 3, 1996, who were assisted with rescheduling, consolidation, reamortization, and/or deferral. In addition, there were 244 borrowers delinquent who were assisted with interest assistance. Mr. Skeen. How many farms were in inventory, by State, and what is the total average estimated value of each farm? [The information follows:] [Page 81--The official Committee record contains additional material here.] Mr. Skeen. How many farms were sold from inventory, by State, in fiscal year 1996? [The information follows:] [Page 83--The official Committee record contains additional material here.] farm operating loan obligations Mr. Skeen. For the record, please provide a table showing how much of the fiscal year 1996 loan allocations were provided for each of the insured farm operating loan programs, such as one-year operating loans, seven-year operating loans, limited resource programs, and socially disadvantaged programs, along with any others. [The information follows:] Direct Operating Loan Obligations, Fiscal Year 1996 (Dollars in Thousands) Regular Rate, one-year........................................ $190,899 Regular Rate, seven-year...................................... 130,192 Limited Resource, one-year.................................... 106,065 Limited Resource, seven-year.................................. 139,427 -------------------------------------------------------------- ____________________________________________________ Total Obligations........................................... $566,583 ============================================================== ____________________________________________________ A portion of the initial direct operating allocation was targeted for exclusive use by socially disadvantaged applicants. The targeted allocation totaled $65,146,000 and $58,861,000 was obligated. Mr. Skeen. Provide the same information for guaranteed subsidized and unsubsidized operating loans. [The information follows:] Guaranteed Farm Operating Loan Obligations (Dollars in Millions) Subsidized one-year........................................... $71,556 Subsidized seven-year......................................... 119,234 -------------------------------------------------------------- ____________________________________________________ Total Obligations........................................... 190,790 ============================================================== ____________________________________________________ Unsubsidized one-year......................................... 85,675 Unsubsidized seven-year....................................... 440,383 -------------------------------------------------------------- ____________________________________________________ Total Obligations...........................................$1,125,058 ============================================================== ____________________________________________________ Mr. Skeen. Did any of the legislatively mandated set-asides cause funds to go unused at the end of fiscal year 1996? Response. $3,155,964 of guaranteed operating budget authority was left unused at the end of the fiscal year. A portion of the guaranteed subsidized loan funds were initially targeted for socially disadvantaged applicants and were released for any eligible applicants near the end of the fiscal year. Mr. Skeen. Did any legislative changes occur in the Farm Bill to allow better management of expenditures for loan programs? Response. The 1966 Farm Bill requires the transfer of unobligated guaranteed operating-unsubsidized loan funds to the direct farm ownership beginning farmer loan program on August 1 and September 1 of each fiscal year. In fiscal year 1996, this transfer resulted in nearly $15 million of direct farm operating beginning farmer loans being made. One-hundred eighty deserving young family farmers were able to utilize otherwise unspent loan funds to purchase farms, and establish themselves as contributing members of rural communities. farm ownership loans Mr. Skeen. Please provide for the record a table showing the number of direct and guaranteed farm ownership loans, by year, for the past ten years. [The information follows:] FARM SERVICE AGENCY, NUMBER OF FARM OWNERSHIP LOANS FISCAL YEARS 1987 THROUGH 1996 ------------------------------------------------------------------------ Fiscal year Direct Guaranteed ------------------------------------------------------------------------ 1987.............................. 896 2,137 1988.............................. 1,371 2,436 1989.............................. 1,172 2,139 1990.............................. 949 2,399 1991.............................. 641 2,509 1992.............................. 447 1,304 1993.............................. 746 2,754 1994.............................. 1,066 3,339 1995.............................. 897 3,447 1996.............................. 1,120 3,130 ------------------------------------------------------------------------ Mr. Skeen. Please provide for the record, a table showing the number and amounts of direct and guaranteed farm ownership loans made, by State, in fiscal year 1996. [The information follows:] [Page 86--The official Committee record contains additional material here.] emergency disaster loans Mr. Skeen. How many emergency disaster loans did you make in fiscal year 1996 and so far in fiscal year 1997? Please provide a table showing how many and the total dollar value by each State. [The information follows:] [Page 88--The official Committee record contains additional material here.] Mr. Skeen. For emergency disaster loans, please provide for the record a ten-year table showing the actual number and dollar amount of emergency disaster loans made each year. [The information follows:] FARM SERVICE AGENCY EMERGENCY DISASTER LOANS OBLIGATED FISCAL YEAR 1986 THROUGH 1996 [Dollars in Thousands] ------------------------------------------------------------------------ Fiscal year Number of loans Amount ------------------------------------------------------------------------ 1986.............................. 5,584 $217,774 1987.............................. 2,548 113,613 1988.............................. 554 29,891 1989.............................. 2,806 73,493 1990.............................. 2,609 101,510 1991.............................. 1,181 81,402 1992.............................. 1,602 74,883 1993.............................. 885 58,607 1994.............................. 3,815 145,738 1995.............................. 1,526 68,823 1996.............................. 3,015 176,500 ------------------------------------- Total......................... 26,125 $1,142,234 ------------------------------------------------------------------------ state mediation grants Mr. Skeen. Please provide for the record, a list of all State mediation grants made in fiscal years 1995, 1996, and 1997. [The information follows:] [Page 90--The official Committee record contains additional material here.] Mr. Skeen. What States contribute to the mediation program? Response. The 22 States participating in the mediation program during fiscal years 1995, 1996, and 1997 are providing $5,725,899 over the 3-year period as their match for the USDA mediation matching grant program. Mr. Skeen. How much has each participating State contributed? Response. The following is a table showing the breakout of the $5,725,899 by State. [Page 92--The official Committee record contains additional material here.] Mr. Skeen. Where any new States certified for mediation grant programs in 1995? Did any State drop the program in fiscal year 1995 or request less funding than in 1994? Response. The State of Michigan was certified for the mediation grant program in 1995 and no State dropped out of the program in 1995 or 1996. The States of New York, Illinois, and Washington were certified in 1996. The States of Florida and Missouri have submitted applications to FSA for certification in 1997. The 22 States currently participating in the program requested over $3.4 million in mediation grants for fiscal year 1996. The full $2 million appropriated for fiscal year 1997 was pro-rated to give all States the same percentage of available grant funds. Of the 22 States, 6 States requested less funding in fiscal year 1996 than in 1994, and 16 requested more funding than in 1994. credit sales of acquired property Mr. Skeen. For the record, provide a five-year table showing the annual cost and the number of units sold through the credit sales of acquired property program. [The information follows:] ------------------------------------------------------------------------ Total Acres at Estimated inventory Fiscal year end of holding cost properties period \1\ sold ------------------------------------------------------------------------ 1992............................ 949,922 $65,236,900 886 1993............................ 879,139 64,712,394 1,244 1994............................ 699,837 46,959,749 1,138 1995............................ 598,414 38,239,978 684 1996............................ 530,306 31,140,959 538 ------------------------------------------------------------------------ \1\ The estimated holding cost is calculated by considering expenses such as taxes, hazardous waste cleanup, maintenance, and legal fees. Mr. Skeen. What is the current backlog of inventoried property? Please provide a list by State. [The information follows:] [Page 94--The official Committee record contains additional material here.] Mr. Skeen. Describe what efforts have been made to assist disadvantaged farmers in the credit sales program. Response. The Agency makes every effort to assist beginning and socially disadvantaged farmers in its offering of inventory properties for sale. However, with the enactment of the Federal Agriculture Improvement and Reform Act of 1996, the Agency is mandated to provide preferences to beginning farmers and ranchers when it sells its inventory farm properties. In order to make every effort that all classes of farmers are reached, including socially disadvantaged individuals, the Agency makes every effort to advertise properties for sale in a wide variety of publications including those targeted to special groups. outreach for socially disadvantaged farmers Mr. Skeen. Please provide a table showing the distribution of the Outreach for Socially Disadvantaged Farmers grants for both fiscal years 1996 and 1997. Response. I will provide the information for the record. This information was obtained from the Natural Resources Conservation Service (NRCS) because effective October 1, 1996 the Outreach Program was transferred to the NRCS. [Page 96--The official Committee record contains additional material here.] indian tribe land acquisition loan program Mr. Skeen. For the record, please provide a table showing the five- year history of the Indian Tribe Land Acquisition Loan Program. Show, by State, the dollar amount and number of loans made each year. [The information follows:] [Page 98--The official Committee record contains additional material here.] conservation reserve program Mr. Skeen. CRP has shifted its focus from highly erodible land conservation and supply management to environmental protection. The new CRP objectives are wildlife habitat, water quality, and erosion reduction. Your 1998 budget request assumes that 19 million acres will be enrolled in 1997. Since CRP emphasis has shifted, what will happen if you are not able to sign up 19 million acres? Response. While the 1998 budget does assume a planning figure of 19 million acres, the Department has made no decision on the amount of acres that will actually be enrolled into CRP for the fifteenth signup period. Enrollment will be dependent on a number of factors including the amount of acres offered and the quality of the environmental benefits that would accrue if land were enrolled into CRP. USDA will only enroll land that provides high environmental benefits per acre. Before any decision is made on future signups, USDA must review the results of the 15th sign up. USDA will review the expected environmental and economic impacts of the 15th sign up prior to making any decision on future signups. Mr. Skeen. Please describe for the Committee how the CRP signup process will work and how it will ensure environmental benefits. Response. Public announcements, fact sheets, press releases and letters to producers about the CRP signup were provided to the field offices for use in informing producers of the program. Producers offer acreage for enrollment at their local FSA office. The maximum payment rate the Commodity Credit Corporation is willing to pay for each soil type in the county is posted in the field office to allow the producers to have information about what the maximum CRP payment rate for their acreage would be before they offer the acreage for enrollment. The offered acres are evaluated by NRCS to determine whether the land eligibility criteria have been met. For eligible offers, FSA and NRCS work with the producer to determine the best conservation practice available to be implemented on the offered acres that will fit the producer's management plan and address the environmental concerns of the site. Each eligible offer will compete against all other eligible offers based on the same established factors contained in the environmental benefits index (EBI). The EBI was developed by a multi- agency team to ensure equivalent consideration of all offers and provide a tool to be used in determining the offers with the highest environmental benefits. After the evaluation and ranking process is completed, producers with accepted offers work with NRCS to develop a conservation plan for the acreage which becomes part of the approved contract. private lenders Mr. Skeen. The Farm Credit Administration reported in their testimony that private lenders are getting back into the business of making loans to farmers and ranchers. How do you see this affecting the guaranteed and direct loans you administer? Response. Increased lending activity by private lenders will sustain the historical heavy usage of the Farm Service Agency guaranteed loan programs. Adequate funding is available to meet the demand in the guaranteed operating and farm ownership loan programs. Increased activity by private lenders should lessen the demand for Farm Service Agency direct loans. authority to forgive loans Mr. Skeen. Mr. Buntrock, I understand the Administrator has the authority to forgive farm ownership or operating loans. Do you intend to use this authority before you leave the Department? Response. This authority has been used for many years as authorized in the CONACT. Borrowers can file an application for debt settlement when the debt exceeds the security value of the loan, or there is no security and the borrower does not have repayment ability. This authority is used in lieu of foreclosure. crp signup extensions Mr. Skeen. We understand there is some interest in Congress in legislating a one-year extension for CRP signups. What would be the Department's position on a one-year extension? Response. The Department of Agriculture opposes another round of one-year extensions. We believe another one-year extension would be poor environmental and agricultural policy, would not be a judicious use of taxpayer dollars, would exacerbate the enormity of the task of evaluating acres offered for enrollment, and could put at risk the authority to enroll acreage in CRP in the future. fsa employee or county committee member loans Mr. Skeen. Please provide a table showing farm ownership, operating or emergency loans where there is a balance owed by an FSA employee or County Committee Member distinguished between the type of employees and loans, the outstanding balance, payment status and any major debt restructuring that has been taken in the FY'95 and '96. [The information follows:] [Page 101--The official Committee record contains additional material here.] civil rights action team Mr. Skeen. The Department's recently released Civil Rights Action Team Report highlighted minority concerns about loan and other programs administered by FSA. What are you doing to address the issues raised in the Report? Response. FSA will soon issue Notice FC-106, ``Suspending Farm Credit Foreclosures,'' that suspends any foreclosure sales until an independent review team has reviewed foreclosure cases and determined whether disparities exist. Also, if a discrimination complaint has been filed by a borrower, all adverse actions will cease until the complaint is resolved. The makeup of the independent review team is being developed and will be activated shortly. On other issues raised by the report, FSA will be collaborating with the Civil Rights Implementation Team to put into place actions necessary to address the issues raised. Timelines and procedures are being developed. [Clerk's Note.--Notice FC-106 was issued March 12, 1997.] Mr. Skeen. The Civil Rights Report recommends improving the management of FSA programs by adding diversity to the county committees, converting all county non-Federal positions, including county executive directors, to Federal status, and removing county committees from loan determinations. Will these changes materially alter how FSA carries out its business and how will they affect your budget? Response. The changes in the committee system, including removal of loan determinations and converting county non-Federal positions to Federal status, will alter, but not materially, how FSA carries out its business. Since FSA county non-Federal staff are already funded through annual appropriations, the effect, if any, on the budget should be minimal. Mr. Skeen. This will take legislation. When will that proposal come to Congress? Response. There are several different recommendations in the Civil Rights Action Team report that will require legislation. USDA plans to package them together and submit legislation within 45 to 60 days. Timelines and procedures are now being developed. minority farmers Mr. Skeen. The Civil Rights Report also calls for fully funding the farm ownership and farm operating direct loan programs at $85 million and $550 million and targeting a higher percentage of these loans to minorities and socially disadvantaged groups. What percent of these loans currently go to minority farmers and what is the proposed funding level? Response. The Administration has requested $30.8 million in direct farm ownership and $450 million in direct farm operating funds for fiscal year 1998. In the direct operating program, 11 percent of the funds are targeted for applicants classified as socially disadvantaged, while in the direct farm ownership the percentage is 20. food security commodity reserve Mr. Skeen. Before fiscal year 1994, surplus commodities were available from CCC to respond to emergencies. Up to 2 million metric tons of surplus commodities were provided. Since these surplus commodities are no longer available and P.L. 480 funding is declining, is the Food Security Commodity Reserve a suitable and sufficient way to meet emergency food needs? Response. The Food Security Commodity Reserve is an important backstop to the P.L. 480 program, which helps to ensure that the U.S. Government can meet its foreign food assistance commitments. As you are aware, commodities can be released from the reserve under two different conditions. First, if the domestic supply of a commodity held in the reserve is so limited in any fiscal year that the Secretary of Agriculture cannot make the commodity available for P.L. 480 programming under the domestic supply criteria established in the law, the reserve may be tapped and the commodity made available for programming under Titles I, II, and/or III of P.L. 480. Second, commodities may be released from the reserve without regard to the domestic supply situation to meet unanticipated food assistance needs that cannot be met under the normal means of obtaining commodities for P.L. 480 programming. In this second case, the commodities can only be made available as emergency assistance under Title II of P.L. 480. This second release mechanism does provide a highly useful means for meeting emergency food assistance needs. However, the total volume of commodities that can be released for emergency programming through Title II in any given year is limited to 500,000 metric tons, plus an additional 500,000 metric tons that could have been released in prior fiscal years but were not. Mr. Skeen. If more is needed in fiscal year 1997 and 1998, will the Reserve be used? Response. Should conditions develop which allow for release of commodities from the reserve in either fiscal year 1997 or 1998, we would be willing to consider that option. However, at this point we do not see any need for tapping the reserve. Moreover, because of difficulties we are likely to face in meeting the costs of replenishing commodities in the reserve, we will need to be very judicious when considering tapping the reserve in the future. At present, there are approximately 2.5 million metric tons of wheat in the reserve. government performance and results act (gpra) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The Farm Service Agency (FSA) Strategic Plan for fiscal years 1997-2002 was completed in November 1996. The plan includes mission and vision statements, strategic goals and objectives, key tasks, performance measures and baselines and was submitted to the Office of the Chief Financial Officer and OMB. The plan will be updated quarterly, beginning April 1997, to reflect changes in strategic direction. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. FSA has not identified any conflicting goals. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? Response. The resources required to achieve FSA's goals and objectives take into consideration the Agency's streamlining and downsizing plan. The administrative services goals and objectives, in particular, provide for streamlining, reinvention and reengineering of certain administrative processes in support of these streamlining and downsizing objectives. In addition, FSA is utilizing and cultivating partnerships with other agencies--such as Natural Resources Conservation Service (NRCS), Rural Business-Cooperative Services (RBCS), Rural Housing Service (RHS), and Rural Utilities Service (RUS), community-based organizations--for outreach activities, other private organizations--such as commercial lending institutions, and State and local governments--on environmental issues, to maximize the benefit of our limited resources and attain common goals and objectives. Mr. Skeen. What assumptions are you making? Response. Our assumptions are that we have to do more with less, and, as priorities shift, we must be flexible and shift resources accordingly. Mr. Skeen. How are you ensuring that your goals are realistic in light of expected resources? Response. Agency managers periodically review and update the strategic plan to ensure that goals are realistic and reflect the current status of programs and legislation. In setting annual goals, we are identifying anticipated levels of resources required for their achievement. In cases where budget realities do not meet our resource expectations, we will review and appropriately revise target levels of performance. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's Budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. The strategic and annual performance plans will include an explanation as to why each performance measure is an appropriate gauge of progress toward achievement of a specific strategic goal/ objective. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Response. Performance goals and measures have been established for each major program and are included in the FY 1998 Budget Explanatory Statement which is directly linked to a specific strategic goal/ objective in the strategic plan. However, strategic goals and annual performance goals are not presently linked to the program activity structure contained in the President's budget. Mr. Skeen. Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. It is possible that we may want to do that. However, much effort has gone into linking performance goals and measures to the strategic plan. The present activity structure would have to be significantly modified to identify strategic goals and performance goals for major programs. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. We have developed key performance measures for our major programs. However, the majority of these measures are process-oriented outputs. We have experienced difficulty in developing results-oriented outcome measures because many external factors impact upon the ultimate outcomes of our programs, and managers are reluctant to provide measurements for factors they cannot control. Additionally, systems are not in place to measure certain results and development of these reporting systems could be costly and would take several years to complete. In an agency faced with major personnel and administrative budget reductions through FY 2002, dedicating the needed resources to GPRA reporting will be a major challenge. In such an environment, performance goals will have to be realistically formulated. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include State and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be the agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. Our primary stakeholders/customers are congressional appropriations and authorizing committees, producers, ranchers, lending institutions, tobacco, peanut, and other loan associations, cooperatives, warehousemen, commodity and conservation groups, and other agencies--such as NRCS, RHS, RUS, RBCS, Agricultural Marketing Service (AMS), Grain Inspection, Packers and Stockyards Administration (GIPSA), Agency for International Development (AID), Foreign Agricultural Service (FAS), and Risk Management Agency (RMA). We will share our plan with stakeholders, obtain feedback, and make appropriate adjustments to the plan. The plan is currently available on the FSA Homepage on the World Wide Web. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? Response. FSA is in the process of requesting the strategic plans of other agencies to identify issues that cross agency lines. The FSA strategic goals and objectives regarding USDA Service Centers, conservation and environmental programs, and administrative services require continued coordination with other mission areas and departments including RuralDevelopment, Natural Resources and Environment, National Park Service, Fish and Wildlife Service, and Treasury. Mr. Skeen. What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. Individual agencies, who have identified cross-cutting issues, are responsible for ensuring that these issues are adequately coordinated and addressed in their respective strategic plans. FSA has begun discussions with FAS, RMA, and Food and Consumer Service. These efforts will continue with other agencies--such as AMS, GIPSA, AID, NRCS, RHS, RBCS, and RUS--as the planning process develops. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by an Under/ Assistant Secretary (or other relevant official), the Senior Policy Staff and the Secretary. Upon completion of the review, the Department plans to provide copies of the Strategic Plan (including an overall Departmentwide Executive Summary and the Strategic Plans for individual Mission Areas/Agencies) to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members or Staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. We plan to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee House Appropriations Committee House Economic and Educational Opportunities Committee House Government Reform and Oversight Committee House Resources Committee Senate Agriculture, Nutrition, and Forestry Committee Senate Appropriations Committee Senate Energy and Natural Resources Committee Senate Governmental Affairs Committee Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision making to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work processes has the agency made to become more results-oriented? Response. Through this effort and as a result of NPR, FSA has become more customer focused and is realigning the field office structure to more efficiently and effectively deliver USDA programs. We have developed customer service standards for program delivery and conducted surveys to determine customer satisfaction with service delivery and quality, payment timeliness, forms sensibility and reasonableness, and the timeliness of program announcements. The Agency has reorganized to better carry out major program policy changes resulting from the Federal Agriculture Improvement and Reform Act of 1996. FSA is also in the process of implementing a cost accounting system that will provide managers and officials with quantitative information that will be useful in improving asset management, operating efficiency, evaluating cost-effectiveness, and establishing charges for services performed. Mr. Skeen. How are managers held accountable for implementing the Results Act of improving performance? Response. Agency managers are accountable for achievement of performance goals within their respective areas of responsibility. Performance measures are being established and will be tracked and evaluated. As the GPRA implementation process evolves, it will be integrated into the performance measurement system for each employee. Mr. Skeen. How is the agency using the Results Act performance goals and information to drive daily operations? Response. FSA will track progress toward achievement of its FY 1999 annual performance goals through the establishment and periodic monitoring of performance measures. During FY 1997, strategic plans for FY's 1998 through 2002 and performance plans that tie to the Agency plans will be developed at the appropriate levels to drive day-to-day operations. staffing reductions Mr. Latham. The budget claims to be cutting 269 FTE's at the Headquarters, State and field offices. Would you please break this number down into those three categories for the record. Also please give us an idea of these positions by role or function. Response. The proposed reduction of 269 Federal FTE's for FY 1998 include 46 at Headquarters, 154 at State offices and 69 FTE's in field offices. These reductions are based on a preliminary review and are subject to change as final decisions are made. The FTE's reflect a broad range of positions such as human resources personnel, administrative officers, clerical and administrative personnel, program specialists, management analysts, information technology specialists, general business analysts, financial and budget analysts and others. Mr. Latham. Your budget includes a commensurate decrease of $2.75 million dollars in operating expenses in the county offices in anticipation of a reduction in county staff. However there is no reduction in operating expenses proposed for the federal offices. Why is this? Response. The estimate for county office operating expenses-- travel, postage, rent, utilities, supplies--is a reduction of $2.75 million from FY 1997 to FY 1998. This estimate is based on projected county office closures and the restructuring of county-based field office locations and services as well as reductions in county staff. The decrease in operating expenses will parallel this county office staff reduction. Administrative efficiencies have enabled FSA to reduce Federal operating expenses in each of the previous 4 years. In fact, we received reduced budgets that reflected a Presidential executive order requiring such savings in each of these years. Although non-Federal staffing is being reduced by the programmatic impacts of the 1996 Farm Bill, the projected FY 1998 Federal workforce includes over 2,000 employees at the county level performing Agricultural Credit program workload for direct and guaranteed loans. Their operating expenses will not decline. In addition, there are additional Federal FTE's at the State office level, including personnel in support of farm credit activities as well as CCC activities, that perform program oversight and other supervisory functions. Their rent will not decline since no Federal State office is expected to close. independent study of fsa and nrcs Mr. Latham. In both Mr. Smith's and Mr. Buntrock's testimonies, it is stated that USDA may contract for a study of FSA and NRCS offices for proposed closings and consolidations. Who will do the independent study and what weight will it be given in the final process and decision to close offices? Response. The Department has some ongoing planning and study efforts which will be coordinated with, or reviewed in combination with, the potential independent study to provide the best input we can get. The recommendations of the study or studies will be evaluated by the Secretary, and any plans for field office streamlining or other significant changes would be reviewed with this committee and other members of Congress. ccc adp budget request Mr. Latham. Your testimony touches on the budget's request for $104 million for computer and telecommunications. This is in addition to $109 million for 1997. Does this assume the current moratorium on information technology procurement is lifted? Response. Yes, the fiscal year 1998 funding request assumes the moratorium on information technology procurement is lifted and business re-engineering plans are ready to guide spending in the new post-farm bill environment. Mr. Latham. Does this figure take into account the Department's plans to reduce staffing levels at the rate proposed in the budget? Response. Adjustments have been made in this funding request because of reduced staffing levels. For example, fewer personal computers, computer terminals, printers, and less associated maintenance of same, will be needed as staffing decreases. Mr. Latham. Does your Agency have an information technology architecture plan? Response. USDA has long been criticized for having separate approaches to implementation technology. We are sensitive to that issue and have been careful at the Farm Service Agency to develop our technology plans in concert with our Service Center partner agencies, Rural Development and the Natural Resources Conservation Service. None of the Service Center agencies should or will implement any technical plan without full coordination among those that serve the public through our field offices. FSA provided co-leaders for two of three parts of the USDA-wide information systems technical architecture development effort. These were the Business Data Architecture and Technical Standards efforts. No agency of USDA has as yet definedor implemented the Department level architecture which was recently finalized. FSA has been working with NRCS and RD since January 1997 to develop a vision of Service Center requirements based on the USDA architecture. Mr. Latham. If so, could you provide it for record. Response. As previously stated, the USDA architecture was just recently finalized, and FSA is working with NRCS and RD to develop Service Center architecture consistent with the USDA's. prorated federal staff reductions Mr. Latham. In your budget, the breakdown of staff years by State indicates the staff years for my State of Iowa will decrease from 196 to 188 for 1998. Would you give me an idea of where the decrease will come from and how this number was generated for Iowa? Response. The calculation for the geographic breakdown of obligations and staff-years is based on estimated prorations to arrive at an equitable distribution of the available staff years between headquarters and field offices. State office staff years are among those prorated to reflect each State's share of available staff years. Before FY 1998 employee reduction plans are finalized, the Agency will have obtained general approval from the Secretary after his consultations with the Congress. classification by objects Mr. Latham. In your budget, in the classification by objects you have two categories labeled respectively ``25 Other Services'' and ``31 Equipment''. Would you please break down these categories for the record. [The information follows:] [Page 108--The official Committee record contains additional material here.] increased planting flexibility proposal Mr. Fazio. Concerns have been raised by a number of my growers-- including my dry bean and fruit and vegetable growers--about possible Administration proposals that would permit increased flexibility for planting on acreage enrolled in production flexibility contracts. We have respected historical practices, but opening this up would give an unfair advantage to farmers receiving program crop payments. What is the Administration's proposal, and is that reflected in your budget submission? Response: One provision being considered for inclusion in the Department of Agriculture's 1997 legislative agenda would permit the planting of fruits and vegetables (FAVs) following a contract commodity that is prevented from being planted or has failed due to adverse weather. Under the Agricultural Act of 1949, the production of FAVs was permitted on program crop acreage determined to be prevented due to natural disaster or similar conditions. This authority was discontinued under the Agricultural Market Transition Act (AMTA). The enactment of this provision would merely allow producers to regain an option that had been available to them in 1995. We do not believe that FAV producers would be unfairly disadvantaged by the restoration of this provision. conservation reserve program Mr. Fazio. Several of us in the California delegation were concerned about marginal pasture lands that have been converted to wetland or established as wildlife habitat--areas previously covered by the Water Bank Program. How were these lands treated in your final rule, and what type of coverage might you expect from your upcoming CRP signup? Response: The final rule provides that acreage in the final year of the Water Bank Program (WBP) agreement may be eligible to be enrolled in the CRP under the marginal pasture land eligibility criteria. Additionally, acreage under a WBP agreement that expired on December 31, 1996, where the land would be considered in compliance if the agreement was still in effect, may be eligible to be enrolled in the CRP. It must be determined that enrollment of these acres in CRP would enhance the environmental benefits of the site. Acreage that is classified as natural occurring type 3 through 7 wetlands (that is, acreage under some level of water) is not eligible to be enrolled in the CRP, but WBP acreage that is artificially flooded will be eligible. This is the first CRP signup period where WBP acreage is eligible to be enrolled in the CRP. We have no prior statistics or history to use as an estimate of the number of WBP acres that may be offered for enrollment. Based on discussions with our State FSA personnel in those areas with eligible WBP acres, we are hopeful that producers will offer those environmentally sensitive acres for CRP enrollment. Eligible WBP acreage, like all other acreage offered for enrollment during the 15th CRP signup, will be scored and ranked according to an Environmental Benefits Index. office consolidations and closures Mr. Rogers. Consolidations and closures of offices seem inevitable as the Department of Agriculture continues to downsize. From March 3 until March 28, 1997, the Conservation Reserve Program will enroll farmers for new and expiring contracts for 19 million acres. Since this enrollment period will be tedious for FSA offices, temporary employees may be hired. Do you anticipate any other periods of heavy work in which you will need to hire temporary assistance in the near future? Response. Secretary Glickman has asked the program delivery agencies--Rural Development, the Natural Resources Conservation Service, and the Farm Service Agency--to review their administrative operations for ways to improve efficiency through sharing administrative services and adjusting staffing. The Secretary has made it clear that State directors can use their authority to adjust staff to ensure that we have resources in place to carry out our program responsibilities. It is difficult to predict if there will be periods in the future when a need to hire temporary employees may arise until after the Department has completed its downsizing and all of the program changes made by the Federal Agriculture Improvement and Reform Act are fully implemented. Outside influences, such as natural disasters, can greatly affect workload and may necessitate temporary hires. In addition, any legislative changes to our programs that Congress may make in the future could impact program delivery and staffing needs. Mr. Rogers. For FY 1998, you have set a goal of reducing the FSA workforce by 34 percent for non-Federal county office employees and 21.5 percent for Federal employees. How did you reach these percentages in reduction? Response. The FY 1998 President's Budget reflects a staff-year level of 5,877 Federal and 9,879 non-Federal county staff years, which represents a decrease of 22.8 percent in Federal staff years and a 33.9 percent decrease in non-Federal county office staff years from the FY 1993 base level of 7,615 FTE's and 14,953 FTE's, respectively. While much of the total percentage reduction has already occurred, the remaining reductions reflect anticipated staffing levels associated with streamlining proposals of the USDA Reorganization Act of 1994, the programmatic impacts of the 1996 Farm Bill, and potential office closures. Mr. Rogers. An independent study will be conducted to determine additional opportunities for streamlining and efficiency. When will the study be concluded? What will be done with these recommendations? Response. We have not yet initiated a formal independent study of the opportunities for streamlining. The Department has some ongoing planning and study efforts which will be coordinated with, or reviewed in combination with, the potential independent study to provide the best input we can get. In any case, the planning for this study is not far enough along to determine when the study would be concluded (target is for the fiscal year 1999 budget). The recommendations of the study or studies will be evaluated by the Secretary, and any plans for field office streamlining or other significant changes would be reviewed with this committee and other members of Congress. Mr. Rogers. The State directors of the Farm Service Agencies were to submit recommendations for closures and consolidations in their respective region. How heavily are these recommendations weighed in the final decision? What other factors are taken into consideration that are outside the realm of the State directors? Response. It is true that the FSA State directors have made some contingency plans in light of the budget allowances through FY 2002. No specific plans have yet been approved by the Secretary concerning the numbers of locations of potential office closures, and consultations with Congress will also need to occur before any action is undertaken. Furthermore, other factors must also be considered to assure that USDA provides customers the best service possible. Any decisions to close USDA field offices, or reduce an agency presence within a USDA service center must be done in coordination with the other agencies involved, including Rural Development and Natural Resources Conservation Service. Mr. Rogers. During the last round of office closures and consolidations, criteria were established by the USDA to determine which offices would be affected. What criteria will be used for future consolidations? Will the criteria be applicable to all States or will they be tailored to meet each State's unique needs? Response. The Department is currently developing a plan for consolidation that looks across the entire field delivery system, not just the Farm Service Agency, and factors in future workload requirements and technological advances that improve the delivery of our programs. During the last round of closures and consolidations, the States were given some flexibility in making determinations, and it is reasonable to expect the same considerations will apply with the new plan. The previous closure plan focused on six basic criteria to allocate the office reductions: program delivery cost, service group and customer base, complexity, geographic service area, collocation status, and workload intensity and productivity of the office. We would strongly consider the use of these or similar criteria in any additional office closing effort. Mr. Rogers. The notion of using distance between FSA offices to determine closures has been discussed. Will the FSA consider road conditions and terrain in addition to distance? Response. The Secretary has made it clear that geography will not be the sole criterion for any future office closings. Road conditions and terrain would certainly be factors the States may want to consider when making recommendations regarding office locations. Mr. Rogers. The frequency of FSA office visits for farmers depends on the crop that is produced. Is that being taken into consideration when determining closures for certain regions? Response. As stated before, the plan for future consolidation is currently being developed and workload requirements, which could be influenced by frequency of producer visits, are certainly a consideration. fsa workload Mr. Rogers. In your testimony, you state that some FSA program activities are expected to increase. Please inform the committee of these activities and how much you anticipate activities to increase. Response. As a result of the 1996 Farm Bill, FY 1998 workload in functional areas such as commodity program payments, conservation, basic farm record maintenance, and compliance will continue to decline. Other activities such as peanut and tobacco program activities are expected to remain constant. However, we expect increases in some commodity loan activity and the Non-Insured Disaster Assistance Program. The level of increases will depend on commodity prices and disaster incidences in FY 1998. FSA will also need to conduct a substantial CRP signup in FY 1998. The associated workload was not considered in the agency's original analysis of Farm Bill workload because, although that Act provided the opportunity to increase enrollment, decisions concerning alternate enrollment levels had not been completed at the time of the analysis. The decision to increase enrollment levels includes enrolling an additional 8 million acres in 1998, as reflected in the 1998 President's Budget. A table is provided that shows functional areas we estimate will increase or decrease in 1998 from 1997, and the amount of change, in workdays. [The information follows:] [Page 112--The official Committee record contains additional material here.] Mr. Rogers. In the last round, Kentucky dealt with 41 office closures. This year, according to the executive director of the Farm Service Agency in Kentucky, as many as 50 offices may be scheduled to close. Is there any consideration for States that took a disproportionate share in cuts in the previous round when considering future cuts? Response. The plan to which the State Executive Director was referring was an internal working document and nothing more than preliminary contingency planning. The Secretary has not approved any action plan and has given every assurance that none of the plans will go ahead without consultation with the Congress. I can only say, again, that plans on how to consolidate are currently being developed and that workload requirements and efficient program delivery will be primary considerations. Foreign Agricultural Service beef hormone dispute Mr. Skeen. What is the status of the dispute between the United States and the European Union over the beef hormone ban? Response. On January 1, 1989, the EU implemented a ban on imports of red meat from animals treated with growth promoting hormones, cutting off U.S. beef exports to the Community valued at approximately $100 million annually--80 percent of which was offals for human consumption. Following unsuccessful bilateral discussions and unproductive WTO consultations in March 1996--in which the United States was joined by Canada, Australia, and New Zealand--in July 1996 a WTO dispute settlement panel was formed at the United States's request. This is the first WTO panel under the new Uruguay Round Sanitary and Phytosanitary--SPS--Agreement. The panel consists of three members-- agreed to by both the United States and the EU: Thomas Cottier-- Switzerland as chairman, Peter Palecka--Czech, and Jun Yokota--Japan. In October and November 1996, there were two panel meetings, as provided for the Dispute Settlement Understanding. In October 1996, Canada also requested a panel to examine the EU's ban; the panelists are the same as for the U.S. panel, and the two panels have effectively been merged procedurally--though not legally. On February 17-18, 1997, the panel met again, this time with five technical experts appointed by the panel to give guidance for both the U.S. and the Canadian panel proceedings. The meetings were helpful in giving the panel members a much better sense of the scientific--as well as legal--issues involved, and in effectively debunking most of the EC's ``evidence.'' All of the technical experts agreed that any risk from hormones is extremely small, but it's unclear how much credence the panel gives to the EC argument that the risk is real. The panel has delayed its deadline for the descriptive report until late March; the final report, with the panel findings, is expected in late May. market access program Mr. Skeen. Are foreign entities producing in the United States eligible for Market Access Program funds? Response. FAS does not enter into direct agreements with commercial entities that are not located in and doing business in the United States and eligible products must be at least 50 percent U.S. content. However, participants are not prohibited from providing MAP resources to foreign entities to reimburse costs they may incur in jointly sponsored promotional activities. As one example, the Alaskan Seafood Marketing Institute, undertakes brand promotion in cooperation with a foreign-owned label. In that instance, however, the promoted product, canned salmon, is 100 percent U.S.-source and is processed, canned and even the labels are affixed in the United States. In effect, all of the value-added aspect of this branded product accrues to the local U.S. economy. Mr. Skeen. What percentage of domestic content must a product have in order to qualify for MAP funding? Response. While the domestic content must be a minimum of 50 percent, almost none is less than 80 percent. The vast majority of the products exceed 95 percent domestic content. agricultural trade offices Mr. Skeen. What Agricultural Trade Offices or other FAS posts are being expanded in fiscal year 1997? What are your plans for fiscal year 1998? Response. In fiscal year 1997, FAS has opened ATOs in Jakarta and Miami--for the Caribbean Basin--, and the opening of the Moscow ATO is scheduled for late summer 1997. In addition, an FAS attache office has been established in Hanoi, and FAS will open an office in Nuevo Laredo, Mexico in the summer of 1997. The agency is adding an American officer position in Geneva at the WTO and adding one officer slot at the ATOs in both Seoul and Tokyo, all of which will take place this summer. In conjunction with this increased American officer presence, in the course of fiscal year 1997 FAS will have expanded foreign national employee staffing at 15 offices around the world. FAS will conduct its annual review of overseas resources in April, 1997. FAS will continue to adjust staffing to take advantage of medium- and long-term opportunities for U.S. agriculture. Among areas which will receive attention for possible staffing augmentation during the April Global Review are Latin America and the newly independent states of the former Soviet Union. food and fiber exports Mr. Skeen. Can you estimate how much of the annual increase in dollar value of food and fiber exports in fiscal years 1996 and 1997 is due to higher prices and inflation? Response. Yes, we can provide these estimates. In fiscal year 1996, export volume fell while export value rose to a record $59.8 billion. In this case, 100 percent of the annual increase in the value of U.S. agricultural exports was due to higher prices for most products. The Department's current export forecast for fiscal year 1997 calls for a drop in both export volume and value; however, volume is projected to fall at a faster rate. Somewhat higher prices are keeping the overall export value higher than it would otherwise be if prices were held constant. If prices were held constant, instead of the current projected $3.3-billion decline in total export value, export value would drop by $4.9 billion or 48 percent more than called for in the current estimate. From fiscal year 1995 to 1996, export value rose 9.5 percent from $54.6 billion to $59.8 billion. In fiscal year 1997, export value is expected to drop 5.5 percent to a projected $56.5 billion. From fiscal year 1995 to 1996, export volume fell 6.7 percent from 169.7 million tons to 158.4 million tons. In fiscal year 1997, export volume is expected to fall another 8.2 percent to a projected 145.4 million tons. Please remember that the volume figure for total agricultural products should be used with some caution because only products which are measured in tons are included. Products that are measured in ``head'' or ``number'' such as live animals or plants, or in ``liters'' such as fruit juices or wine are not included in the total agricultural volume figures. trade barriers to u.s. exports Mr. Skeen. What countries would you identify as being particularly difficult in terms of erecting unfair trade barriers to U.S. exports? Response. As you are aware, the Department has placed and continues to place strong emphasis on providing U.S. agricultural exporters with a level playing field. Fair access to foreign export markets is a must, and removing unfair trade barriers is fundamental to the Department's export efforts. The Uruguay Round was vital to this process in agriculture. This said, we do face unfair trade barriers. We expect, however, that as we work with our foreign partners the process of eliminating non-tariff barriers will be clear and progressive. In this regard, we are extremely frustrated with some countries, particularly those which have the capacity to identify their own unfair barriers and address them, but avoid moving forward with elimination for trade protectionist reasons. Obviously, our myriad problems with the European Union come at the top of this list. With the EU, we face technical standards which, if not challenged, are often adopted by other countries--looking to minimize their problems in shipping to the EU. Our major issues with the EU, for example, include the contentious veterinary equivalence negotiations, the EU hormone ban, and EU approval of new biotech products. The importance of issues such as these lies not only in the market access--or preservation of trade--for U.S. products into the EU, but also in our concern that other countries may adopt the unscientific methodologies used by the EU in setting their own animal, plant, and public health standards. Another country that has been particularly difficult is China. The lack of transparency in China's import regime continues to be a concern, as well as its use of unscientific sanitary and phytosanitary measures, discretionary import licensing and state trading. These policies continue to constrain the way U.S. agriculture conducts business in China. We expect that these restrictions will be clarified and unfair barriers removed in the process of negotiating China's accession to the World Trade Organization. u.s. export programs Mr. Skeen. Please provide a schedule of required reductions in U.S. export programs as a result of the GATT/WTO agreement. Response. The commitments are on a commodity basis, not a program basis. [The information follows:] [Page 116--The official Committee record contains additional material here.] u.s.-mexico trade in agricultural products Mr. Skeen. What is the export and import forecast for U.S.-Mexico trade in agricultural products for fiscal year 1997? Response. After Japan, the European Union, and Canada, Mexico is the fourth largest market for U.S. agricultural exports. U.S. agricultural exports to Mexico are projected to reach a record $5.5 billion in fiscal year 1997, up 10 percent--$500 million--from the previous year, despite lower U.S. wheat and corn prices. The major reasons for the overall increase are: U.S. soybean and cotton exports are projected higher, as are shipments of high-value horticultural and meat products. U.S. agricultural imports from Mexico are forecast to rise $200 million to a record $3.9 billion largely on the strength of fresh fruit and vegetable shipments and higher coffee prices. Mexico is the third largest supplier of agricultural products to the United States. two new offices on the u.s.-mexican border Mr. Skeen. Did you open two new offices on the U.S.-Mexican border as requested in last year's budget? What are the primary missions of these two offices? Response. FAS will open its Nuevo Laredo office this summer. Once that office is operating, FAS staff will begin the planning process for an office in the western segment of the U.S./Mexico border. The primary mission of these two offices will be to minimize the adverse impact of non-tariff barriers on U.S. trade with Mexico. These offices will help define and identify problems affecting cross-border trade for bilateral discussions/negotiations, provide support for U.S. exporters by developing materials explaining procedures and logistics, help inexperienced firms get ``export ready'', and give our Embassy office and ATO in Mexico City support in locations where most trade problems actually arise. operating costs of international cooperation and development Mr. Skeen. What is the cost to operate the International Cooperation and Development Program and how much of this is offset from reimbursements? Response. The total funding for the International Cooperation and Development Program is about $40 million annually. Of this, $32 million, or 80 percent of the total, is offset from reimbursements, primarily from AD. mexico's creditworthiness Mr. Skeen. What is the status of Mexico's creditworthiness under the General Sales Manager--GSM--program? Response. The Government of Mexico has implemented various programs to help the banking sector adjust to the new financial conditions caused by the devaluation of the peso. These programs have contributed to increased stability in the Mexican banking sector. TheGovernment of Mexico also fully backs international obligations incurred by Mexican commercial banks, such as those under the GSM program. Mexico is USDA's largest GSM program. We have taken great care to balance the risk to the CCC and simultaneously support exports to Mexico during a difficult economic downturn. There have been no problems with payments under the Mexican export credit guarantee program. foreign market development Mr. Skeen. How will the new competitive process for awarding funds to cooperators in the Foreign Market Development--FMD--Program operate? How will the new system differ from the previous one? Response. FAS has developed a proposal to allocate funding competitively under the FMD effective with the 1998 program year, which we have shared with House Appropriations Subcommittee staff. We will shortly publish the proposal in the Federal Register to solicit public comments. As currently drafted, FAS will solicit applications once a year, which will be reviewed by FAS commodity specialists and attaches in the respective targeted markets in terms of the following criteria: The ability of the organization to provide an experienced U.S. based staff with technical and international trade expertise to ensure adequate development, supervision and execution of the proposed project. The organization's willingness to contribute resources including cash and goods and services of the U.S. industry and foreign third parties. The conditions or constraints affecting the level of U.S. exports and market share for the agricultural commodities and products. The degree to which the project is likely to contribute to the creation, expansion, or maintenance of foreign markets. The degree to which the strategic plan is coordinated with other private or U.S. government-funded market development activities. In addition, the new process will require that eligible applications compete for funds on the basis of the following specific, quantifiable allocation criteria: The proposed contribution level compared to the requested budget. Past export performance compared to prior FAS promotional funding. Past demand expansion performance compared to prior FAS funding. Future demand expansion goals compared to requested funding. Accuracy of past demand expansion projections compared to actual performance. We will also consider setting aside funds for short-term promotional campaigns, selecting the promotions which are likely to have the greatest impact on export development. fas program support for states, nasda and state regional groups Mr. Skeen. Please update the chart on pages 41-46 of last year's hearing record showing how much money from FAS programs, including FSMIP, MAP and FMD/Cooperator, are going to the states. Response. Please note that the states receive only FSMIP funds directly. Market Access Program and FMD-Cooperator Program funds are allocated directly from FAS to the National Association of State Departments of Agriculture/NASDA, and the four State Regional Trade Groups which are the Eastern U.S. Agricultural and Food Export Council Inc./EUSAFEC, the Mid-America International Agri-Trade Council/MIATCO, the Southern United States Trade Association/SUSTA, and the Western U.S. Agricultural Trade Association/WUSATA. Individually, and reflected in the attached chart, the FY 1996 budgets for each of the four state regional trade groups and NASDA when combining MAP and FMD funds are as follows; EUSAFEC $6,493,845, MIATCO $8,369,478, SUSTA $6,021,000, WUSATA $7,651,249, and NASDA $730,513. [The information follows:] [Pages 119 - 123--The official Committee record contains additional material here.] supplier credit guarantee program Mr. Skeen. Please explain how the Supplier Credit Guarantee Program works and how it is different from other credit guarantee programs. Response. Under the Supplier Credit Guarantee Program, Commodity Credit Corporation--CCC--guarantees a portion of payments due from the importer. These guarantees cover short-term financing up to 180 days that exporters have extended directly to such importers for the purchase of U.S. agricultural commodities and products. The direct credits must be secured by promissory notes signed by importers. By contrast, under the GSM-102 program, CCC guarantees repayment of credits extended to foreign banks which have issued letters of credit as a means of payment for imports of U.S. agricultural commodities. Under the Supplier Credit Guarantee Program, CCC's guarantee covers the risk of default by the importer, as opposed to foreign bank risk under GSM-102. As a result, under the Supplier Credit Guarantee Program, CCC will cover a smaller portion--50 percent of the value of exports-- rather than the traditional 98 percent guaranteed under GSM-102. As under GSM-102, the U.S. exporter may assign the proceeds of the Supplier Credit Guarantee Program guarantee to a U.S. financial institution so that the exporter can receive payment before it is due under the promissory note. Mr. Skeen. What commodities will benefit most from this program? Response. We anticipate the Supplier Credit Guarantee Program will be most helpful in exporting value-added and high-value products and/or commodities where supplier credits are normally extended for 180 days or less on open account sales, and where the transaction size makes the cost of obtaining a letter of credit prohibitive. For example, products eligible for the Supplier Credit Guarantee Program include: fresh, canned, and dried fruits; fresh, canned, and frozen vegetables; dairy products, including ice cream, and processed meat products. As the program develops, more consumer-ready foods are expected to benefit. Mr. Skeen. Why were there no registrations in the Supplier Credit Guarantee Program in fiscal year 1996? Response. The Supplier Credit Guarantee Program was not implemented until August 30, 1996, when a program for Mexico was announced. Given the timing, there may not have been enough time for exporters to get sales in place in fiscal year 1996. With any new program, the learning curve is steep; participants need time to understand the program and make decisions on how and where it can benefit their business. Mr. Skeen. What are the estimates for fiscal year 1997? Response. For fiscal year 1997, we have announced Supplier Credit Guarantee Programs totaling $80 million for use in three countries, Mexico, Guatemala and Jamaica, and one regional program in South East Asia, including Indonesia, Malaysia, Philippines, and Singapore. Through the end of February, we have approved 50 percent coverage on sales totaling $2.7 million. As I noted earlier, we have learned that all such programs require some learning time for participants to become familiar with the program. Therefore, is it difficult to project accurately what our total sales registrations will be by the end of the fiscal year. trade shows Mr. Skeen. Do the U.S. companies participating in international trade shows reimburse USDA/FAS for its costs? Are all companies and organizations fully paid or are some in arrears? Response. All companies participating in USDA/FAS sponsored shows are charged an exhibitors fee. The total fees collected in fiscal year 1996 were $1,696,600 or 92 percent of the expenses to organize the sponsored shows. Through cost efficiencies and greater cost sharing by the private sector, FAS has been able to reduce its investment in organizing international trade shows. During fiscal year 1996, there were 486 companies participating in the USDA sponsored shows. There are still 12 companies with payment in arrears for a total of $88,475. trade embargoes on iran and libya Mr. Skeen. Do trade embargoes on such countries as Libya and Iran include agricultural products? What restrictions are there on the export of U.S. agricultural products? Response. As a result of their continued support international terrorism, then President Reagan imposed comprehensive trade sanctions against Libya in 1986 and Iran in 1987. Under these sanctions, the export of goods and services from the United States to Iran and Libya, either directly or through third countries, generally is prohibited. Only donations of articles intended to relieve human suffering--such as food, clothing, and medicine--are permitted. These sanctions are covered under Title 31 Parts 550 and 560 of the U.S. Code of Federal Regulations and are administered by the U.S. Treasury Department's Office of Foreign Assets Control. alcoholic products Mr. Skeen. How much does FAS spend in all export assistance and promotion on alcoholic products, including wines, beers, and distilled spirits? Response. For 1995, total expenditures were $5.7 million and $6.1 million was budgeted for 1996. I am providing a list of the breakouts. ------------------------------------------------------------------------ 1995 Expended 1996 Budgeted ------------------------------------------------------------------------ Brandy Export Association............... $245,146 $246,542 Vodka Producers Association............. 83,829 .............. State Regional Trade Group's est \1\.... 350,000 900,000 Pacific N.W. Wine Promotion Coalition... 256,539 288,240 New York Wine & Grape Foundation........ 169,977 218,271 Wine Institute.......................... 4,587,255 4,443,650 ------------------------------------------------------------------------ \1\ Not specialized in these products, but are typically part of a broader grocery mix. food aid Mr. Skeen. What are the restrictions USDA and AID are under in terms of providing food aid and not interfering with the development of local agriculture? Response. Both USDA and AID are required by law to certify that food aid will not be a disincentive to local production or marketing. These certifications are called ``Bellmon'' determinations and are completed before an action to provide food aid is undertaken. These determinations also certify that a country can receive, store and distribute commodities without waste. Mr. Skeen. Is the U.S. Government prohibited from promoting foreign aid programs which would have negative effects on U.S. commodity exports? Response. There are a number of such provisions that have appeared in appropriations acts covering programs administered by the Agency for International Development or that address assistance to multinational development banks. The only related provision that is applicable to operations of the Department of Agriculture appears in section 414(a) of the Agricultural Trade Development and Assistance Act of 1954-- ``P.L. 480''. That section directs that local currencies made available under P.L. 480 may not be used to finance the production of agricultural commodities for export that would compete with similar agricultural commodities produced in the United States if such competition would cause substantial injury to the United States producers. Mr. Skeen. Again this year, P.L. 480 program levels are decreasing, especially title I, but administrative and program costs are increasing. Why is this? Response. The current, limited staff supporting the proposed $123 million title I program level must continue to prepare and negotiate a similar number of agreements, handle the commodity purchases and monitor the program. The $31,000 increase in administrative costs is projected to cover pay costs. u.s. wheat associates Mr. Skeen. In its first half fiscal year 1995 report, the Inspector General reported that FAS gave U.S. Wheat Associates $192,000 to open an office in Moscow. How much FMD/MAP/MPP support has been given to U.S. Wheat for its Moscow office since April 1, 1991? How much has U.S. Wheat paid from its own funds? Response. Since the office opened in February 1992, U.S. Wheat Associates has been reimbursed $1,073,980 in MAP resources to support their Moscow office. In addition, U.S. Wheat Associates has contributed an additional $1,286,500 of their own resources--which includes $96,500 towards salary costs for Moscow office staff and $1,190,000 for home office supervision and administration of staff and programs of the Moscow office. criteria used to select Mr. Skeen. In the past year, have you made any changes to the criteria used to select Market Promotion Program/Market Access Program participants? Response. In keeping with the 1996 Farm Bill, FAS no longer allocates resources directly to large companies or to foreign entities. Otherwise, the basic entry criteria remain unchanged. FAS has developed a formula, however, to make more transparent the competitive basis upon which the level of resources allocated to eligible participants is determined. The factors considered by the formula and the weights assigned to each were published in the Federal Register soliciting applications for the 1997 program year. mpp/map program Mr. Skeen. How many new participants joined the MPP/MAP program in fiscal year 1996 and how many either dropped out or were removed? Response. Although several organizations applied for MAP participation for the first time in 1996, only three, the United Fresh Fruit and Vegetable Association, Western Growers and the North American Blueberry Council, received allocations. Western Growers had previously participated in the FMD program. Of the total number of participants in the fiscal year 1995 program, Cal-Almond, Inc., U.S. Mink Export Development Council, and Vodka Producers of America did not reapply in fiscal year 1996. In addition, the U.S. Surimi Commission applied successfully for 1996 MAP, but subsequently withdrew from the program. Mr. Skeen. For the record, please provide a list of all organizations and companies that received MPP/MAP funds in fiscal year 1996. [The information follows:] [Pages 127 - 128--The official Committee record contains additional material here.] Mr. Skeen. Please update the information provided last year as to how many small and medium-sized companies participate in MPP/MAP. Response. FAS provides assistance on a ``priority'' basis only to companies that qualify as ``small'' by SBA's criteria and cooperatives, so these are the only categories tracked in our records. In the 1995 program year, 449 of the 648 companies participating in the MAP, through brand promotion agreements directly with CCC or with Participants, qualified as ``small'' per the criteria used by the Small Business Administration. So far in the 1996 program year, 417 of the 564 companies participating in MAP qualify as ``small''. The 1996 program year is underway and, as additional companies are enlisted, the number of those qualifying as ``small'' will likely increase. Mr. Skeen. What evidence do you have that the MPP/MAP is working as it was intended? Can you estimate direct benefits from MPP in terms of exports and job growth? Response. Evaluating the effectiveness of export promotion, particularly generic promotion which accounts for most of the promotion undertaken in the MAP, is difficult and the factors affecting exports vary greatly by commodity. Therefore, evaluation studies attempting to measure the effects of promotion on exports have focused on specific commodities or small groups of commodities in selected countries. Recent analytical efforts have focused on high-value consumer-oriented products since about 80 percent of MPP/MAP funds are used to promote these products. One such study published by FAS in 1995, ``Evaluating the Effectiveness of the Market Promotion Program on U.S. High Value Agricultural Exports'' concluded that, assuming 100 percent additionality for the programs, that the government's investment in export promotion for high value products since 1986 through the TEA, MPP and MAP programs would generate $4.8 billion of the total value of U.S. exports of those products in 1996, supporting 105,000 jobs throughout the U.S. The study also separated the effects of a cheaper dollar on U.S. market share from the impact of export promotion, concluding that the change in the value of the dollar was responsible for roughly 40 percent of the change in market share, the rest was due to export promotion. The net result assuming 100 percent additionality, was that for every dollar spent on export promotion, exports rose sixteen dollars. Independent researchers in the academic community have produced several significant studies evaluating the effectiveness of the FAS export promotion programs in recent years. One of the most recent works--1995--by Halliburton and Henneberry of Oklahoma State University confirmed the effectiveness of U.S. almond promotions in Japan, Taiwan, and Hong Kong indicating a return on investment to the Government ranging from $4 to $9 for every dollar of promotional expenditure. Another even more recent study--presented at the May 1996 NEC-63 Conference, but still ongoing--by the University of California at Davis produced results consistent with the almond study in measuring the effectiveness of U.S. export promotions of walnuts to Japan. Prior research conducted at Oklahoma State University in 1991 by Henneberry and DeBrito also concluded that U.S. non-price promotions had a positive impact on total Japanese red meat imports, particularly beef offals. Similarly, export promotion programs for cotton in the Pacific Rim countries of Japan, Hong Kong, South Korea, and the Philippines were found to be effective in a study conducted in the early 1990s by Solomon and Kinnucan. According to Timothy Richards, et al., who investigated the promotion of Washington apples, ``* * * the U.K. results show that U.S. promotion both increases the size of the total market and the U.S. share of the market.'' Richards attributes a growth in U.S. market share of over 5 percent for each $100,000 in additional promotional expenditures. In Singapore, Mr. Richards concludes that ``export promotion is successful in increasing aggregate apple demand * * *'' and ``* * * that each dollar of promotion increases total expenditure on apple imports by $27.84.'' wto budget Mr. Skeen. What is the current WTO annual budget and what is the U.S. share of that budget? Is the U.S. the largest contributor? Response. The WTO budget for 1996 was about $80.6 million. The U.S. was the largest single contributor with a 16 percent share, or about $12.7 million. However, when the contributions of the member states of the European Union are added together, their combined share is nearly 45 percent or about $36.4 million. former soviet union Mr. Skeen. What is the current situation with regard to credit guarantees to the countries of the Former Soviet Union? Response. Russia is the only FSU country with a credit guarantee program for fiscal year 1997. The country recently exhausted the $70 million allocated under its private sector GSM-102 program. Last year, Russia used about $54 million of its $70 million allocation. Similar to the case of Mexico last year, we are carefully balancing our objectives of managing risk to CCC and developing market opportunities. In addition to the program for Russia, we have allocated a total of $13.5 million to the Baltic countries of Estonia, Latvia and Lithuania. To date, no sales have been registered for these countries. Mr. Skeen. How large a market is the Former Soviet Union, by country, and what were the main commodities it bought during 1996? Response. The Russian Federation is by far the largest market for imported agricultural products within the Former Soviet Union--FSU. This is true both for imports from the world and imports from the United states. In calendar 1996, U.S. agricultural exports to the FSU totaled $1.7 billion, two-thirds of which--$1.3 billion--were shipped to the Russian Federation. A table on the value of U.S. agricultural exports, by republic, follows. U.S. Agricultural Exports FSU Country CY 1996 $ Millions Russian Federation............................................ $1,326 Latvia........................................................ 92 Uzbekistan.................................................... 81 Georgia....................................................... 48 Ukraine....................................................... 44 Armenia....................................................... 42 Estonia....................................................... 27 Kyrgyzstan.................................................... 16 Lithuania..................................................... 15 Moldova....................................................... 12 Turkmenistan.................................................. 12 Tajikistan.................................................... 12 Byelarus...................................................... 11 Azerbaijan.................................................... 6 Kazakhstan.................................................... 1 -------------------------------------------------------------- ____________________________________________________ Total................................................... $1,745 The Russian Federation is currently the ninth largest market for U.S. agricultural exports, and the largest market for U.S. poultry meat. U.S. agricultural exports to the Russian Federation are highly concentrated in a few products, namely poultry meat and red meats. These two product groups accounted for 83 percent--$1.1 billion--of total U.S. agricultural exports to the country in 1996. The other product groups whose export value exceeded $15 million in 1996 were: wheat--$28.5 million, processed fruit and vegetables--$22 million, and dairy products--$19 million. A table on U.S. agricultural exports to the FSU and the Russian Federation follows. [Pages 131 - 132--The official Committee record contains additional material here.] commercial sales to the former soviet union Mr. Skeen. What percent of the U.S. sales to the former Soviet Union are commercial sales and what percent are government-involved sales? Response. U.S. sales to the former Soviet Union--including the Baltics--reached $1.66 billion in fiscal year 1996, of which $167.4 million--10 percent--was food aid and $1.5 billion--90 percent--was commercial, including $61.2 million financed with CCC export credit guarantees. Mr. Skeen. What is the total quantity of commodities sold to the former Soviet Union under the EEP and GSM programs during calendar year 1996, and what was the value of the bonuses paid in connection with those sales? Response. During calendar year 1996, there were no awards under the EEP to the former Soviet Union. The report for GSM follows. [Page 134--The official Committee record contains additional material here.] sales to china Mr. Skeen. What have been our sales to the People's Republic of China during fiscal year 1996, and what is the outlook for 1997? Please discuss both the terms of commercial sales and government-involved sales. Response. U.S. sales to the People's Republic of China reached $1.83 billion in fiscal year 1996, and all sales were made on a commercial basis. In fiscal year 1997, exports are projected a $20.0 billion, of which up to $100 million are eligible to be financed under the export credit guarantee program--GSM-102. China is also included in the Asia Region under the DEIP for sales of nonfat dry milk, cheese and butterfat. export enhancement program Mr. Skeen. What EEP sales were made to China during calendar years 1995 and 1996 and what bonuses were paid on those sales? Response. During calendar 1996, there were no awards under the EEP to China. [The information follows:] EXPORT ENHANCEMENT PROGRAM AWARDS TO CHINA--CALENDAR YEAR 1995 ---------------------------------------------------------------------------------------------------------------- Commodity Quantity Unit of measure Bonus paid ---------------------------------------------------------------------------------------------------------------- Wheat......................................... 1,546,000 MT.............................. $25,345,540.00 Total..................................... 1,546,000 .............................. $25,345,540.00 ---------------------------------------------------------------------------------------------------------------- china's accession to the wto Mr. Skeen. What effect would China's accession to the WTO have on U.S. agricultural imports and exports? Response. China's accession to the WTO has serious implications for U.S. agriculture over both the short and long term. As a consequence, USDA places the highest importance on getting the terms of the accession right and has devoted significant resources for negotiations with China. Certainly, few international trade issues are as important for U.S. agriculture. In the near term, China's adopting WTO rules for its trade regime through accession could result in significant benefits for U.S. agriculture. Coming into compliance with general WTO rules, suchas transparency, non-discrimination, expanding trading rights, improving uniform application of laws, administration of customs procedures, and application of sanitary and phytosanitary measures and other standards would have an immediate positive impact on the trading environment. Moreover, implementation of specific commitments by China to lower tariffs, liberalize trade of state-traded products, remove unjustified sanitary and phytosanitary measures, and refrain from certain subsidy practices would improve market access for U.S. products and reduce unfair export competition. Over the longer term, if China disciplines its trade policies through WTO rules, market conditions in China will become more predictable and market-oriented, which would benefit competitive agricultural exporters such as the United States. There are serious consequences of China entering the WTO under the wrong conditions. Not only would the United States lose a unique opportunity to negotiate specific concessions of value to U.S. agriculture, but a weak agreement would not include the mechanisms necessary to encourage trade liberalization in China. Moreover, if China joins the WTO and has not adopted liberal market-oriented principles for agricultural trade, it would likely become a serious obstacle within the organization to continued WTO negotiations to liberalize agricultural trade. export enhancement program Mr. Skeen. Your budget justification says that the Department spent $5 million in Export Enhancement Program money in fiscal year 1996 to assist poultry exports. Was that the total level of EEP spending in fiscal year 1996? What is your estimate for fiscal year 1997 for total EEP funding? Response. Yes, total bonus awards under EEP for fiscal year 1996 totaled $5 million. For fiscal year 1997 to date, USDA has not awarded any bonuses under the EEP, however, we view EEP as a ready policy option, if needed, to make our exports competitive. Mr. Skeen. Please provide for the record a table showing the total value of bonuses paid by exporter under the Export Enhancement program since the inception of the program. [The information follows:] [Pages 136 - 139--The official Committee record contains additional material here.] eep bonuses by country Mr. Skeen. Please provide for the record a table which shows the total bonuses, by country, for fiscal years 1995 and 1996. [The information follows:] [Page 141--The official Committee record contains additional material here.] changes in eep program Mr. Skeen. Please describe for the Committee any changes you have made in the EEP program since last year. Response. In its 1995 Farm Bill ``Bluebook,'' the Administration committed to propose for public comment the reform of USDA's export bonus programs. At the time, programs included the Export Enhancement Program, the Dairy Export Incentive Program, the Sunflowerseed Oil Assistance Program, and the Cottonseed Oil Assistance Program. On June 8, 1995, the NEC Deputies met to discuss reform concepts for USDA's export bonus programs. It was agreed that a Federal Register notice would be published to solicit public comment on three options to reform USDA's export bonus programs. The comment period ended July 26, 1995. The three options considered were: (1) an auction system; (2) a pre- announced bonus; and (3) a significantly modified price/bonus process designed to enhance market-orientation. These reform options could make the export bonus programs more flexible in responding to changing world market conditions and serve to further goals for increased deficiency and lower program costs. In response to the Advance Notice of Proposed Rulemaking, USDA received 65 comments. The NEC Deputies met on December 10, 1996 to consider the three options for awarding export subsidy bonuses through, (1) an auction system, (2) use of a pre-announced bonus, or (3) modifications to make the current price/bonus review process more market-oriented. The Deputies agreed to delay the selection of a reform option for bulk commodities like wheat until the program is reactivated and to adopt the third option for value-added commodities like flour. USDA is implementing these modifications in the operation of the DEIP. Mr. Skeen. How much barter was done in fiscal year 1996? Response. CCC did not participate in any direct barter arrangements in fiscal year 1996. We continue to structure our export assistance programs such as EEP and DEIP so that trade financing such as barter or counter trade among commercial entities can be accommodated. map brand name companies Mr. Skeen. Please provide for the record a list of the private companies with which you had contractual relations for the promotion of brand name food items during fiscal year 1996. Response. FAS had MAP agreements with only four private commercial entities in 1996, all of which were U.S. cooperatives: Blue Diamond Almond Growers, Sunkist Growers, Ocean Spray Cranberries, Inc. and the National Grape Cooperative. However, the nonprofit commodity associations and state regional trade groups that receive MAP allocations for branded programs reallocate those resources to hundreds of private companies and cooperatives to promote value added forms of their commodities. I am providing a list of the private companies and entities with which participants have signed agreements to date in the 1996 program year. Since the 1996 program is still underway and new agreements may continue to be signed, this list may not be complete. [Pages 143 - 154--The official Committee record contains additional material here.] export incentive program and market access program Mr. Skeen. Please describe the difference between the Export Incentive Program--EIP--and the Market Access Program. Response. EIP is a subcomponent of the Market Access Program in which the CCC enters into direct agreements with small-sized U.S. commercial entities and agricultural cooperatives. Mr. Skeen. In fiscal year 1996, of the MPP/MAP agreements, how much was for EIP? Response. There were no EIP agreements in 1996. Collectively, the four cooperatives with which FAS has direct MAP agreements have budgets totaling almost $5 million. credit sales registration Mr. Skeen. Please provide a table showing a list of the countries that receive GSM-102 guarantees during fiscal year 1996 and show what commodities were sold. [The information follows:] [Pages 156 - 166--The official Committee record contains additional material here.] credit sales registration Mr. Skeen. Please provide a table showing the list of the countries that received GSM-103 guarantees during fiscal year 1996 and show the amount of the guarantee and what commodities were sold. [The information follows:] [Pages 168 - 169--The official Committee record contains additional material here.] u.s. produced commodities Mr. Skeen. Your regulations require that commodities sold under the GSM-102 and -103 programs should be restricted to agricultural commodities or products entirely produced in the United States. How do you go about enforcing this provision? Response. Exporters participating in the GSM programs are required to certify to CCC that the commodity exported meets the definition of a U.S. agricultural commodity. This certification is obtained at the time of application for a payment guarantee and again when the evidence of export report is filed. Further, exporters are required to maintain and grant access by USDA officials to their records of sales and inventories. FAS's Compliance Review Staff samples approximately 10 percent of GSA-102/103 payment guarantees issued annually by CCC and, among other checks, determines compliance with the U.S. content provisions of the program. If evidence is found that foreign commodities were included in an export transaction, CCC may hold that exporter liable for any amounts attributed to the foreign content which are paid by CCC in the event of a claim. CCC may also suspend or debar an exporter from participation in the GSA-102/103 and other CCC programs for shipping foreign commodities under CCC programs. Mr. Skeen. During fiscal year 1996, did you have any cases where exporters falsely certified that the commodities they were selling were not entirely of U.S. origin. Response. No. For applications received in fiscal year 1996, we are presently unaware of any cases where exporters falsely certified that the commodity was entirely of U.S. origin. facility guarantee program Mr. Skeen. Under the guarantees for emerging democracies, what amount of the guarantees were used for facilities in fiscal years 1995 and 1996. Response. No facilities financing guarantees were issued in 1995 or 1996. The 1990 Food, Agricultural, Conservation and Trade Act authorized the Facilities Guarantee Program to target countries that were designed as emerging democracies. On March 1, 1993, CCC published a Facilities Guarantee Program interim rule in the Federal Register. However, due to delays in determining what countries qualified as ``emerging democracies'', the statutory authorization expired before the program could be made operational. Subsequently, the interim rule itself was deleted. FAS is currently finalizing an interim rule to operate the Facilities Guarantee Program. The program is expected to be in operation as soon as clearances can be obtained and the rule published. We are now projecting a late spring or early summer starting date for the program. Now, of course, the program will focus on emerging markets in accord with the 1996 Farm Bill. ccc export credit programs Mr. Skeen. Please update the table that appears on page 96 of last year's hearing, listing all of the countries that are in arrears in their payments. [The information follows:] [Page 171--The official Committee record contains additional material here.] Mr. Skeen. Please provide for the record, a table showing how much CCC has paid out, by country, on loans that were in arrears. Also show what recoveries were made in 1996. [The information follows:] [Pages 173 - 174--The official Committee record contains additional material here.] Mr. Skeen. What are the total arrearages for P.L. 480 and the Commodity Credit Corporation--CCC? Response. As of January 31, 1997, arrearage under our P.L. 480 and CCC programs totaled $636 million. Mr. Skeen. What is being done to collect this money? Response. It is our policy to suspend programming for significant arrears--arrears of more than $250,000. Nearly all of the arrearage under the programs are public sector arrears, the bulk of which is in countries considered the poorest or in countries where we have legal or political constraints. For example, of $636 million total arrears, $600 million is owned by the Dominican Republic, Liberia, Somalia, Sudan, Syria, and Zaire. The remaining balance of $36 million is owed by all other countries. Mr. Skeen. Are any countries in arrears continuing to receive the benefit of P.L. 480 or CCC Programs? Response. Several years ago, we revised our suspension policy to allow for private sector CCC programs in countries with protracted public sector arrears. Therefore, we have private sector CCC programs in several countries where there are significant public sector arrears on our records. These countries include, Brazil, Ecuador and Bulgaria. We have found that arrearages in public sector programs have no correlation to the private sector activity. Under P.L. 480, our policy is not to sign a new agreement with a country's government unless the country is current on its Title I payments. Occasionally a country may lag behind on payments during the course of the year after an agreement has been signed. Given the concessional nature of this program, we will not suspend shipments. However, we will suspend new Title I programming until the arrearages are resolved. Mr. Skeen. During calendar years 1995 and 1996, what debts were written off by CCC? Response. For fiscal year 1995, CCC wrote off a total of $17.7 million in GSM rescheduled Jordanian debt. In addition, a total of $1.5 million of P.L. 480 Title I debt was written off for Jordan in fiscal year 1995 and $1.3 million in fiscal year 1996. Mr. Skeen. How long are these old loans carried on CCC's books, and under what circumstances is the debt written off? Response. Write-off of any CCC foreign debt requires legislative authority. Without such authority, debts remain on CCC's book indefinitely. Legislative authorities used in the past to reduce debt are: Section 411 of P.L. 480, Section 604 of P.L. 480--Enterprise for the Americas Initiative, Section 579 of the Foreign Operations Appropriations Act of 1991 for Poland, and the recent special statutory for Jordan debt forgiveness. public law 480 Mr. Skeen. Please list for the record all of the Title I agreements that were signed during fiscal year 1996, including the country, the commodity, the dollar value and the terms of these agreements. [The information follows:] [Pages 176 - 177--The official Committee record contains additional material here.] public law 480 Mr. Skeen. Please provide for the record the allocations, by country, under Title I for calendar years 1996 and 1997 after the proposed $50 million rescission. Response. The Title I commodity allocations announced for 1997 will not be affected by the proposed rescission. The reduction in program funding will be taken from a reserve of unallocated funds and from unobligated funds carried over from 1996. The fiscal year 1996 and fiscal year 1997 allocation tables follow. [Pages 179 - 180--The official Committee record contains additional material here.] ocean freight differential Mr. Skeen. What is the ocean freight differential for fiscal years 1995 and 1996, and your estimate for fiscal year 1997? Response. The ocean freight differential for Title I for fiscal years 1995 and 1996 was $28.0 million and $23.2 million respectively. Our estimate of ocean freight differential for fiscal year 1997 is currently $13.9 million, excluding the pending rescission proposal. standard commercial terms Mr. Skeen. What is the status of negotiations on standard commercial terms for P.L. 480 contracts discussed in last year's hearing record? Response. We are continuing to make progress as we work with both the Maritime Administration and the Agency for International Development on specific commercial terms which are appropriate for P.L. 480 shipments. There is not one standard set of ``commercial terms'' which all parties use in a commercial sale; all freight contract terms are negotiable. We also must take into consideration that countries receiving food aid often have problems, such as inefficient discharge facilities, which commercial importers do not. Our policy is that Title I recipient countries should arrange and pay for shipping commodities inland after discharge, relieving the ocean carrier from that responsibility. After consultation with the Maritime Administration, we agreed to Armenia's request to include the costs of inland transportation in their fiscal year 1997 Title I agreement; however we do not plan any future exceptions to this policy. p.l. 480 title ii program Mr. Skeen. Please provide for the record the Title II program, by country and commodity, for fiscal year 1996. [Pages 182 - 231--The official Committee record contains additional material here.] p.l. 480 transportation costs Mr. Skeen. What was the cost of internal transportation during fiscal years 1995 and 1996, and what is the estimate for 1997? [The information follows:] P.L. 480 Title II Internal Transportation Costs Fiscal Year U.S. $ 1995 (final)............................................ $98,691,400 1996 (final)............................................ $86,038,900 1997 (estimate)......................................... $87,000,000 Mr. Skeen. How do you determine what internal transportation costs are allowable under the program? Response. Internal transportation costs are those that are related to the movement of commodities from the point of entry or port of entry in the recipient country to the distribution sites where the beneficiaries receive the food. In accordance with Title II legislation, USAID only pays these costs when they are related to activities for urgent and extraordinary relief. Allowable costs under internal transport are those directly related to the internal transportation, storage, monitoring, and distribution of Title II emergency commodities. Mr. Skeen. What was the cost of external transportation during fiscal years 1995 and 1996, and what is the estimate for 1997? [The information follows:] P.L. 480 TITLE II EXTERNAL TRANSPORTATION COSTS ------------------------------------------------------------------------ Inland U.S. $ Fiscal year Ocean (000s) ------------------------------------------------------------------------ 1995 (final)............................ $200,359 $84,307 1996 (final)............................ $179,015 $58,461 1996 (estimate)......................... $180,000 $60,000 ------------------------------------------------------------------------ Mr. Skeen. Please describe what external transportation costs are allowable. Response. Title II may pay the ocean transportation costs incurred in the delivery of commodities from the port of loading in the Untied States to the primary discharge port in the recipient country. Also, in the cast of a land-locked country, Title II may pay the transportation costs associated with the delivery of the commodity from the primary discharge port to the primary storage point in the land-locked country. school lunch program Mr. Skeen. Please describe the school lunch program provided under Title II, and let us know how many children were involved in this program during calendar year 1996. Response. A successful school feeding project will provide a nutritional supplement to school children coming from households in a country or region within a country which is clearly food deficit and encourages families to enroll or maintain their children in school. The project needs a demonstrated host government commitment to education in general, and basic education in particular. Active community participation, through parent's associations is essential in providing services such as cooks, kitchen helpers, and guards required for operating a school feeding program. The community may either provide these services or contribute cash to compensate those engaged to perform the services. Based on fiscal year 1996 records, school feeding activities benefited over 3.8 million children. monetization Mr. Skeen. Please explain monetization. In what programs is it used? How much was monetized in fiscal year 1996? Response. Monetization is the sale, by a Cooperating Sponsor, of Title II commodities in the recipient or neighboring countries to obtain foreign or local currencies to support humanitarian and development activities. The currencies generated by the monetization of Title II commodities are used to support activities related to household nutrition and agricultural productivity, such as maternal child health activities and food for work activities. In fiscal year 1996, approximately 190,000 metric tons, with a total commodity and freight value of over $86 million, were monetized. food for peace and food for progress Mr. Skeen. Please explain Food for Peace and Food for Progress and how they fit into P.L. 480 Titles I, II, and III. Please also explain section 416 and its relationshp to other food aid programs. Response. The authority for P.L. 480 was enacted in 1954, and is commonly referred to asthe ``Food for Peace Program.'' Title I, P.L. 480 is a long-term concessional credit program administered by USDA, and is primarily a market development tool. Titles II and III are food donation programs, and are administered by AID. Title II is generally designed to respond to emergency food needs and to support humanitarian and development programs carried out by private voluntary organizations. Title III provides grants to governments to promote economic development. Funding for these P.L. 480 programs is appropriated annually. The Food for Progress program was authorized under a separate authority in 1985. Under this program USDA may donate from CCC inventories or purchase, either with Commodity Credit Corporation funds or funds appropriated for Title I, P.L. 480, up to 500,000 metric ton of commodities each fiscal year for donation to foreign governments, private voluntary organizations, international organizations or private entities. The commodities are used to support the introduction or expansion of free enterprise systems in agricultural economies. In addition, not more than $30 million of CCC funds are available each fiscal year for transportation costs and other non-commodity costs associated with the donation of the commodities purchased with CCC funds or donated from CCC inventories. USDA can also use Title I funds to pay for costs related to the provision of commodities purchased with Title I, P.L. 480 funds. Section 416(b) of the Agricultural Act of 1949 authorizes CCC to donate surplus commodities acquired by CCC under domestic price support programs. This authority only applies to commodities in CCC inventory. The donated commodities may be used to support direct feeding programs or may be sold with the proceeds used for development activities. Since CCC does not at present own excess stocks, this program is inactive. agreements signed under title iii Mr. Skeen. During fiscal year 1996, what agreements were signed under Title III and in what amounts? [The information follows:] FY 1996 TITLE III AGREEMENTS SIGNED [In millions of dollars] ------------------------------------------------------------------------ Countries Amounts ------------------------------------------------------------------------ Eritrea.................................................... $20 Bangladesh................................................. 7.5 Haiti...................................................... 10 Honduras................................................... 5 Nicaragua.................................................. 4 Ethiopa.................................................... \1\ 25 ------------------------------------------------------------------------ \1\ This three year agreement was signed in FY 1996, with the first tranche of $9 million acutally funded in early FY 1997. Mr. Skeen. Please describe how these Title III funds are used. Response. Title III funds were used to support a variety of policy reforms and programs in agriculture, primary education and health care, and rural infrastructure development. In Bangladesh, Title III supported a primary education program for poor children; policy reforms to reduce government interventions in food marketing; and government and nongovernmental organization collaboration to increase agricultural productivity and food-based nutrition. In Eritrea, the Title III program is structured around the country's national food security policy. Disbursement of assistance is based on Eritrean demonstrated commitment to their own policies and to measurable results against these commitments rather than to USAID- determined benchmarks. The program reinforces not only Eritrean ownership of policy reform but also Eritrean leadership. In Ethiopa, the Title III program focuses on policies associated with liberalizing food markets and the development of targeted safety net programs. It also promotes restructuring and eventually privatizing state-owned enterprises engaged in agri-based manufacturing, distribution, and marketing; developing efficient agricultural input markets, with particular emphasis on fertilizer; and creating an environment supportive of private sector involvement in the grain and agricultural inputs markets. In Haiti, policy reform has focuses on two objectives: (1) liberalization of the country's agricultural markets and (2) the development of a National Environmental Action Plan that also will address many of the numerous underlying constraints to increasing agricultural production and productivity in the country. The Title III local currencies were used to support the creation of short-term jobs to build or repair productive infrastructure and the expansion of agricultural productivity enhancing and soil conservation activities to reach additional poor hillside farmers. Funds were also used to support activities primarily in the social sectors begin carried out by the three Title II cooperating sponsors. In Honduras, the current program builds on earlier program successes in improving food availability and access by implementing land tenure reforms begun under previous agreements; continuing commitments to the liberalization of agricultural trade; creating an agricultural marketing information system; strengthening agricultural research and extension; and privatizing state enterprises. A 1994 evaluation of the earlier program concluded that the Title III supported policy reforms had a significant and measurable impact on the availability and access to food among the countries rural poor. Title III local currencies were used to support the government's family assistance program, which provides a social safety net during the economic adjustment process, as well as land titling, market information, and small farmer access to financial, agriculture processing, and marketing services. In Nicaragua, the policy conditionalities in the fiscal years 1993- 1996 agreement required the Government to remove the ban on agricultural exports, eliminate the sale of donated food at below market prices, adopt open trade policies--including the elimination of some input taxes and the facilitation of the legal and administrative environment for exports--and to allocate at least 40 percent of the Ministry of Health's budget to primary health care. The economic reforms led to an increase in producer prices for basis grains which contributed to a substantial increase in the total value of agricultural exports and in food grain production. Title III local currencies were used to provide small farmers with technical and marketing support for both traditional and non- traditional crops, including assistance in agro-forestry, land titling and improved on-farm grain storage; microenterprise credit; and support for improvements in primary health care. section 461(b) commodities Mr. Skeen. During fiscal year 1996, what commodities were distributed under section 416(b) and what countries received these commodities? Response. There were no agricultural commodities determined available for distribution from CCC inventories for donation overseas under section 416(b) in fiscal year 1996. Mr. Skeen. What are the terms and conditions for distributing section 416(b) commodities? Response. Section 416(b) allows CCC to donate its agricultural commodities acquired through its price support operations to assist needy people overseas. The program has specific requirements on the use of local currencies generated from the sale of commodities. Foreign currencies generated from the sale or barter of commodities shall be used to enhance the effectiveness of the use of commodities donated under this program and to implement, community development, health, and nutrition programs, and other developmental activities. Mr. Skeen. Are all of the section 416(b) commodities distributed from CCC inventory, or does USDA purchase any commodities for distribution under this section? Response. All section 416(b) commodities are distributed from CCC inventory. food for progress Mr. Skeen. During fiscal year 1996, did you purchase any commodities for the Food for Progress program? What are the plans for fiscal years 1997 and 1998? Response. For fiscal year 1996, about 350,000 metric tons of agricultural commodities were purchased for the Food for Progress program. About half of this amount was under Title I-funded Food for Progress agreements with Georgia, Kyrgyzstan and Tajikistan and the rest were purchases made with CCC funds. In fiscal years 1997 and 1998, we plan to ship as much tonnage as possible within the constraint of the $30 million freight cap for CCC purchases. These funds are used to support Food for Progress programs with Private Voluntary Organizations. In addition, we have several Title I-funded Food for Progress programs planned for fiscal years 1997 and 1998. Mr. Skeen. Do you have authority to pay any transportation costs under section 416(b) and if so, what were the transportation costs associated with this program during fiscal year 1996? Response. Yes, we have authority to pay for ocean and inland freight, as well as internal distribution. However, no commodities were available from CCC inventories for section 416(b) foreign donations in fiscal year 1996; therefore, no transportation costs were incurred under the program. transportation costs Mr. Skeen. Please provide a table for the record showing the transportation costs for 416(b) and Food for Progress in fiscal years 1995 and 1996 and the estimates for fiscal years 1997 and 1998. [The information follows.] SECTION 416(b) AND FOOD FOR PROGRESS TRANSPORTATION COSTS, FY 1995-96 AND ESTIMATES FOR FY 1997-1998 [In millions of dollars] ---------------------------------------------------------------------------------------------------------------- Fiscal year --------------------------------------------------- 1995 1996 1997 1998 ---------------------------------------------------------------------------------------------------------------- Section 416(b).............................................. .3 0 0 0 Food for Progress........................................... \1\ $47.3 \1\ $40.0 $30.0 $30.0 Total................................................... 47.6 40.0 30.0 30.0 ---------------------------------------------------------------------------------------------------------------- \1\ Transportation costs for Food for Progress for fiscal years 1995 and 1996 include costs incurred for shipping CCC purchased agricultural commodities as well as shipping agricultural commodities purchases with Title I funds. Estimates for fiscal years 1997 and 1998 represent the $30.0 million transportation cap for CCC purchases for the Food for Progress program. dairy export incentive program Mr. Skeen. Please provide the statutory authority for the Dairy Export Incentive Program--DEIP. Response. The DEIP was established by sec. 153 of the Food Security Act of 1985. It was most recently extended through December 2002 by sec. 148 of the Federal Agriculture Improvement and Reform Act of 1996. Mr. Skeen. Please describe how this program operates. Response. The DEIP operates by paying a bonus or subsidy on a bid basis for the export of specific dairy products to targeted destinations. This makes it possible for U.S. dairy products to compete against subsidized prices offered by competitor countries. The bonus paid by CCC for the export of the dairy product is meant to bridge the price difference between the U.S. domestic market and the world market for that product. In general, the DEIP works as follows. CCC issues invitations for bids targeting various regional groups of countries with specific dairy products. An eligible exporter negotiates a firm export sale for one of the dairy products with a buyer in a targeted destination. The exporter then submits a bid for a bonus to CCC along with other relevant information regarding their sale to the buyer. The bid submitted by the exporter is in dollars and cents per ton. CCC reviews the exporters bonus request, along with other relevant information in the bid, such as sales price, and delivery period, and compares this against prevailing world market conditions and the U.S. domestic market for that product. CCC responds to the exporter the next business day following the submission of the bid. If accepted by CCC, the exporter is paid the bonus in cash following submission of export documentation. If the bid is not accepted the exporter may submit another bid for a bonus at any time he or she wishes. The current program pays subsidy on nonfat dry milk, butterfat which includes anhydrous milk, butter oil or ghee, wholemilk powder and a variety of cheeses. Mr. Skeen. What was the cost of the DEIP in fiscal years 1995 and 1996, and what is the estimate for fiscal years 1997 and 1998? Response. Bonus award commitments under the DEIP for fiscal year 1995 totaled $140.2 million. For fiscal year 1996 commitments totaled $20.4 million. Budget estimates for fiscal year 1997 are $55.5 million and $88.7 million for fiscal year 1998. The Secretary is authorized to use up to the maximum volume and funding levels permitted under GATT. Mr. Skeen. For the record, please provide a list of countries that participated in the DEIP program and the amount of product they received in fiscal year 1996. [The information follows:] [Page 236--The official Committee record contains additional material here.] section 416(b) commodities Mr. Skeen. Please list for the record the total amount of Section 416(b) commodities donated, by fiscal year, since fiscal year 1987. Please estimate the market value of those commodities for each fiscal year. [The information follows:] [Page 238--The official Committee record contains additional material here.] sunflower oil assistance program Mr. Skeen. Please describe what has happened under the Sunflower Oil Assistance Program during calendar year 1996. Response. The Federal Agriculture Improvement and Reform--FAIR--Act of 1996 did not reauthorize funding for the Sunflowerseed Oil Assistance Program--SOAP. However, Congress did provide funding for SOAP for fiscal year 1996 in the Agriculture Appropriations Act, but no SOAP bonuses were awarded. While no funding for SOAP is available in fiscal year 1997, the Secretary may utilize funds under the EEP to facilitate the export of sunflower oil. During calendar year 1996, neither SOAP nor EEP funds were utilized to facilitate sales of sunflowerseed oil because the market situation did not warrant their use. Mr. Skeen. What are your plans for 1998? Response. USDA could use EEP funds to promote exports of U.S. sunflower oil should their use be justified. cottonseed oil assistance program Mr. Skeen. Please describe what has happened during calendar year 1996 under the Cottonseed Oil Assistance Program. Response. As in the case for SOAP, the FAIR Act of 1996 did not reauthorize funding for COAP. While Congress provided funding for COAP in the 1996 Agriculture Appropriations Act, the program was inactive. During calendar year 1996, neither COAP nor EEP funds were utilized to facilitate sales of cottonseed oil because the market situation did not warrant their use. Mr. Skeen. What are your plans for 1998? Response. USDA could use EEP funds to promote exports of U.S. cottonseed oil should their use be justified. fas trade shows Mr. Skeen. What international or national food shows were sponsored by FAS during fiscal year 1996, and what shows are currently scheduled for fiscal years 1997 and 1998? Also indicate the location, dates, and purpose of each show. [The information follows:] ---------------------------------------------------------------------------------------------------------------- Show Date Location ---------------------------------------------------------------------------------------------------------------- FAS sponsored shows, fiscal year 1996: Festival de Alemientos y Bebidas, Jan., 1996............................. Mexico. 1996. Great American Food Show............. Mar., 1996............................. Korea. Food & Hotel Asia.................... Apr., 1996............................. Singapore. Alementaria.......................... Mar., 1996............................. Spain. Great American Food Show--Argentina.. Aug. 21-22, 1996....................... Buenos Aires, Argentina. Great American Food Show--Brazil..... Aug. 26-28, 1996....................... Sao Paulo, Brazil. FAS endorsed shows, fiscal year 1996: FMI Asiamart......................... Oct. 18-20, 1995....................... Hong Kong. World Food '95....................... Nov. 13-17, 1995....................... Russia. IGEHO................................ Nov. 23-29, 1995....................... Switzerland. MEFEX................................ Jan. 13-16, 1996....................... Bahrain. World of Private Label............... Jan. 24-25, 1996....................... Japan. Chna Supermarket/Hotel '96........... Mar. 11-14, 1996....................... China. Foodex............................... Mar. 12-15, 1996....................... Japan. Food '96............................. Mar. 17-20, 1996....................... Saudi Arabia. Shanghai Hotelex/Foodex '96.......... Apr. 2-5, 1996......................... China. CIBUS................................ May 9-13, 1996......................... Italy. SPAFE '96--St. Petersburg............ May 17-21, 1996........................ Russia. IFIA '96--food ingredients........... May 28-30, 1996........................ Japan. Taipei Int'l Food Industry Show...... June 15-18, 1996....................... Taiwan. Food & Hotel China................... Sept. 3-6, 1996........................ China. Fine food '96........................ Sept. 8-11, 1996....................... Australia. World Food '96--Moscow............... Spet. 16-21, 1996...................... Russia. POLAGRA '96.......................... Sept. 19-24, 1996...................... Poland. FAS endorsed shows, fiscal year 1997: SIAL (American Foods Pavilion)....... Oct. 20-24, 1996....................... Paris, France. Food and Hotel Africa '96 (American Nov. 10-13, 1996....................... Johannesburg, South Africa. Foods Pavilion). Gulf Food '97........................ Feb. 23-26, 1997....................... Dubai, United Arab Emirates, World Trade Center. Great American Food Show--Philippines Feb. 25-26, 1997....................... Mainla, Philippines, Shangri- La's EDSA, Plaza Hotel. Great American Food Show--Korea...... Mar. 18-20, 1997....................... Seoul, Korea. FAS endorsed shows, fiscal year 1997: AsiaMart '96......................... Oct. 30-Nov. 1, 1996................... Hong Kong. Food & Hotel Vietnam................. Nov. 13-16, 1996....................... Ho Chi Minh, Vietnam. International Food Products Salon.... Nov. 14-17, 1996....................... Poliedro de Caracas, Venezuela. Food & Hotel Indonesia '97........... Feb. 19-22, 1997....................... Jakarta, Indonesia, Jakarta Int'l Exhibition Center. Foodex '97........................... Mar. 11-14, 1997....................... Tokyo, Japan, Nippon Convention Center. GastroNord '97....................... Mar. 18-21, 1997....................... Stockholm, Sweden, Stockholmsmassan. HOFEX '97............................ May 6-9, 1997.......................... Hong Kong Convention Center. Alimentaria '97...................... May 10-14, 1997........................ Lisbon, Portugal. Int'l Food Ingredients & Additives... May 27-29, 1997........................ Tokyo, Japan, Tokyo Int'l Exhibition Centre, Ariake. World Food '97....................... June 3-7, 1997......................... Moscow, Russia. Int'l Food & Hospitality '97......... June 5-8, 1997......................... Bangkok, Thailand, Queen Sirikit Nat'l Convention Center. Taipei Int'l Food Industry Show...... June 12-16, 1997....................... Taipei, Taiwan. Food & Hotel China................... Aug. 26-29, 1997....................... Shanghai, China. SIAL Mercosur........................ Aug. 26-29, 1997....................... Buenos Aires, Argentina Municipal Exhibition Center. Fine Food '97........................ Sept. 7-10, 1997....................... Sydney, Australia. FAS endorsed shows, fiscal year 1998: ANUGA '97............................ Oct. 11-16, 1997....................... Cologne, Germany. Great American Food Show--Korea '98.. Mar. 17-19, 1998....................... Seoul, Korea FAS endorsed shows, fiscal year 1998:. POLAGRA '97.......................... Oct. 2-7, 1997......................... Poznan, Poland. Food & Hotel Vietnam '97............. Nov. 5-8, 1997......................... Ho Chi Minh City, Vietnam, HIECC Food & Hotel Philippines............. Feb. 18-21, 1998....................... Manila, Philippines. MEFEX '98............................ Feb. 28-Mar. 13, 1998.................. Manama, Bahrain. Food and Hotel Asia.................. Apr. 14-17, 1998....................... Singapore. ---------------------------------------------------------------------------------------------------------------- fas trade shows Mr. Skeen. What are the FAS trade shows scheduled for calender years 1997 and 1998, where will they be held, and what will be the dates? [The information follows:] ---------------------------------------------------------------------------------------------------------------- Show Date Location ---------------------------------------------------------------------------------------------------------------- Sponsored trade shows: \1\ Gulf Food '97........................ Feb. 23-26, 1997....................... Dubai, United Arab Emirates, World Trade Center. Great American Food Show--Philippines Feb. 25-26, 1997....................... Manila, Philippines, Shangri- La's EDSA Plaza Hotel. Great American Food Show--Korea...... Mar. 18-20, 1997....................... Seoul, Korea. ANUGA '97............................ Oct. 11-16, 1997....................... Cologne, Germany. Endorsed trade shows: \2\ Food & Hotel Indonesia '97........... Feb. 19-22, 1997....................... Jakarta, Indonesia, Jakarta Int'l Exhibition Center. Foodex '97........................... Mar. 11-14, 1997....................... Tokyo, Japan, Nippon Convention Center. GastroNord '97....................... Mar. 18-21, 1997....................... Stockholm, Sweden, Stockholmsmassan. HOFEX '97............................ May 6-9, 1997.......................... Hong Kong Convention Center. Alimentaria '97...................... May 10-14, 1997........................ Lisbon, Portugal. Int'l Food Ingredients & Additives... May 27-29, 1997........................ Tokyo, Japan, Tokyo Int'l Exhibition Center, Ariake. World Food '97....................... June 3-7, 1997......................... Moscow, Russia. Int'l Food & Hospitality '97......... June 5-8, 1997......................... Bankok, Thailand, Queen Sirikit National Convention Center. Taipei International Food Industry & June 12-16, 1997....................... Taipei, Taiwan. Additives. Food & Hotel China................... Aug. 26-29, 1997....................... Shanghai, China. SIAL Mercosur........................ Aug. 26-29, 1997....................... Buenos Aires, Argentina, Municipal Exhibition Center. Fine Food '97........................ Sept. 7-10, 1997....................... Sydney, Australia. POLAGRA '97.......................... Oct. 2-7, 1997......................... Poznan, Poland. Food & Hotel Vietnam '97............. Nov. 5-8, 1997......................... Ho Chi Minh City, Vietnam, HIECC. ---------------------------------------------------------------------------------------------------------------- \1\ Note: In a USDA sponsored show, USDA is involved in all aspects of show management and provides related services. These services include assistance in sample product shipment, rental of floor space, booth design/ layout and marketing the show to potential exhibitors. \2\ Note: A USDA endorsed show is a show recommended by USDA as the best avenue to enter a prospective market for consumer-oriented foods. USDA provides limited services related to these shows. These services include marketing, mailing advertising material, referral to show organizer, an information booth or national pavilion, pre-show promotion, and invitation of potential buyers. The 1998 calendar year schedule has only one endorsed show to date. Food & Hotel Philippines; February 18-21, 1998, Manila, Philippines. agricultural trade offices Mr. Skeen. Please list for the record the location of the Agricultural Trade Offices--ATO--and indicate the number of FAS and foreign nationals assigned to each ATO. [The information follows:] ------------------------------------------------------------------------ Number of Number of Location of ATO American foreign officers nationals ------------------------------------------------------------------------ China, Guangzhou.............................. 1 4 China, Shanghai............................... 1 3 Germany, Hamburg.............................. 1 4 Hong Kong..................................... 2 4 Indonesia, Jakarta............................ 1 3 Italy, Milan.................................. 1 2 Japan, Osaka.................................. 1 3 Japan, Tokyo.................................. 2 5 Korea, Seoul.................................. 1 6 Mexico City................................... 2 5 Saudi Arabia, Riyadh.......................... 1 3 Singapore..................................... 2 4 United Arab Emirates, Dubai................... 1 3 U.S. Miami--Caribbean Basin................... 1 \1\ 2 ------------------------------------------------------------------------ \1\ U.S. staff. landsat Mr. Skeen. Please describe the program you have for evaluating LANDSAT data. Describe what type of data you purchase, how the data is evaluated, and how accurate your estimates are based on use of this technique. Response. The Foreign Agricultural Service's Remote Sensing Program has been a major civilian user of LANDSAT data. Satellite imagery analysis is an important element in the Department's monthly lockup process that analyzes the world agricultural production, supply, and demand situation. The major application of LANDSAT data is to monitor the condition and expected yield of crops in designated countries. These crops include wheat, coarse grains, rice, oilseeds and cotton in major competitor and importing countries. For example, FAS satellite imagery analyses of 1996 drought in Ukraine and Mexico and flooding in China and North Korea allowed the U.S. Department of Agriculture to accurately estimate these important countries' grain and oilseed production months before harvest, thus alerting U.S. policy makers and traders to potential market changes. Also, FAS supports the Farm Service Agency's and Risk Management Agency's domestic commodity and program analyses by submitting regular and ad hoc reports on crop conditions and crop disasters. FAS, for example, closely monitored the drought-affected U.S. southern Great Plains hard red winter wheat crop. FAS purchases LANDSAT Thematic Mapper digital data, both full- resolution and sampled. This data is received daily on computer tapes and is processed and analyzed immediately. Analysts visually assess crop conditions, relative yield, reservoir levels, and field operations by comparison to imagery acquired earlier in the crop season and to other crop years. Additionally, spectral reflectance equations are automatically calculated and entered into a world grid-cell and political polygon data base. The derived greeness index may then be quantitatively related to crop yield. The accuracy and reliability of USDA crop condition assessments and production estimates have been enhanced and have steadily improved since the FAS remote sensing program became operational in 1983. through daily operational analysis of satellite data, we have gained experience and increased both our confidence and skill. Our recently updated computer support system provides superior capabilities in processing speed and storage capacity. Our timely, accurate assessments have been routinely confirmed by subsequent ground-truth crop observations and official year-end commodity harvest reports. Mr. Skeen. How much did you receive from the Commodity Credit Corporation during fiscal year 1996 for the purchase of LANDSAT data and what are your current plans for fiscal years 1997 and 1998? Response. FAS received $2.25 million from the Commodity Credit Corporation for fiscal years 1996 and 1997 for the purchase of satellite imagery and services and to fund two FAS staff positions. The CCC funds are being used to purchase LANDSAT imagery as well as SPOT and IRS imagery, as the loss of LANDSAT 6 has required us to go to other sources of multi-spectral imagery to meet our global coverage requirements. For fiscal year 1998, FAS is proposing to use $2.25 million of Commodity Credit Corporation funds to purchase satellite imagery. For the future, FAS aims to maximize the operational use of remotely sensed data in a multi-disciplinary and multi-agency environment. The new FAS Image Analysis System allows for a much greater throughput in image analysis, the flexibility to include spectral crop yield modeling, expanded Geographic Information System and database management capability, improved area discrimination enhancements, and sufficient data handling capability to cover all significant foreign agricultural areas. We are working to expand and improve information on crops for domestic commodity and program analyses so that more accurate, unbiased, and timely projections and evaluations of crop disaster situations and program compliance can be made during the growing season. With our increased capabilities and additional funding, we will be able to significantly enhance support and assistance to the Farm Service Agency, Risk Management Agency, and the National Agricultural Statistics Service. Mr. Skeen. What were the total costs of the LANDSAT program, separately identifying people assigned to the program and the purchase of data in fiscal years 1995 and 1996? [The information follows:] ------------------------------------------------------------------------ 1995 1996 ------------------------------------------------------------------------ Data costs.................................... $2.3 $2.3 Personnel costs............................... .3 .3 ------------------------- 2.6 2.6 ------------------------------------------------------------------------ Note: Dollars are in millions. language training Mr. Skeen. How much did you spend on language training during fiscal year 1996, and what are your estimates for 1997 and 1998? Response. During fiscal year 1996 a total of $335,678 was spent on language training. The estimated language training costs for fiscal year 1997 and fiscal year 1998 are $380,000 and $398,000, respectively. Mr. Skeen. During fiscal year 1996 and to date for fiscal year 1997, how many FAS employees have been enrolled in language training, by language? Response. A total of 59 FAS employees were enrolled in language training during fiscal year 1996. In fiscal year 1997 to date, 27 FAS employees are currently enrolled in language training. A list of languages with the number of employees follows. FAS EMPLOYEES IN LANGUAGE TRAINING ------------------------------------------------------------------------ Fiscal year-- Language ------------------------- 1996 1997 ------------------------------------------------------------------------ Arabic........................................ 5 1 Chinese....................................... 3 3 Dutch......................................... 1 0 French........................................ 9 1 German........................................ 1 0 Indonesian.................................... 1 0 Italian....................................... 0 4 Japanese...................................... 4 3 Korean........................................ 1 2 Malay......................................... 1 0 Polish........................................ 2 1 Portuguese.................................... 1 1 Russian....................................... 13 9 Spanish....................................... 12 2 Swahili....................................... 1 0 Swedish....................................... 1 0 Tagalog....................................... 1 0 Turkish....................................... 1 0 Vietnamese.................................... 1 0 ------------------------- Total................................... 59 27 ------------------------------------------------------------------------ Mr. Skeen. Where do your employees receive this training and what is the average cost per student? What is the length of the training? Response. The majority of employees attend the National Foreign Affairs Training Center, Department of State for language training. Some employees attend in-house group training and others receive training from private language schools. The average length of training is 20 weeks. The average cost is $5,700 per student. conference on asia-pacific issues Mr. Skeen. It has been reported to the Committee that FAS contracted with World Perspectives, Inc. in 1996 to conduct a seminar or conference on Asia-Pacific issues. Please provide a brief summary of that event, its purpose and cost. Response. There were some very positive aspects of the conference, especially because the Pacific Economic Cooperation Council--PECC-- brought together government, private sector, and academic representatives to address the refrigeration and distribution needs of the Pacific Rim food system and the enormous potential for increasing exports once these bottlenecks are suitably addressed. The conference was held in conjunction with the FMI AsiaMart show; the subject of refrigeration would not have otherwise been covered at the FMI show. On a less positive note, however, FAS was concerned that the number of participants at the PECC conference may not have warranted the Emerging Markets Program contribution of $240,000, with additional resources needed to support FAS staff travel to attend and make presentations at the conference. In addition, the composition of the audience was disappointing. The PECC proposal to FAS defined the target audience as representatives from the food and beverage industry, hotel and restaurant industry, refrigeration products and services, and all aspects of the transportation and distribution industry. We do not believe these groups were adequately represented. In particular, the U.S. refrigeration and distribution companies were under-represented. The budget of projected expenditures which was part of the cooperative agreement between FAS and PECC indicates the total cost of the conference--excluding participation in the FMI show--at approximately $1.3 million; USDA's contribution was $240,000, or approximately 19 percent.--U.S. private sector contributions are listed at $848,000, PECC foreign contributions are listed at $158,500. Frankly, from many reports, it appears that $1.3 million may have exceeded the value of the end product. Mr. Skeen. Does FAS plan to contract for any similar events in fiscal year 1997 and fiscal year 1998? Response. No, not at this time. fas conferences Mr. Skeen. What other FAS conferences took place in fiscal year 1996 and where were they held? Response. The Global Attache Conference was held in Washington, D.C. the week of July 16, 1996. A Regional Attache Conference was held in Brussels, Belgium on December 14-16, 1995. employee retreats Mr. Skeen. Has FAS held any employee management retreats during the past 12 months, and if so, where and what was the cost. Response. FAS did not have any employee management retreats during the past 12 months. fas employees training Mr. Skeen. Has FAS held any large training sessions during the past 12 months, and if so, where, what was the purpose of the training, and what was the cost? [The information follows:] ---------------------------------------------------------------------------------------------------------------- Training Location Purpose/Cost ---------------------------------------------------------------------------------------------------------------- Export Payments.......................... Washington, D.C......................... To provide knowledge of export credit documentation payment process. 3 sessions-- $12,190. Contracting Officers Responsibilities.... Washington, D.C......................... To inform contracting officer's technical representative--CORT--of procurement responsibilities. 2 sessions--$10,620. Marketing Skills......................... Washington, D.C......................... To upgrade skills and knowledge of marketing specialists. 3 sessions-- $11,104. ---------------------------------------------------------------------------------------------------------------- ``top ten'' suppliers of u.s. agricultural imports Mr. Skeen. Please list the top ten sources of U.S. agricultural imports, in terms of dollar value, for fiscal years 1995 and 1996. [The information follows:] ------------------------------------------------------------------------ Fiscal year in billions of dollars Supplier ------------------------- 1995 1996 ------------------------------------------------------------------------ Canada........................................ $5.4 $6.4 European Union-15............................. 5.8 6.3 Mexico........................................ 3.7 3.7 Indonesia..................................... 1.4 1.5 Brazil........................................ 1.3 1.2 Colombia...................................... 1.1 1.1 Thailand...................................... 0.9 0.9 Australia..................................... 0.9 0.9 New Zealand................................... 0.8 0.7 Argentina..................................... 0.5 0.7 ------------------------------------------------------------------------ ``top ten'' u.s. agricultural imports Mr. Skeen. Please list the top ten items imported for fiscal years 1995 and 1996, by dollar value. [The information follows:] ------------------------------------------------------------------------ Fiscal year in billions of dollars Products groups ------------------------- 1995 1996 ------------------------------------------------------------------------ Fruit and juices.............................. $3.4 $3.8 Vegetables and preparations................... 3.0 3.4 Coffee and products........................... 3.4 2.9 Wine and malt beer............................ 2.2 2.7 Grains, feeds, and grain prods................ 2.3 2.6 Red meats..................................... 2.3 2.3 Oilseed and products.......................... 1.8 2.1 Sugar and products............................ 1.2 1.8 Live animals.................................. 1.7 1.6 Rubber and gums............................... 1.6 1.4 ------------------------------------------------------------------------ fas representation allowance Mr. Skeen. During fiscal year 1996, how much of the representation allowance was used in Washington and how much was used overseas? Response. Of the $128,000 available for representation activities in fiscal year 1996, $84,370 was used by overseas offices and $26,787 used for domestic activities. Mr. Skeen. Please provide for the record a listing of how the funds were used in Washington during fiscal year 1996. [Pages 246 - 250--The official Committee record contains additional material here.] middle-income country training program Mr. Skeen.How many students, and from what countries, were selected to participate in the Middle-Income Country Training Program during fiscal year 1996? Response. In fiscal year 1996, a total of 676 participants from 44 countries received training under the Middle-Income Country Training Program. Participant numbers by region and by country follow: --Asia: 102 participants from seven countries: Korea--16 participants, Malaysia--8, China--24, Thailand--17, Indonesia--10, Philippines--25, and Vietnam--2. --Eastern Europe: 171 participants from 13 countries: Turkey--12, Poland--34, Hungary--13, Czech Rebpulic--10, Slovakia--15, Albania--7, Bulgaria--22, Slovenia--16, Crotia--8, Latvia-- 10, Estonia--10, Lithuania--6, and Romania--8. --Latin America: 85 participants from seven Latin American countries: Mexico--32, Venezuela--9, Trinidad & Tobago--8, Barbados & Other West Indies--2, Panama--9, Colombia--19, and Chile-- 6. --Africa: 47 participants from five African countries: Cote d' Ivoire--2, Algeria--6, Tunisia--14, South Africa--22m and Namibia--3. --New Independent States: 271 participants from the New Independent States of the Former Soviet Union: Russia--121, Ukraine-- 43, Belarus--13, Kazakstan--23, Kyrgyzstan--7, Uzbekistan-- 8, Turkmenistan--6, Tajikistan--9, Armenia--18, Moldova 12, Georgia--5, and Azerbaijan--6. Mr. Skeen.What is the status of the 1997 program? How many students will be selected and what countries will be involved? Response. The Middle-Income Country Program staff are in the process of selecting participants for the program in 1997, and we expect to provide training to over 700 participants. The program will operate in 46 countries, up from the 44 countries mentioned above for 1996. Three new countries will be added in 1997--Brazil, Kenya, and Bosnia--and one country, Belarus, will be dropped at the request of the State Department. Mr. Skeen.Please provide for the record an object classification table for the program for fiscal years 1996 and 1997. [The information follows:] FAS MIDDLE-INCOME COUNTRY TRAINING PROGRAM OBJECT CLASS TABLE, FY 1996- 97 ------------------------------------------------------------------------ Fiscal Year-- ----------------------------------- 1996 actual 1997 estimate ------------------------------------------------------------------------ Object class--description: 11--Personnel compensation...... $408,360 $410,000 12--Personnel benefits.......... 69,213 69,500 21--Travel...................... 270,049 271,200 22--Transportation of things.... 6,792 6,800 23--Communications and utilities 64,496 64,800 24--Printing.................... 13,147 13,200 25--Contracts and agreements.... 911,434 915,100 26--Supplies.................... 25,114 25,200 41--Grants...................... 649,683 652,200 ----------------------------------- Total appropriation........... 2,418,288 2,428,000 ------------------------------------------------------------------------ Mr. Skeen. Is there a carryover in this program? Response. Yes, there is. Each year, about two to three hundred thousand dollars is carried over due to the fact that most of the programs run in the summer and early fall. Our experience in the past was that the program managers were running into the limits of the annual appropriation and losing program funds due to the program's time constraints. The problem of funds lapsing three-quarters of the way through the program cycle was, I believe, the reason that Congress authorized these funds to be available until expended. This has worked well. aid funding Mr. Skeen. What is the current estimate for AID reimbursable funding for fiscal years 1997 and 1998? Response. The current estimate for AID reimbursable funding for fiscal years 1997 and 1998 is $32 million for each year. united states-israel binational agricultural research and development fund--bard Mr. Skeen. What is the total amount of U.S. funding provided to United States-Israel Binational Agricultural Research and Development Fund--BARD--and what years were the funds provided? Response. In fiscal year 1977 the United States contributed $40 million for the BARD endowment; in fiscal year 1984, another $15 million was provided. These amounts were matched by the Government of Israel, creating a total endowment of $110 million. In each of the fiscal years 1994, 1995 and 1996 an additional $2.5 million was provided, not to increase the endowment, but rather as direct support for grant operations that year. All three of these U.S. contributions have been matched by Israel. Mr. Skeen. What research grants were awarded by BARD during fiscal year 1996? [The information follows:] bard research grants Bitter taste transduction: Cellular pathways, inhibition and implications for human acceptance of agricultural food products The interaction between nonpathogenic mutants of Colletotrichum and Fusarium, and the plant host defense system Enhancement of baculoviruses' insecticidal potency by expression of synergistic anti-insect scorpion toxins Molecular genetic analysis of citric acid accumulation in citrus fruit Transpirational cooling of greenhouse crops Molecular pathogenesis of Mycoplasma bovis and Mycoplasma agalactiae and its application in diagnosis and control Virus synergy in transgenic plants Genetic diversity at resistance gene clusters in wild populations of Lactuca Molecular mechanisms of pollen-pistil interactions in interspecific crossing barriers in the tomato family Optimization of secondary wastewater reuse to minimize environmental risks Characterization and immunogenicity of Mycobacterium paratuberculosis secreted and cellular proteins Resistance to tomato yellow leaf curl virus by combining expression of a natural tolerance gene and a dysfunctional movement protein in a single cultivar. Parthenogenesis-inducing microorganisms in parasitic Hymenoptera: Their mode of action and utilization for improvement of biological control agents Mapping and tagging by DNA markers of wild emmer alleles that improve quantitative traits in common wheat Ozone altered stomatal/guard cell function: Whole plant and single cell analysis Computerized synthesis of information on the scale insects of the world Osmotin and osmotin-like proteins as a novel source for phytopathogenic fungal resistance in transgenic carnation and tomato plants Bacteriocin markers for propionibacteria gene transfer systems Consumption of tannin-rich forage by ruminants: From mechanism to improved performance Developing nutritional-management protocols which prevent tibial dyschondroplasia Study of the basis for toxicity and specifically of Bacillus thuringiensis &-Endotoxins Elicitor--induce response in Lycopersicon esculentum Advancing puberty in the black carp (Mylopharyngodon piccus) and the striped bass (Morone saxatilis) Isolation and characterization of plasmodesmata components by association with tobacco mosaic virus movement proteins fused with green fluorescent protein from Aequorca victoria Problems and prospects in the political economy of trans-boundary water issues Biosensors for on-line measurement of reproductive hormones and milk proteins to improve dairy herd management Increasing mammary protein synthesis through endocrine and nutritional signals Role of placental lactogen in sheep Identification of Staphylococcus aureus virulence factors associated with bovine mastitis Regulated expression of yeast FLP recombinase in plant cells Functional biogenesis of V-ATPase in the vacuolar system of plants and fungi Sub-specific populations of Verticillium dahliae and their roles in vascular wilt pathosystems Creating and characterizing genetic variation in Tilapia through the creation of an artificial center of origin Identification of polyviral domains controlling system infection, host range and aphid transmission Rhizosphere ecology of plant-beneficial microorganisms scientific activities overseas Mr. Skeen. Are any foreign currencies currently in surplus? Response. There are no foreign currencies currently in surplus. maritime costs Mr. Skeen. What is the total USDA/CCC spent on maritime costs for each of the past five years for food aid programs? How much was paid by USDA/CCC and how much was paid by MARAD [The information follows:] OCEAN FREIGHT DIFFERENTIAL COSTS FOR FOOD AID PROGRAMS [In millions of dollars] ------------------------------------------------------------------------ USDA/CCC Fiscal year OFD costs MARAD costs costs ------------------------------------------------------------------------ 1992............................. 170.4 86.6 83.8 1993............................. 252.9 68.1 184.5 1994............................. 204.2 24.1 180.1 1995............................. 107.4 21.1 86.3 1996*............................ 66.1 12.0 54.1 -------------------------------------- Total...................... 801.0 212.2 588.8 ------------------------------------------------------------------------ OFD costs are included for Section 416, Food for Progress, and P.L. 480, Titles, I, II and III. Figures are based on Quarterly Tonnage/OFD Reports which lists the cargo preference year. Cargo Preference years do not coincide with the fiscal years. Two cargo preference quarters are in one fiscal year and two are in another. *Preliminary. All documents may not have been received for fiscal year 1996. activities previously funded by ccc Mr. Skeen. FAS is requesting an increase of $15,381,000 for fiscal year 1998 over the current year. How much of this increase is to cover costs now paid for with CCC funds? Response. The fiscal year 1998 FAS budget includes $19.7 million for activities previously funded from CCC, including $10.0 million for the Emerging Markets Program and $9.7 million for the CCC Computer Facility and related FAS IRM costs. The budget proposes increases totaling $14.0 million for these costs, with the $5.7 million balance to be absorbed through reductions in FAS market development activities. Mr. Skeen. What are the specific areas in which you propose to make reductions as a result of absorbing the $5,652,000 in CCC computer costs? Response. Reductions in FAS market development activities totaling $5,652,000 are necessary to partially offset a portion of the annual operating costs of the CCC Computer Facility which now must be funded from FAS appropriations. Offsets will be created through reductions in marketing programs conducted through FAS Agricultural Trade Offices, including limiting trade show activities and in-store promotions. Additional savings are anticipated by increasing the cost-share factor for participants in the Foreign Market Development Cooperator Program. fiscal year 1998 proposed increases Mr. Skeen. Please provide a breakdown of the requested increase showing where you propose to put additional money in fiscal year 1998. [The information follows:] SUMMARY OF FY 1998 BUDGET INCREASES [Dollars in millions] ------------------------------------------------------------------------ Dollars SY ------------------------------------------------------------------------ FY 1997 current level............... $135.5 885 FY 1998 budget request.............. 150.9 885 ----------------------------------- Net increase.................. 15.4 0 ------------------------------------------------------------------------ Distribution of Increases 1. Strategic Outreach and Market Intelligence: Funding for CCC Computer Facility/FAS IRM..................................... $9.7 2. Market Development and Promotion: Reduction of $5.7 million to be applied to funding the CCC Computer Facility/FAS IRM....... -5.7 3. Market Access: Identify and catalog technical barriers to trade in top 30 markets............................................. 0.5 4. Long-term Market Development: Fund Emerging Markets Program from FAS appropriation........................................ 10.0 5. FAS Pay Costs.................................................. 0.9 ----------------------------------------------------------------- ________________________________________________ Total Distribution of Increases......................... $15.4 market development program Mr. Skeen. Please provide the table of actual and estimated costs for the Foreign Market Development program provided to Subcommittee staff on February 28, 1997. [The information follows:] [Page 255--The official Committee record contains additional material here.] Mr. Skeen. What is the authority which allows the carry over of funds from year to year in the FMD program? Response. Historically, FMD program agreements are fully obligated in the fiscal year for which appropriations are made available. Typically, these program agreements finance marketing activities that extend beyond the year in which the agreements were obligated. As such, the unliquidated portions of specific program agreements are carried forward into the subsequent fiscal year. cooperator program expenses Mr. Skeen. Please list all expenses, such as housing, travel, entertainment, etc. for which cooperators may claim reimbursement under the Foreign Market Development/Cooperator Program. Response. Under the FMD program, project funds may be used to pay costs which are necessary to carry out the activities in the Cooperator's annual marketing plans, approved by FAS. FAS tracks such expenses by ``Cost Codes''. I will provide for the record the cost codes and their descriptions. cost code and description 10--Technical assistance to the foreign trade 20--Activities targeting trade or government decision makers 30--Activities targeting consumers 40--International travel and per diem in compliance with the Fly America Act, but excluding first class accommodations, and standard Government per diem rates. 50--Sales and Trade Relations Expenses 60--Personnel Compensation for approved foreign offices including allowances for U.S. citizen employees, such as housing, education, etc. 70--Office Rents, Utilities & Maintenance, including office equipment, supplies, and communications. fmd participants Mr. Skeen. Please provide a table identifying each participant in the FMD/Cooperator program in fiscal year 1996, the overseas location of each participant, the total U.S. contribution to each and a breakdown of that contribution into categories such as travel, housing, office expenses, etc. If the full U.S. contribution has not been made for that year, please provide estimates of the full contribution. [The information follows:] [Pages 257 - 258--The official Committee record contains additional material here.] fmd/map participants Mr. Skeen. Please provide a table for fiscal years 1995 and 1996 listing all participants in the FMD/Cooperator Program together with all U.S. contributions received or estimated, if necessary, from the FMD/Cooperator funds and from the Market Promotion/Market Access Program. [The information follows:] [Pages 260 - 261--The official Committee record contains additional material here.] export enhancement program Mr. Skeen. What justifies the need for an increase of $400 million in the Export Enhancement Program this year? Response. The goal of inducing competitors to negotiate an end to unfair trading practices has been strongly advanced, but not entirely resolved by the Uruguay Round Agreement. Limits on direct export subsidies are a major accomplishment, but the fact remains that the UR agreement allows those limited export subsidies to continue and, furthermore, does not address the differential pricing practices of monopoly export organizations like the Canadian and Australian wheat boards. EEP allows us to continue to compete with these monopolies and the lower levels of export subsidies that the EU will continue to grant. Allocations for the 1996/97 EEP Program were announced last summer at the maximum allowable quantity levels under the Uruguay Round Agreement. We will implement the program if we believe it is necessary for our exports to be competitive. For fiscal year 1998, the budget provides funding for EEP at the maximum level authorized in the FAIR Act. chile Mr. Skeen. Does the Department expect to engage in any preliminary or formal negotiations with Chile in fiscal year 1997 regarding NAFTA accession? Response. Formal negotiations with Chile on NAFTA accession began in the summer of 1995, but stalled due to the lack of fast-track negotiating authority and Chile's resulting unwillingness to further advance discussions. USDA is prepared to work closely with USTR trade officials to prepare for Chile's accession to NAFTA, once fast-track negotiating legislation is extended by Congress. u.s.-chilean agricultural exports and imports Mr. Skeen. Please provide a table showing U.S.-Chilean agricultural exports and imports--including processed products such as beer, wine and distilled spirits--for fiscal years 1995, 1996, and the most recent statistics for fiscal year 1997. [The information follows:] [Pages 263 - 264--The official Committee record contains additional material here.] chile's trade barriers Mr. Skeen. What are Chile's trade barriers to U.S. agricultural exports? What does Chile consider to be U.S. barriers to its agricultural products? Response. Sanitary and phytosanitary import requirements and quality and grade standards color much of Chile-United States bilateral agricultural issues. In 1996, USDA/Animal and Plant Health Inspection Service--APHIS--discontinued annual bilateral meetings on plant health and quarantine issues out of frustration on lack of progress with Chile. There is considerable concern within USDA and U.S. commodity groups that Chilean market access restrictions have increased despite U.S. attempts to cooperate closely with Chile for a number of years. The United States is seeking access to the Chilean market for wheat, poultry, beef, applies, pears, and citrus, among other products. In February, USDA agreed to establish a Consultative Mechanism on Agriculture that provides for the discussion and resolution of bilateral agricultural trade issues, as well as increased cooperation in the area of sanitary and phytosanitary regulations. Recognizing the potential of the Chilean market for U.S. agriculture, President Clinton has asked Secretary Glickman to travel to Chile in order to initiate a new series of discussions on agricultural trade issues. Current Issues Wheat--Chile currently prohibits imports of U.S. wheat citing Karnal bunt concerns. Chile is one of the few remaining countries that does not accept APHIS certification for Karnal bunt. In February, Chile proposed new import requirements that would allow for imports of U.S. wheat from ports in the Pacific Northwest--PNW, as well as require APHIS to provide state of origin certification and private lab testing. USDA opposes any limitation of wheat exports from ports in the PNW, as well as mandatory private lab testing on the basis that APHIS has established a quarantine and surveillance area for Karnal bunt and issues phytosanitary certificates based on enforcement of that system. We continue to urge the Chilean government to implement new import requirements for wheat that are based on sound science. Poultry.--In 1992, Chile's Servicio Agricolay Gandadero--SA--issued revised import regulations calling for zero tolerance for salmonella, effectively blocking U.S. poultry sales to Chile. The U.S. maintains that Chile's salmonella rule is unscientifically based and inconsistent with international trade practices. According to APHIS, Chile's zero tolerance for salmonella cannot be justified, as it is likely already present and being carried by other sources such as live chicks and eggs, which the U.S. currently exports. Chile is currently considering irradiation, as well as USDA/Food Safety and Inspection Service's-- FSIS--new Hazard Analysis and Critical Control Points--HACCP-- methodology, as alternatives to its current requirements. Horticultural Products--For the past 4 years USDA/APHIS officials have been working with the Chileans to establish a set of protocols that would allow for the export of certain horticultural products-- applies, pears, grapes, lemons, and kiwis to Chile. In February, Chile announced that it was prepared to finalize protocols that would provide for the entry of these products. However, to date no action has been taken. Beef--Although U.S. beef is not banned, Chile's grading system, based on the age of the animal, instead of the quality of the meat, restricts U.S. sales. U.S. producers agree that the size of the Chilean market is too small to make grading by the Chilean system economically feasible. Chilean kiwis to the United States.--Chile faces minimal phytosanitary import restrictions when exporting to the United States, but believes recently implemented fumigation requirements for kiwi fruit are unjustified, unduly harsh and implemented in a punitive manner. Chile also views marketing orders maintained by the United States as market access barriers. The Chilean Ministry of Agriculture appears to be withholding approval of U.S. horticultural products until the United States approves an alternative program for Chilean kiwis. major trade barriers Mr. Skeen. What are Canada's major trade barriers to U.S. agricultural exports? Is there any prospect of resolving these in the coming year? Response. In general, we have a large and growing agricultural trade relationship with Canada. But with more than $12 billion in agricultural goods crossing the border now on an annual basis, naturally there are frictions. On January 1, 1998, all bilateral trade will be duty-free, with the exception of those products that are subject to tariff-rate quotas--resulting from the Uruguay Round and subject to the recent NAFTA panel decision. These products include dairy, poultry, eggs, barley, and margarine. Since the panel found in Canada's favor, it will be difficult to tackle these remaining tariff barriers except in the context of market access negotiations--for example, the next round of WTO negotiations or negotiations under the Free Trade Area of the Americas. We continue to face barriers in exporting wheat and barley. These barriers stem from Canada's grading, marketing, and transportation system for grains. We will continue to push for resolution of these issues and will likely request consultations soon to discuss these issues further. Barriers continue in the animal health area--costly quarantine requirements for U.S. feeder cattle and slaughter hogs. We are working with Canadian health officials on changes to their regulations that would provide less onerous entry requirements for live animals and are hopeful of progress this year. We remain concerned about Canadian grading and packaging requirements for some bulk horticultural products and processed foods. Although we had a success last year in getting Canada to remove restrictive requirements affecting french fry exports, we will continue to work toward removal of other similar requirements that occasionally disrupt and limit U.S. exports. object class 25.2, other services Mr. Skeen. What is the reason for the increase in Object Class 25.2, Other Services? Response. The increase in Object Class 25.2, which totals $11.4 million, includes $10.0 million for Emerging Markets Program agreements and $7.4 million for commercial ADP costs in support of the CCC Computer Facility and $0.5 million for contract support for the market access barrier identification initiative, offset by a reduction of $5.5 million in the Cooperator Program, $0.2 million in FAS market development projects and $0.8 million in non-recurring overseas office renovations. object class 31, equipment Mr. Skeen. What is the reason for the increase in Object Class 31, Equipment? Response. The increase in our equipment budget is associated with IRM equipment purchases which were previously funded through CCC-- Section 11 transfers. vehicle replacement Mr. Skeen. Where are the three replacement passenger vehicles to be used? Response. These vehicles will be used in Rabat, Morocco, Brasilia, Brazil and New Delhi, India. funds available for two years Mr. Skeen. Why is FAS asking for obligation of funds for two years? Response. Essentially, this proposal is in conjunction with the proposal for an advance appropriation. Under this initiative, upon documentation as to the extent that wage and prices increases and/or changes in exchange rates were incurred in fiscal year 1998, OMB will make available some or all of the fiscal year 1999 advance appropriation to offset those expenses. Having the fiscal year 1998 appropriation available for obligation for two fiscal years is essential in the case where exchange rates offer more buying power to U.S. currency and unobligated balances are incurred. advance appropriation Mr. Skeen. FAS is asking for an advance appropriation of up to $3 million for overseas wage and price increases. How are such increases handled now? Response. In previous budgets, requests for overseas wage and price increases and changes in exchange rates were made as part of the President's budget. However, it is virtually impossible to accurately forecast these costs given the long lead time associated with the budget process. In some years, amounts were included for increases that did not subsequently occur at the level estimated and, conversely, budgets were presented that did not include sufficient funding to maintain current services overseas. This proposal will help to eliminate those budgetary uncertainties. market barrier access Mr. Skeen. How much has been spent annually on Market Barrier Access Identification--MBAI--in the past two years and what is your estimate for fiscal years 1997 and 1998? Response. The Market Barrier Access Identification project proposed in the President's fiscal year 1998 budget represents that first dedicated effort in FAS to implement a systematic process to review, identify, and catalog technical barriers to trade and other technical requirements that limit export opportunities for U.S. agricultural product. This effort is an important step in preparing for the next round of multilateral trade negotiations during which they are expected to be a major focus of the negotiations. Mr. Skeen. Who will be the primary beneficiaries of the MBAI project? Response. U.S. agricultural product exporting firms are targeted as the primary beneficiaries. emerging markets program Mr. Skeen. Please provide some specific examples of how the Emerging Markets Program works. Response. In 1996, Russia declared a moratorium on all U.S. poultry exports because of Russian food safety concerns related to American imports. The issue was resolved through the intervention of the Secretary of Agriculture, assisted by Emerging Markets-funded training and information seminars on poultry diseases and health and food safety regulations involving Russian officials and U.S. federal, state, and private industry representatives. Partly because of these efforts, in fiscal year 1996 the U.S. shipped nearly one billion dollars worth of poultry to Russia, up from $530 million in fiscal year 1995. Also, technical assistance funds were used in Russia to train private commodity brokers, many of whom were directly involved in the accession of the Russian grain economy to the international market. Under the Emerging Markets Program, the Technical Issue Resolution Fund was established in 1996 to specifically address sanitary and phytosanitary trade barriers. This program financed the attendance of an ARS scientist at technical bilateral meetings in July 1996 in Brasilia which played a critical role in persuading Brazilian officials to eliminate a proposed treatment on pears for the eradication of fire blight. As a result, the new requirements for pears are greatly improved compared to previous proposals. Another example was the funding of three senior veterinarians from China's Ministry of Agriculture to conduct on-site visits in the U.S. which led to the approval for export to China of two bovine semen artificial insemination centers and nine embryo transfer centers. domestic staff assignments Mr. Skeen. How many staff did FAS assign to the California, Colorado and Oregon state offices and to the Iowa FSA office in fiscal year 1996 and how many people are assigned there in fiscal year 1997? Response. During fiscal year 1996, two FAS staff members began their assignments, one in Colorado and a second in Oregon. In fiscal year 1997, two additional staff members have been assigned, one in California and another in Iowa, bringing the total to four staff members. Mr. Skeen. What is the length of assignment of FAS personnel in these offices? Response. These assignments are for a two-year period. criteria for domestic field offices Mr. Skeen. What were the criteria for selecting these offices? Why are there none in the east or south? Response. To better serve our constituents with hands-on counseling in all parts of the country, FAS in 1996 established its outreach offices in the cities of Portland, Oregon; Sacramento, California; Denver, Colorado; and Des Moines, Iowa. FAS continues to work very closely with the four State Regional Trade Groups, EUSAFEC, MIATCO, SUSTA and WUSATA, to service companies and organizations in all states which have expressed an interest in exporting agricultural products. Geographically, EUSAFEC is located near Harrisburg, Pennsylvania and serves the northeast region, MIATCO is in Chicago and serves the Midwest, SUSTA is located in New Orleans and provides services to the southern states, and WUSATA is in Vancouver, Washington focusing on the western states which includes Hawaii and Alaska. In order to more effectively and efficiently engage more cooperatives, small, medium and new-to-market entities in exporting it was important to establish FAS domestic field offices in states with a strong agricultural base, but relatively distant from already established SRTG offices. As to the east and southern regions of the United States, FAS with its headquarters in Washington, D.C. plus EUSAFEC and SUSTA have done a very good job serving the needs of those regions. Noting the outreach role of the SRTG's, in affect, there are eight domestic offices for exporters to contact, as each provides a complete range of export services, all supported by FAS's AgExport Services Division and the local State Department of Agriculture. This partnership between Federal and State offices is tangible evidence of FAS's commitment to expanding business knowledge of export opportunities, USDA export programs and services. FAS actively monitors the effectiveness of these offices, and any future outreach office sites will be based on regional need and the ability of that office to effectively contribute to the mission of the agency. lats Mr. Skeen. Is the Department still developing the Long term Agricultural Trade Strategy--LATS? Response. The 1996 Long-term Agricultural Trade Strategy--LATS--was submitted to Congress by the Secretary on October 25, 1995. The major policy objectives contained in the LATS largely drive the Agency's strategic planning process and the subsequent decision-making processes for resource allocation. The LATS is intended to reflect changing world-wide market opportunities and, as such, will be periodically reviewed and modified as necessary. reimbursements to the department of state Mr. Skeen. Please describe the program under which the Department reimburses the Department of State for certain expenses overseas. Please also provide the amount reimbursed to the Department of State in fiscal years 1995 and 1996 together with estimates for fiscal years 1997 and 1998. Response. FAS, as well as other foreign affairs agencies, relies on the State Department to provide in-country administrative support services including such functions as budget, fiscal, personnel, building maintenance, motor pool, and security. Agencies receiving these services reimburse State through the Foreign Affairs Administrative Support--FAAS--system. Beginning in fiscal year 1998, the State Department will implement the International Cooperative Administrative Support Services--ICASS--program which replaces the current FAAS system as the mechanism for sharing overseas administrative support costs. ICASS essentially represents a redistribution of existing costs on a budget neutral basis; participating agency costs will increase while the State Department's share decreases. To fund these higher agency costs, the President will be submitting an amendment to the fiscal year 1998 budget transferring $113 million from the State Department to the 30 Federal department and independent agencies that maintain a presence in diplomatic missions overseas. For USDA, the budget amendment includes a total of $5.5 million; $4,521,000 to FAS, $932,000 to APHIS and $16,000 to ARS. A four year cost summary for FAS reimbursements to the State Departments is as follows: [$000] Fiscal year: 1995 actual...................................................$6,278 1996 actual................................................... 6,490 1997 estimate................................................. 6,823 1998 estimate.................................................11,344 p.l. 480 programs levels Mr. Skeen. Please provide a table showing adjusted program levels for Titles I, II and III for fiscal years 1995 and 1996 and estimates for fiscal years 1997 and 1998 to include the transfer announced in Acting Under Secretary Smith's letter to the Committee of February 11 and the rescission proposed by the Administration in Title I for fiscal year 1997. [The information follows:] [Page 269--The official Committee record contains additional material here.] inspector general report Mr. Skeen. Page 60 of the Inspector General's most recent report says that there were 71 indictments and 22 convictions involving FAS in a six-month review period. Please provide brief summaries of the indictments and convictions. Response. The Office of Inspector General--OIG--report is incorrect. The indictments and convictions resulted from OIG investigations of Farm Service Agency, not Foreign Agricultural Service, programs and activities. Mr. Skeen. What is FAS doing about the IG's suggestion that public access to results of the Emerging Democracies program be improved? Response. The Emerging Markets Office has posted on FAS' Internet home page Executive Summaries of project reports and assessments, as well as instructions on how to receive a copy of a full report. food aid to north korea Mr. Skeen. Please describe the Administration's food aid program to North Korea. Please include tonnages and commodities, total cost and brief description of how the program will operate. Also include participation by other donors and the scope of the entire program. Response. In response to a World Food Program appeal for 100,000 metric tons of food for North Korea, the United States Government recently announced that it will provide about 27,000 metric tons corn soy blend, rice, and corn at a cost of $10 million. This assistance will be provided under P.L. 480 Title II through the World Food Program as emergency food aid for children under age five and food victims. The World Food Program will monitor distribution to ensure that aid reaches those in need. The Republic of South Korea intends to provide $6 million and Australia about $2 million in response to the World Food Program appeal. Last year, the United States government provided $8.2 million in assistance to North Korea, of which $6.3 million was funded by P.L. 480 Title II and the balance was funded from USAID's international disaster assistance program. reduction in title i Mr. Skeen. In last year's hearing, then Under Secretary Moos testified that although title I was to be reduced in fiscal year 1997, ``we believe we will be able to achieve the program's market development objectives.'' given the Administration's intention to reduce Title I spending in both fiscal years 1997 and 1998, how can these program objectives still be realized? Response. We have been able to continue to achieve the program's market development objectives with reduced funding primarily because most of the reductions have been in our grant funding. From fiscal 1995 to 1997, funding under Title I--funded food for Progress grant programs, for countries in the former Soviet Union, has declined from $88 million to $30 million.We have been successful in graduating Armenia and Georgia from large Food for Progress grants to smaller Title I direct credit programs. As a result, we are continuing to develop these markets without unduly adding to these countries' debt burdens. We have also been able to continue programs in other parts of the world including, Asia, Latin America, and Africa. For example, we work with the U.S. Wheat Associates in our Title I program with Angola to support their efforts. We are also continuing to work with our partners in the U.S. rice industry in several Latin America markets. great lakes--proposed rule Mr. Skeen. Great Lakes port representatives have told the Committee that USDA's proposed rule on Section 17 of the Maritime Security Act of 1966 effectively prohibits use of lower cost intermodal transportation in the region. Please explain your proposed rule and its relationship to cost effectiveness. Mr. Response. our proposed rule was published in the Federal Register on February 12, 1997. It would revised CCC's procedures for buying processed commodities under P.L. 480, Title II. This proposal would implement recent changes in Section 17 of the Maritime Security Act of 1996 which require CCC to follow certain procedures in these purchases. The new procedures are intended to correct a perceived unfairness to Great Lakes ports stemming from cargo preference requirements. Up to 25 percent of the cargo would be allocated to Great Lakes ports if ocean transportation was available and it represented the lowest landed cost. The procedure would also allow CCC the flexibility to allocate the balance of the cargo in the most efficient manner to meet cargo preference requirements. We intend to comply with this legislation in the most cost- effective way possible. I want to emphasize that this is simply a proposed rule; no final decisions have been made. We are soliciting public comments, which we will take into consideration in developing the final rule. Comments received regarding the use of intermodal transportation in the Great Lakes will be part of this consideration. the government performance and results act Mr. Skeen. GPRA, known as the Result Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented--such as to improve literacy--as opposed to output or activity oriented--such as to increase the number of education grants issued. What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The Foreign Agricultural Service--FAS--has provided its draft strategic plan to USDA's Office of the Chief Financial Officer and to the Office of Budget and Program Analysis. The draft strategic plan includes a mission statement and strategic goals. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. To date, the agency has not identified any conflicting program goals. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. We fully recognize that constraints on federal spending, including outlays for agriculture, are likely to become even more severe as further progress is made toward achieving a balanced budget. At the same time, we believe that exports are likely to grow in importance as a critical safety net for U.S. agriculture, especially as domestic demand expands only at the rate of U.S. population growth, and as direct federal income support for farmers declines as currently provided by the Federal Agricultural Improvement and Reform--FAIR--Act of 1996. If export revenue is expected to comprise an ever larger share of U.S. net farm income, then the trade programs that contribute to export success are likely to remain vital, particularly if competitor countries maintain support for their own agricultural exports, as anticipated. Taken together, we believe these factors support our assumption that FAS resources will remain essentially flat, after accounting for inflation. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. FAS will be engaged through the summer of 1997 in developing performance plans for each division in the agency. Since most of our work in this area still lies ahead of us, this activity will be an agency priority in the coming months. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. Because our strategic plan is still in the draft stage, and because our performance plans are still very much a work in progress, it is too early for us to predict with absolute certainty at this point if our strategic and annual performance goals will require a change in the FAS program activity structure as presented in the President's budget. We should point out, however, that the FAS program activity structure as presented in the President's fiscal year 1998 budget already reflected the general strategic goals proposed in the initial version of the FAS strategic plan. Having taken this step, it is probably fair to say that any further change that may be made will likely be a refinement in what has been adopted for the 1998 budget. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. FAS has made considerable progress in establishing the framework for carrying out strategic planning and measuring results in a manner consistent with GPRA prescribed standards. This foundation should serve us well as we focus with specificity on the development of performance plans in the weeks ahead. The major challenges encountered thus far have been: (1) to determine with clarity just what the Act requires and how FAS' strategic plan needs to be made consistent with related efforts across the entire Department of Agriculture; (2) to identify performance measures that are ``measurable,'' appropriate, and both realistic and challenging; and (3) to convince each agency employee that the Results Act is not just another temporarily fashionable management tool--that in fact it is required by law and will have a direct bearing on the ability of FAS to serve its customer needs in the years ahead. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity--information systems, personnel skills, etc.--necessary to implement the Results Act? Response. The pilot phase introduced the agency to the general requirements and ``language'' of the Results Act. It also forced the development of a more comprehensive strategic plan. In order to ensure compliance with the Results Act, the agency has named a Director of Strategic Operations and plans to train additional agency personnel in GPRA implementation. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. Our primary stakeholders are producers--farmers and ranchers, processors and exporters. These stakeholders are generally represented by the many trade associations--usually referred to as ``cooperators''--that serve as advocates for the various segments of agriculture that are interested in expanding trade opportunities. We have held strategic planning sessions with a number of cooperators in order to provide them with an understanding of our strategic planning efforts to date and to support their strategic planning initiatives. We also are planning a large ``strategic planning'' conference with the cooperators and many of our overseas staff to be held this July. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. At this stage of the process, we have not shared our strategic plan with agencies outside of USDA. However, we anticipate doing that once the FAS strategic plan has received additional review within the Department. We are confident that our agency's activities complement and do not unnecessarily duplicate other federal efforts. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by an Under/ Assistant Secretary--or other relevant official--the Senior Policy Staff and the Secretary. Upon completion of the review, the Department plans to provide copies of the Strategic Plan--including an overall Department-wide Executive Summary and the Strategic Plans for individual Mission Areas/Agencies--to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members or Staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. We plan to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee House Appropriations Committee House Economic and Educational Opportunities Committee House Government Reform and Oversight Committee House Resources Committee Senate Agriculture, Nutrition, and Forestry Committee Senate Appropriations Committee Senate Energy and Natural Resources Committee Senate Governmental Affairs Committee Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision making to be more results-oriented. Organizations that havesuccessfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results- oriented? Response. In general, we anticipate that significant GPRA-inspired changes in policy and programs will flow from the findings in the first performance reports. Those performance reports will be the first opportunity to review actual performance results as measured under approved GPRA performance indicators. However, the early imprint of GPRA principles is already in evidence throughout FAS. For example, significant changes have occurred with respect to the two major market development programs that FAS administers: the Market Access Program-- MAP--and the Cooperator Program. Over the past year, new, more comprehensive competitive criteria have been developed to determine the awarding of funds under these two programs. These criteria are very much performance based, focused on such criteria as export levels attained, private-sector matching contributions, and the degree to which strategic planning is employed by the program participant. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. At this early stage, there is simply the expectation, as made clear by the FAS Administrator, that all managers--indeed, all agency employees--will be held responsible for implementing the Results Act. In addition, agency employees are being told in no uncertain terms that GPRA performance results will be used to determine the level of support for each agency activity as our annual funding requests are submitted. One specific proposal that we are considering, as we gain experience with GPRA implementation, is to include GPRA compliance as one of the formal ``elements'' that will be included in each manager's or employee's ``standards and elements'' used for purposes of annual employee performance ratings. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. At this point, the realization that FAS must, in the very near future, have measurable results for all that we do is permeating all agency activities related to planning, budgeting, and the development of new initiatives. This realization has a clear impact on the agency mind set as we conduct our business. As indicated in some of the previous answers, however, the full impact of the GPRA-driven performance standards is not likely to be felt until the results of the first performance plans are measured and reported. p.l. 480 title ii Mr. Walsh. There are two important issues to raise with AID and USDA regarding P.L. 480 Title II and the Food Security Commodity Reserve. Under P.L. 480 Title II, each year at least 1.55 MMT of commodities are supposed to be used in programs that help the poor and hungry directly, such as food-for-work, school feeding and mother-child health care. Typically, there are 5-year programs developed and implemented by private voluntary organizations and cooperatives. However, this 1.55 MMT level has not been reached and AID does not encourage private voluntary organizations to submit proposals for this program. Actually, by established an extremely cumbersome approval process, AID actively discourages these types of proposals for many needy countries. An important element of the Title II program is that programs are sponsored overseas by non-governmental organizations. How does AID ask private voluntary organizations to submit Title II proposals for such things as mother-child health care, food-for-work and school feeding? For instance, does AID send releases or notices encouraging PVOs to submit proposals? Response. There are many mechanisms USAID uses to support private voluntary organizations and to encourage their participation in the P.L. 480 Title II program. These mechanisms cover the full range of non-emergency programs, including maternal and child health, food-for- work and school feeding. First, we maintain a continuous dialogue with the community of private voluntary organizations. Overall, USAID works closely with the Advisory Committee on Voluntary Foreign Aid--ACVFA--which represents the entire private voluntary organization community on a broad range of issues ranging from development assistance strategy to federal procurement regulations. There are over 400 private voluntary organizations which have registered with USAID and which participate in this dialogue with USAID, either directly or through ACVFA. With respect to Title II food aid programs, USAID works closely with the private voluntary organizations through the Food Aid Consultative Group, an advisory group established by the P.L. 480 legislation to assure close consultation on all food aid matters. This group meets at least twice a year in formal session and has constituted several working groups to review and advise on food aid issues. Second, the private voluntary organizations review and contribute to USAID guidance and regulations on food aid programs, including mother-child care, food for work and school feeding. For example, they are now completing review of the guidance for so-called Development Activity Proposals, which document requests for new programs, and for requests for resources for ongoing programs. This guidance will soon be published in the Federal Register to reach out to as broad a community as possible. Third, we have encouraged our USAID field missions to work closely with private voluntary organizations in the Field and to include them as partners in deciding objectives for U.S. assistance programs. This involvement allows for outreach to organizations which may not be familiar to USAID in Washington but are interested in participating in field operations. So I believed we do a good job of reaching out to the private voluntary organization community and encouraging new Title II non- emergency programs. Just last year, for example, we received fifty- eight proposals for new programs from eighteen private voluntary organizations. Mr. Walsh. could you submit to the subcommittee any AID releases or notices asking for PVO proposals for Title II programs to subcommittee? Response. I will provide a copy of the fiscal year 1998 draft Title II guidelines for food aid development activities. These guidelines, while admittedly detailed, are the product of a collaborative effort of USAID and members of the Food Aid Consultative Group, established by Section 205 of P.L. 480. We believe that these guidelines redefine and focus food security strategic objectives and promote the efficient and effective management of food aid. [Clerk's note.--The 1998 draft Title II guidelines for food aid development activities is too lengthy to print and is retained in the Committee files.] the food security commodity reserve Mr. Walsh. Also under Title II, at least another 475,000 MT of food is supposed to be made available each year for emergencies. If emergency needs exceed this amount and there is inadequate funding to meet the additional needs--which is usually the case--then funds can-- and have been--transferred from Titles I and III to Title II. In addition, commodities from the USDA Food Security Commodity Reserve can be used for an emergency. But using the Reserve for emergencies just borrows against future year P.L. 480 funds and once the 2.3 MMT commodities remaining in the Reserve are gone, it will take an appropriation to refill the Reserve. Therefore, this emergency back-up mechanism needs to be improved. In Mr. Rogers testimony, he mentions the Food Security Commodity Reserve, which is important as a back-up for P.L. 480 Title II to provide food for emergency needs. However, it seems that there are some reimbursement and replenishment problems with the Reserve. I would appreciate it if both USDA and AID could submit recommendations to the Committee about how the Food Security Commodity Reserve could be improved to make it an effective means for providing food for emergencies. Response. USAID. The Food Security Commodity Reserve provides an effective backup for the Food for Peace Program in responding to emergency and urgent humanitarian food needs. The Food Security Commodity Reserve Act of 1996 authorized the Secretary of Agriculture to release commodities from the Reserve as needed. The Act also provided flexibility for holding corn, grain, sorghum and rice, in addition to wheat currently in the Reserve and the authority to exchange these commodities for another United States commodity of equal value. Commodities can be released from the reserve under two different conditions. First, if the domestic supply of a commodity held in the reserve is so limited in any fiscal year that the Secretary of Agriculture cannot make the commodity available for P.L. 480 programming under the domestic supply criteria established in the law, the reserve may be tapped and the commodity made available for programming under the three P.L. 480 titles. Second, commodities may be released from the reserve without regard to the domestic supply situation to meet unanticipated emergency food assistance needs under Title II that cannot be met under the normal means of obtaining commodities for P.L. 480 programming. This provision provides a highly useful means for meeting emergency food assistance needs. However, the total volume of commodities that can be released for emergency programming through Title II in any given year is limited to 500,000 metric tons, plus an additional 500,000 metric tons that could have been released in prior fiscal years but were not. While we continue to believe the Reserve is well designed to support our international Food Aid, efforts, we will certainly continue to work with AID officials and Congressional staff to see if we can find ways to further improve this tool. p.l. 480 title ii Mr. Walsh. Mr. Rogers, I have several questions regarding some points you made in your written statement about the programming of Title II food aid for non-emergency programs. On page 4, you state that non-emergency Title II resources will concentrate on improved nutrition or agricultural productively objectives. Although these both have merit, this seems to place severe limitations on the program and overlooks many other important contributors to food security. For instance, poverty is directly linked to food insecurity. Why can't programs be approved that help improve the incomes--and purchasing power--of the poor? Why is school feeding considered an unusual case for food aid, since it is one way to encourage poor families to send their children to school and education is particularly important for long-term human development? Since private voluntary organizations and cooperatives are responsible for designing and implementing Title II regular programs, and under section 202 of the P.L. 480, they must be consulted by AID on the development of program guidance and procedures, do they support these programming limitations? Response. You are referring to the priorities which have been established for non-emergency Title II programs. These priorities provide guidance to the private voluntary organizations and USAID's field missions on those activities which are most likely to be successful in promoting food security in poor, food deficit countries. They were developed because we recognized there was a significant change in the environment in which the United States provides its food aid and also because GAO, in an audit of U.S. food aid programs, strongly recommended we develop such guidance. These guidelines provide program managers with a general sense of what works best in improving food security. As such, we expect that over time Title II resources will concentrate in these areas. I would like to emphasize, however, that they are not intended to exclude activities which might make a major contribution to food security in any specific country setting. You are absolutely right that there are good examples of other types of programs which improve incomes and as a result enhance food security. School feeding programs can also be worthwhile interventions. In fact, we have recently approved major school feeding programs in Burkina Faso and in Bolivia. The private voluntary organizations participated in developing this program guidance through extensive series of briefings and through full and open discussion. While the private voluntary organizations represent a board diversity of views, I believe they agree with these priorities. At the same time, I think it fair to say they would define the areas for intervention broadly, and they strongly support the position that other interventions can successfully enhance food security and should be given full consideration for approval. Mr. Walsh. On page 4, you state that USAID is ``decentralizing'' operational decisions to USAID field missions. I understand that USAID is phasing out many missions and that several food insecure countries in sub-Sahara Africa either do not or will not have missions. Which sub-Saharan countries have a mission, which do not and which are being phased out? Response. There are ongoing bilateral USAID assistance programs in 20 sub-Saharan countries. These are: Benin, Eritrea, Ethiopia, Ghana, Guinea-Bissau, Kenya, Madagascar, Malawi, Mali, Mozambique, Namibia, Nigeria, Rwanda, Senegal, South Africa, Tanzania, Uganda, Zambia and Zimbabwe. In addition, USAID provides assistance through its regional programs located in Botswana, Cote d'Ivoire and Kenya to 14 sub-Saharan countries. These are: Botswana, Cote d'Ivoire, Central African Republic, Comoros, Congo, Djibouti, Equatorial Guinea, Gabon, Mauritania, Mauritius, Sao Tome and Principe, Seychelles and Sierra Leone. Finally, USAID provides limited humanitarian or emergency assistance programs to five counties: Angola, Burundi, Liberia, Somalia and the Sudan. Starting in fiscal year 1994, USAID closed missions in twelve countries, including Botswana, Burkina Faso, Burundi, Cameroon, Chad, Cape Verde, Cote d'Ivoire, Gambia, Lesotho, Swaziland, Togo, and Zaire. USAID expects to close Niger in 1998 and to graduate Zimbabwe, Namibia and South Africa in 2000. Countries without bilateral missions, however, can continue to participate in regional or USAID-funded private voluntary programs, depending on the nature of their development problems. Mr. Walsh. Under section 202 of P.L. 480, private voluntary organizations and cooperatives are eligible to develop and implement non-emergency Title II programs and such programs can be conducted in countries where there are no USAID missions or where the program does not fit into a USAID country strategy. What will be the impact of decentralization on the ability of private voluntary organizations and cooperatives to establish programs in countries without USAID missions or where the program does not fit into USAID mission strategy? Do these organizations support this decentralizing strategy? Response. Decentralization will not have any significant effect on the ability of private voluntary organizations to operate in countries without USAID missions or to operate where programs do not fit into a USAID mission strategy. The point of decentralization is to put responsibility for operational decisions into the hands of field managers. This allows the field team, consisting of both USAID and private voluntary organization personnel, to make direct operation decisions on how best to produce the results we are all seeking. Accountability for taxpayer resources, as represented by final authority to sign and approve official documents, will be decentralized to the USAID Mission Director. However, we intend that actual operational decisions will be made by the team managing the food aid program in the country. That team includes the private voluntary organizations. We hope ultimately to do something similar in countries where there is no USAID mission. We still believe the field managers should be the ones making the operational decisions. In this case, the private voluntary organization, perhaps in consultation with one of the USAID regional offices or USAID/Washington, would make the decisions. Final signing authority would rest with a USAID regional office or USAID/ Washington, but that would simply be a matter of routine. I would like to point out that we believe food aid programs are most likely to produce significant results where they are integrated with a USAID mission program. This is so because USAID can bring dollar-funded resources, usually in the form of technical assistance, to the joint activity. USAID also maintains close coordination with and can leverage the resources of other donors. And because we represent the U.S. Government, USAID usually has considerable influence with the host government. So for all these reasons, which have the effect of amplifying the scope and impact of an activity, we give priority to integrated private voluntary organization/USAID programs. In short, we give priority to these programs because we expect them to produce the greatest results. However, we do recognize fully that Title II programs where there is no USAID mission or where the food aid is not integrated into the mission strategy can also produce results and are therefore worthy of full consideration. With respect to whether the private voluntary organizations support decentralizations, I believe they support the concept and agree that field managers are best positioned to make operational decisions. The private voluntary organizations are also willing to work with USAID to see if an acceptable process for implementation can be developed. We are now working on three pilot cases in Ethiopia, Peru and Bangladesh. We will proceed based on mutual agreement that decentralization improves the efficiency and effectiveness of the Title II program. So in the end, we will all agree that decentralization is a good idea, or we will revert to some form of the current system in which many decisions are made in Washington. sugar tariff-rate quota Mr. Kingston. I understand that USDA is required to announce by mid March whether the Department will increase the raw cane sugar import quota as specified in your quota formula announcement of September 1996. Have you made a decision? What will it be and why? Response. Our September 13, 1996, announcement of the fiscal year 1997 sugar tariff-rate quota--TRQ--is the only announcement that USDA is likely to make during fiscal year 1997 regarding sugar. The administrative plan we established calls for the allocation, by the U.S. Trade Representative--USTR--of additional 200,000 ton tranches from the USDA-announced TRQ if the stocks-to-use ratio, as defined in the World Agricultural Supply and Demand Estimates (WASDE), is less than or equal to 15.5 percent. If, however, the ratio is greater than 15.5 percent, the tranche is canceled. In January the ratio was at 15.7 percent, resulting in the cancellation of the first tranche. On March 11, 1997, the stocks-to-use ratio in the WASDE report will signal the allocation or cancellation of another 200,000 ton tranche. Once again in May, if the stocks-to-use ratio as reported in the WASDE is less than or equal to 15.5 percent, the USTR will allocate 200,000 tons of sugar to exporting countries. That will be the final tranche that is available as a result of the September 13, 1996 announcement. foreign trade efforts Mr. Fazio. There is a portion of Response's testimony that I wish I could bronze and mount over the dias: ``As domestic farm supports are reduced, export markets become even more critical for the economic well-being of our farmers and rural communities, as well as suburban and urban areas that depend upon the employment generated from increased trade.'' Your testimony tells a wonderful and successful story of our foreign trade efforts: A record year for ag exports` $60 million, up nearly 50 percent since 1990 and rising--the number 1 positive contributor to the U.S. trade balance. Individual success stories abound: Rice to Japan: Half the market, more than $125 million in US sales this year--up from zero in 1993. Beef to Korea: Up 50 percent. Soybeans in the Philippines: Up 122 percent--to $160 million. Soybeans to Indonesia: Up to $20 million in just two years. Feed grains to the Philippines: 75 percent of a once-closed market. Table grapes to Korea: $1.3 million in 10 months. Oranges to Korea: From $5.3 million to $13.6 million in one year and rising. Much of our success stems from the Market Access Program. Tell us about your changes to get more of these resources to small companies and to cooperatives. Response. FAS has made several changes designed to increase opportunities for small businesses and cooperatives. Within the brand program, FAS continues to give priority assistance to small-sized entities and cooperatives. In 1997, because FAS has made every effort to fully fund the requests for brand promotion funding for small companies, 84 percent of brand promotion funds will go to these groups, up from 76 percent in 1996. Four percent of the resources allocated for brand promotion will go directly to four cooperatives: Blue Diamond Almond Growers, Sunkist Growers, Ocean Spray Cranberries and the National Grape Cooperative. The remaining 96 percent of brand promotion funds will be competitively allocated by nonprofit commodity trade associations and state regional trade groups to private companies and cooperatives within their respective industries or regions. In addition, small entities and cooperatives will benefit from generic activities, including the opportunity to participate in subsidized trade shows and retail promotions organized and coordinated by participants. This is part of an ongoing effort to reach out to organizations that can benefit most from export promotion assistance by availing less experienced new-to-market small entities and cooperatives the advantage of closer supervision and guidance by the participants' in-country representatives. FAS also continues to dedicate significant staff and financial resources to outreach efforts to educate associations with significant small, medium and minority business membership regarding export opportunities, FAS services and programs available to assist them, and to provide advice regarding the mechanics of exporting. To augment that effort we have actually placed for FAS staff in outreach offices, cooperatively housed with State Departments of Agriculture or USDA's own FSA staff, in Des Moines, Iowa; Sacramento, California; Denver, Colorado; and Portland, Oregon. We also opened an Agricultural Trade Office in Miami, Florida, to assist exporters in that area in fully capitalizing on the opportunities offered by the Caribbean region. Mr. Fazio. Can you provide any up-to-date estimates of the total return from MAP? For many years, we have been using a $16 in increased exports for every $1 provided, but it appears that the return would be significantly increased for some commodities. Response. Two years ago, a study was completed by FAS which provided this estimate of $16 in increased exports for every $1 of promotional funds. While it is undoubtedly true that some commodities have a greater than 16 to 1 ratio, this study looked at changes in market share of the total basket of consumer oriented products, and not the sum of individually promoted products. Therefore, this study provides no performance measures on individual commodities. There have been no subsequent studies by the Agency which would quantify different impacts on a commodity specific basis. trade barriers Mr. Fazio. Is FAS working to enumerate trade barriers, especially those based on ``scientific'' or ``phytosanitary'' concerns? The Economic Research Service spoke of a report coming out in several weeks that may be related. Response. In 1995, FAS initiated, in cooperation with the Economic Research Service--ERS--a desk inventory of known barriers to U.S. exports. The compiled information was provided to the affected Agricultural Affairs Offices of the U.S. Embassies located in those countries for comment and verification. This research resulted in a first assessment of the Technical Barriers to Trade--TBT. A more systematic approach to include the broader set of foreign markets, other government agencies, and U.S. commodity group interests was undertaken in 1996. The 1996 inventory, therefore, represents a very comprehensive view of potential technical barriers faced by U.S. agriculture. Risk Management Agency blazy report Mr. Skeen. Shortly after the FCIC was merged with the Farm Service Agency a study was conduced to analyze RMA and its strengths and weaknesses. Please submit for the record a copy of the complete study and agency actions taken to address weaknesses found by the study author. I believe the study is commonly referred to as the Blazy Report. Response. The report referred to by the question was a draft study by the Farm Service Agency performance Engineering and Analysis Staff entitled ``Technical and Organizational Analysis of Risk Management Loss Adjustment Operations; and the Structure of Compliance, and the Regional Services Offices.'' The study, which was intended to implement the full merger of the former Federal Crop Insurance Corporation into the then-newly constituted FSA, was never issued in final form, and is now viewed as largely moot in light of the creation of a separate Risk Management Agency. Nevertheless, the draft report has served to provide RMA with insights of understandably mixed value given the original premise of the study. The draft report contained nine recommendations. Those--#1 and #3-- relating to organizational change were based on the assumption that FCIC/Risk Management would be fully folded into FSA and its field structure. The resources of FCIC's ten Regional Service Offices and the six Compliance Field Offices were seen as FTE's best made available to the FSA State Executive Directors or FSA Administrator to enhance the federal portion of the dual delivery system. The report also envisioned a role for FSA state offices overseeing private reinsured companies inconsistent with the public-private relationship basic to the crop insurance program. The proposal--#7--calling for institution of cross- cultural training for Risk Management, FSA Program Delivery, and Farm Programs, might have been appropriate to the single agency concept. All three of the recommendations noted above were rendered moot by the 1996 Act. The report recommended the immediate creation of an Internal Quality Assurance Staff within Risk Management's Compliance office--#2. That capability was in place and operating at the time of the report. Compliance was then and is now able to measure key timeliness and accuracy factors in Risk Compliance reports. RMA will continue to do so. The former FCIC's ``Internal Controls Staff,'' which had been absorbed by FSA as a part of the 1994 merger, has since returned to RMA and made part of RMA's Risk Compliance office. Other concerns about Compliance raised in the draft study have been addressed by greater use of administrative sanctions, close cooperation with the Justice Department ACE program for civil cases, development of a Memorandum of Understanding--MOU with the Office of Inspector General, a request for limited subpoena power, changes in reinsured company reviews that will make for more responsive reporting of findings, and continued training for all investigators. RMA has developed revisions to its operating manual for reinsured companies--M-14--that will simplify and systematize many company requirements. The pending 1998 Standard Reinsurance Agreement--SRA negotiations will likely reflect these and other positive innovations. The proposal--#4--calling for the development of a loss adjustment training certification program failed to note the nature of RMA's SRA- based relationship with participating companies. Training for the private companies already existed and is reimbursed as an administrative expense under the SRA. In keeping with the concept of limited direct involvement in the training process, we continue to explore improvements and potential third party training programs. Recommendations #5 and #6 proposed that RMA develop statistical models of the loss adjustment and claims adjudication processes based upon ``outcome'' performance measures. We are in the process of establishing such a tracking system, pending Privacy Act considerations and final Office of General Counsel--OGC approval. Some tracking of company agents exists. Tracking of loss adjusters, other than former FCIC and current FSA adjusters, has generated privacy questions because of the proprietary nature of that information. It should be noted that reinsured companies are required under the SRA to maintain loss adjustment and agent training annually, including required hours of update training. Records are available to Compliance and are part of the reinsured company compliance review process. We did, however, disagree with an approach solely based on statistical models. The advent of loss adjuster tracking in the data base will allow Risk Management to establish performance norms based on the overall book of business, and identify those adjusters falling outside expected performance levels. We will continue to use statistical resources to develop methods and measures to assure accurate loss adjustment. The recommendation--#8 to develop a Concept of Operation has been folded into RMA's GPRA process which is proceeding on schedule. We concurred with the general concept of recommendation #9 regarding Derived Issues and the need for an Improvement Program. However, a number of the individual observations were made moot by the ``carve-out''--movement of the R&D computers, others are addressed in procedural changes--Compliance random selection of policies, others by purchase--laptops in the field, some by training--lack of contract administration knowledge, and still others through application of statutory requirements--MBO planning replaced by GPRA. RMA follows an annual business cycle that generates continuous review and improvement of the Risk Management Program. [Clerk's note.--The report provided for the record is too lengthy to reprint and is retained in Committee files.] funding for additional compliance staffing Mr. Skeen. Of the $4,465,000 increase requested in your budget, how much will go for additional compliance staffing? Response. Risk Compliance is scheduled to receive an additional $1,338,350 to support the increase of 13 additional staff persons required to handle the increased workload of the expansion of programs and increasing demands of the Federal crop insurance program. sales commissions of agents Mr. Skeen. What would the possible consequences be if no funds are appropriated for sales commissions to reinsurance companies? Response. Delivery of the crop insurance program since the Federal Crop Insurance Act of 1980 has been through privately licensed insurance agents. If no funding for sales commissions is appropriated-- a delivery system would be destroyed. Taking the agent out of the sales and service of crop insurance is troublesome to RMA since 15 years of experience gained and the proven ability of agents to properly market and service crop insurance products would be lost. We also expect that agents will be actively involved in RMA's risk management education efforts. RMA and the Department are committed to the private delivery of crop insurance. We believe in the private delivery system and its ability to broaden the available safety net to farmers. Insurance agents are knowledgeable about the crop insurance products and have made extra efforts to provide producers with access to other lines of insurance and non-insurance risk management tools. funding of delivery expenses Mr. Skeen. In FY 1998 some costs related to delivery expenses are paid from the crop insurance fund and some will be paid from the A&O account. Please describe the difference between the costs paid from each account. Response. Under current law, the delivery expenses estimated to be paid from the A&O account--discretionary funds--for FY 1998 are part of the program expenses paid to reinsured companies as authorized by Section 516 of the Federal Crop Insurance Act. These delivery expenses currently represent what is estimated to be paid by the reinsured companies to their sales agents. Mandatory funds--from the FCIC insurance fund--reimburse the reinsured companies for all other administrative, delivery, and loss adjusting expenses they incur related to delivering the crop insurance programs. For FY 1995, 1996, and 1997 all reinsured company delivery expenses, including sales agents expenses, were paid from FCIC's mandatory funds. Any loss adjustment contractor costs for the FSA county office business will also be paid from mandatory funds. Our legislative proposal would allow the payment of delivery expenses other than just sales commissions from discretionary funds in FY 1998. The proposal specifies that 10.5 percentage points of the rate used to reimburse reinsured companies for their administrative expenses be funded out of the discretionary account. excess losses Mr. Skeen. The budget reflects an increase in costs to the fund of $5,419,000 for excess losses. What constitutes an ``excess loss'' and how do you estimate for these costs for FY 1998? Response. An excess loss refers to the excess of losses over total premiums net of underwriting gain due the reinsured companies. For each crop year, FCIC estimates its total losses by first estimating gross premiums which include the portion paid by the farmer and the portion subsidized by the federal government. Gross premiums are then multiplied by an estimated loss ratio. The determination of any excess loss involves the estimation of net premiums which are gross premiums less the underwriting gains paid to the private reinsured companies. FCIC records an excess loss when total losses exceed net premiums. The estimated losses for FY 1998 are $2,100,645,000 minus the estimated total premium of $1,909,215,000 net of the estimated underwriting gain of $123,502,000, to equal excess losses of $314,932,000. The estimated excess losses for FY 1997 were $309,513,000, which shows an increase of $5,419,000. de-linkage Mr. Skeen. Last year the Farm Bill unlinked the requirement to carry crop insurance from participation in the farm programs of USDA. Have you been able to tell yet if this has caused any erosion in participation? Response. De-linkage has caused a decrease in participation when comparing the 1995 and 1996 crop years. The year-to-year change is shown in the following two tables, which show (1) the number of catastrophic level coverage active policies, and (2) the number of catastrophic level coverage acres insured. The decrease in policy count is greater than the decrease in acres, which indicates there was a tendency for small farms to drop out in greater percentages than did larger farms. ---------------------------------------------------------------------------------------------------------------- Difference 1995 1996 -------------------- Amount Percent ---------------------------------------------------------------------------------------------------------------- Change in premium earning CAT Policies: FSA............................................................ 807,134 431,980 (375,154) -46 Reinsured...................................................... 367,507 297,756 (69,751) -19 Less New Buy-up Policies....................................... ........... 19,394 ......... ........ -------------------------------------------- Total........................................................ 1,174,641 749,130 (425,511) -36 ============================================ Change in CAT acres insured (000): FSA............................................................ 73,729 47,608 (26,121) -35 Reinsured...................................................... 41,565 39,274 (2,291) -6 Less New Buy-up Acres.......................................... ........... 11,596 ......... ........ -------------------------------------------- Total........................................................ 115,294 98,478 (16,816) -15 ============================================ ---------------------------------------------------------------------------------------------------------------- buy-up coverage Mr. Skeen. For the 1995 crop insurance year, you stated last year that about 51,000 more policies were sold at higher coverage levels than in 1994. Clearly that was a part of the goal of the Crop Insurance Reform Act. What kind of buy-up occurred in 1996? Response. As can be seen from the tables presented previously, in 1996 the number of active buy-up policies increased by 19,394, or 2.2 percent. The number of acres insured increased by 11,596,000, or 11 percent. object class 25.2--other services Mr. Skeen. For the record please provide a breakout of object class 25.2--Other Services. Response. For FY 1998, we have estimated that the $9 million requested will be required to support activities, such as: $8 million for the services of the National Computer Center in Kansas City, MO; an estimated $556,000 for Department Greenbook charges; and the remaining portion for re-engineering initiatives of the accounting system for the Fiscal Systems Branch. object class 23.3--communications Mr. Skeen. The budget justifications indicate an almost doubling of object class 23.3--Communications from FY 1996 to 1997. What caused the increase? Response. For FY 1996, the budget for Risk Management was consolidated with FSA's budget. While every effort was made to track obligations for all of the cost centers of Risk Management, there are obviously obligations that were coded incorrectly or entered into the system charged to the incorrect object codes. The obligations for FY 1996 are the best that could be determined at the end of the fiscal year. The FY 1997 estimated obligations are needs that have been identified for Risk Management for communications, such as FTS charges for our Washington offices and field offices, and utilities for our field offices. It is difficult to make a comparison of obligations from FY 1996 to FY 1997. computer and software spending Mr. Skeen. For the record, please provide a table showing all costs related to computer and software spending for fiscal years 1995, 1996, 1997, and 1998. [The information follows:] [Page 282--The official Committee record contains additional material here.] delivery of crop insurance policies Mr. Skeen. One of the concerns of providing crop insurance was the competition between private insurance agents and Farm Service Agency personnel. Do FSA personnel or other Federal employees still sell some crop insurance policies? Response. CAT coverage is available from local FSA offices in all States except the following single delivery States announced last year--Arizona, Colorado, Illinois, Indiana, Iowa, Kansas, Minnesota, Montana, Nebraska, North Carolina, North Dakota, South Dakota, Washington, and Wyoming. As you know we are required by statute to announce other single delivery states by April 30th this year. underserved counties Mr. Skeen. For the record please provide a list of counties that are considered underserved by private insurance agents. Response. Presently, there are no crop insurance agents in the State of Alaska. The following counties were reported to be ``underserved''--Boundary County, Idaho; Cape May, Middlesex, Morris, Sommerset, and Sussex Counties, New Jersey; Bristol, New Port, Providence, and Washington Counties, Rhode Island; and Boone, Braxton, Calhoun, Clay, Doddridge, Gilmer, Harrison, Lewis, Logan, Marion, Monongalia, Ritchie, Taylor, Upshur, Wayne, Wetzel, Wirt, and Wyoming Counties, West Virginia. options pilot program Mr. Skeen. Over the past several years the Department has carried out a Pilot Options Program. For the record, please provide a table that shows the costs per fiscal year for every year the program operated? [The information follows:] COSTS OF OPTIONS PILOT PROGRAM, FISCAL YEARS 1993-95 ---------------------------------------------------------------------------------------------------------------- Deficiency Year Total OPP payments CCC cost/ payments foregone (savings) ---------------------------------------------------------------------------------------------------------------- 1993...................................................... $12,685,665 $4,783,800 $7,901,865 1994...................................................... 14,653,680 14,532,400 121,280 1995...................................................... 11,105,491 0 11,105,491 ----------------------------------------------------- Total............................................... 38,444,836 19,316,200 19,128,636 ---------------------------------------------------------------------------------------------------------------- Mr. Skeen. This program was to be operated in a budget neutral way. With the costs running into the millions each year, how was that department operating a cost neutral program? Response. The cost-offsetting effect of foregone deficiency payments under the Options Pilot Program from 1993 through 1995 was heavily dependent upon commodity prices over the growing and marketing season. During both 1993 and 1995 years, adverse weather and strong demand combined to push market prices for corn and wheat close to, or above the Farm Service Agency (FSA) target price. Thus, the deficiency payment rate fell short of expected levels. Costs far exceeded savings and the program was not operating in a cost neutral manner. However, FSA's report on this subject does imply that the neutrality could have been achieved over the long term. Mr. Skeen. The new Farm Bill again allows a pilot options program. The budget justification indicate the RMA will now operate this program instead of the Farm Service Agency. Why this shift in agency management? Response. RMA administration of the Options Pilot makes sense in view of its broadened ``risk management'' mission beyond the scope of crop insurance. RMA will be the ``manager'' of all agricultural risk management tools. Among these aspects are the expansion into revenue coverage products and a much sharper focus on educating farmers to meet individual risk management needs. The Options Pilot Program fits well in each of these two categories. Mr. Skeen. What do you expect to spend in fiscal years 1997 and 1998 on this problem? How much will come from the A&O account and from the fund? Response. RMA did not spend any funds for an Options Pilot Program during the 1997 fiscal year and no monies have been budgeted to provide an Options Pilot Program during the 1998 fiscal year. At this time RMA continues to evaluate this program. We have received a program for an option on milk from the Coffee, Sugar and Cocoa Exchange. We are currently evaluating this option. Mr. Skeen. How will the program be different than the previous efforts? Response. RMA is currently evaluating the Options Pilot Program delivered by the former Agricultural Stabilization and Conservation Service. We have reviewed an Office of the Inspector General Report regarding this program and will consider the recommendations made by the OIG in this evaluation. RMA currently does not have a position regarding the differences between the RMA Options Pilot Program and the former ASCS program at this time. group risk plan Mr. Skeen. For the record, provide a list of all counties and states where the Group Risk Plan is in effect for 1997. Do you plan any expansion of the plan in 1998? Response. An expansion of the GRP pilot program is planned for the 1998 crop year. The expansion would add approximately 200 additional forage production counties to the GRP program. Please refer to the attached listing of 1997 GRP counties and crop programs by state. This listing is followed by a summary page for all states for the 1997 crop year. [Clerk's note.--The list provided was too lengthy to reprint and is retained in Committee files.] Mr. Skeen. What has been the loss ratios in GRP areas versus other crop insurance programs? [The information follows:] 1996 LOSS RATIOS ------------------------------------------------------------------------ Actual Group risk production plan (GRP) history (APH) ------------------------------------------------------------------------ Corn.......................................... 0.03 0.41 Cotton........................................ 0.00 1.45 Forage Production............................. 0.00 0.98 Grain Sorghum................................. 0.00 0.09 Peanuts....................................... 0.00 0.56 Soybeans...................................... 0.04 0.29 Wheat......................................... 0.00 1.49 ------------------------------------------------------------------------ nonstandard classification system Mr. Skeen. The nonstandard classification system has had a big impact on reducing the losses in the crop insurance program. Can you provide us some details as to what your experience has been on a crop- by-crop basis? Response. The NCS program identifies insureds with abnormal loss histories and individually adjusts their rate and/or coverage to reflect the higher risk they represent. RMA thus hopes to avoid inequitable, across-the-board rate increases which would otherwise be required to achieve actuarial sufficiency as established by the Omnibus Reconciliation Act of 1993 (OBRA) and the Federal Crop Insurance Act of 1994. Overall, the nonstandard classification system program has had a positive effect on the insurance program. The General Accounting Office (GAO) released in September, 1995, a report to the U.S. Senate Committee on Agriculture, Nutrition, and Forestry entitled, ``Crop Insurance, Additional Actions Could Further Improve Program's Financial Condition.'' Its findings indicated that the NCS program produced initial savings of $33 million annually. The attached table provides NCS for the 1997 crop year on a crop by crop basis. [The information follows:] [Page 286--The official Committee record contains additional material here.] distribution of profits and losses Mr. Skeen. For the record, please provide a table displaying how profits and losses were distributed between RMA and reinsurance companies for the past ten years. [The information follows:] [Page 288--The official Committee record contains additional material here.] reinsured companies Mr. Skeen. For the record, please provide us with a list of the currently active reinsurance company agreements, and indicate which ones had gains and losses under the gain-loss provisions. [The information follows:] COMPANIES UNDERWRITING GAIN/LOSS POSITION, 1996 REINSURANCE YEAR [As of February 10, 1997] ------------------------------------------------------------------------ Company Underwriting Gain or Loss ------------------------------------------------------------------------ Alliance Insurance Co...................... Gain. American Agricultural Insurance Co......... Gain. American Growers Insurance Co.............. Gain. CIGNA Property & Casualty Insurance Co..... Gain. Cotton States Mutual Insurance Co.......... Gain. Country Mutual Insurance Co................ Gain. Farm Bureau Insurance Co. of Nebraska...... Gain. Farm Bureau Mutual Insurance Co. of Iowa... Gain. Farmers Alliance Mutual Insurance Co....... Gain. Great American Insurance Co................ Gain. Hartford Fire Insurance Co................. Gain. IGF Insurance Co........................... Gain. Millers Mutual Fire Insurance Co........... Gain. Plains Insurance Co........................ Gain. Producers Lloyds Insurance Co.............. Loss. Rural Community Insurance Co............... Gain. SAPR (Puerto Rico)......................... Loss. ------------------------------------------------------------------------ Source: Jan. 11, 1997 Reinsurance Accounting Report. Mr. Skeen. For the record, please provide a table showing, from 1981 through fiscal year 1996, the reimbursements to reinsured companies and the total RMA operating and administrative costs (including the costs paid from the fund). [The information follows:] [Page 290--The official Committee record contains additional material here.] ratio of losses Mr. Skeen. For the record, please provide a table that shows the ratio of losses for RMA and reinsured companies to the units insured and the average losses for each year since 1991. [The information follows:] RISK MANAGEMENT AGENCY, FCIC/FSA/REINSURANCE COMBINED EXPERIENCE ---------------------------------------------------------------------------------------------------------------- Percent Dollar loss Year Units Units Indemnity average units to insured indemnified losses insured units ---------------------------------------------------------------------------------------------------------------- 1981............................................. 952,649 151,378 407,288,709 2,691 16 1982............................................. 951,674 147,155 529,075,057 3,595 15 1983............................................. 773,801 197,212 583,743,866 2,960 25 1984............................................. 961,248 202,422 638,475,475 3,154 21 1985............................................. 1,008,608 169,311 683,214,394 4,035 17 1986............................................. 1,013,931 170,207 615,742,121 3,618 17 1987............................................. 1,075,238 136,773 369,844,076 2,704 13 1988............................................. 1,218,891 430,038 1,067,610,557 2,483 35 1989............................................. 2,178,443 461,813 1,215,278,470 2,632 21 1990............................................. 2,149,498 296,514 971,959,478 3,278 14 1991............................................. 1,846,889 339,765 955,093,714 2,811 18 1992............................................. 1,903,134 245,128 917,801,181 3,744 13 1993............................................. 1,565,132 458,298 1,655,473,843 3,612 29 1994............................................. 1,815,784 190,064 594,304,310 3,127 10 1995............................................. 3,706,456 565,004 1,547,237,366 2,738 15 1996............................................. 3,193,549 462,920 1,340,901,665 2,897 14 ---------------------------------------------------------------------------------------------------------------- administrative and operating expense obligations Mr. Skeen. Please provide for the record an update of the table that described the administrative and operating expenses obligations and RMA revolving fund activities. [The information follows:] [Pages 292 - 293--The official Committee record contains additional material here.] fcic/reinsurance experience Mr. Skeen. For the record, please update the table that appears on page 208 of last year's hearing record which shows RMA and reinsurance combined insurance. [The information follows:] [Page 295--The official Committee record contains additional material here.] marketing expenditures Mr. Skeen. Please provide a ten-year table showing the marketing expenditures for the crop insurance program. [The information follows:] RISK MANAGEMENT AGENCY/FEDERAL CROP INSURANCE CORPORATION FUND MARKETING EXPENDITURES ------------------------------------------------------------------------ Fiscal year Expenditure ------------------------------------------------------------------------ 1986.................................................. $749,181 1987.................................................. 847,382 1988.................................................. 961,268 1989.................................................. 1,005,481 1990.................................................. 540,000 1991.................................................. 0 1992.................................................. 275,501 1993.................................................. 3,731,115 1994.................................................. 1,644,463 1995.................................................. 2,371,715 1996.................................................. 1,150,510 ------------------------------------------------------------------------ insured crops Mr. Skeen. For the record, please provide a list of all crops on which crop insurance is now being offered. [The information follows:] All other citrus trees All other grapefruit Almonds Apples Avocado Avocado trees Barley Blueberries Burley tobacco Canning beans Canola Carambola trees Cigar binder tobacco Cigar filler tobacco Cigar wrapper tobacco Citrus Citrus trees Corn Cotton Cotton ex long staple Cranberries Dark air tobacco Dry beans Dry peas Early & midseason oranges Figs Fire cured tobacco Flax Flue cured tobacco Forage production Forage seeding Fresh apricots Fresh freestone peaches Fresh market sweet corn Fresh market tomatoes Fresh nectarines Fresh plum Grain sorghum Grapefruit Grapefruit trees Grapes Green peas GRP barley GRP corn GRP cotton GRP forage production GRP grain sorghum GRP peanuts GRP soybeans GRP wheat Hybrid corn seed Hybrid sorghum seed Income protection corn Income protection cotton Income protection sorghum Income protection soybeans Income protection wheat Kinnow mandarins Late oranges Lemon trees Lemons Lime trees Macadamia nuts Macadamia trees Mango trees Maryland tobacco Millet Minneola tangelos Navel oranges Nursery Oats Onions Orange trees Orlando tangelos Peaches Peanuts Pears Peppers Popcorn Potatoes Processing apricots Processing cling peaches Processing freestone Prunes Raisins Revenue assurance corn Revenue assurance soybeans Revenue coverage corn Revenue coverage sorghum Revenue coverage soybeans Revenue coverage wheat Rice Rio red & star ruby Ruby red grapefruit Rye Safflower Soybeans Sugar beets Sugarcane Sunflowers Sweet corn Sweet oranges Table grapes Tomatoes Valencia oranges Walnuts Wheat ccc and treasury borrowings Mr. Skeen. Over the years, FCIC had to borrow a significant amount of funds from CCC to cover indemnities. For the record, would you provide a table showing Treasury and CCC borrowings since 1981? [The information follows:] [Page 298--The official Committee record contains additional material here.] crop participation rates Mr. Skeen. Please provide a table, by crop that shows the average participation rate for the last three fiscal years. For each crop, show the insurable acres, the insured acres, and the participation rate. Response. The following tables provide the request information for principle crops only. It is not possible to provide the information for all insurable crops--the data is not available. [The information follows:] FEDERAL CROP INSURANCE CORPORATION, PRINCIPAL CROPS PARTICIPATION BY DELIVERY SYSTEM--1996 [Acres in thousands] ---------------------------------------------------------------------------------------------------------------- Reinsured Insurable FCIC net net 1996 total Crop acres insured insured percent acres acres insured ---------------------------------------------------------------------------------------------------------------- Barley.......................................................... 7,174 648 4,139 67 Corn............................................................ 79,487 11,853 35,070 59 Cotton.......................................................... 14,666 2,425 9,921 84 Dry beans....................................................... 1,813 150 1,159 72 Grain sorghum................................................... 13,188 1,837 7,901 74 Oats............................................................ 4,661 266 927 26 Peanuts......................................................... 1,413 208 1,022 87 Potatoes........................................................ 1,456 206 559 53 Rice............................................................ 2,819 951 877 65 Soybeans........................................................ 64,205 10,198 29,555 62 Sugar beets..................................................... 1,368 122 963 79 Sunflowers...................................................... 2,556 134 2,039 85 Tobacco......................................................... 734 147 396 74 Wheat........................................................... 75,639 15,049 44,356 79 ----------------------------------------------- Total 1996................................................ 271,179 44,194 138,884 .......... ---------------------------------------------------------------------------------------------------------------- FEDERAL CROP INSURANCE CORPORATION, PRINCIPAL CROPS PARTICIPATION BY DELIVERY SYSTEM--1995 [Acres in thousands] ---------------------------------------------------------------------------------------------------------------- Reinsured Insurable FCIC net net 1995 total Crop acres insured insured percent acres acres insured ---------------------------------------------------------------------------------------------------------------- Barley.......................................................... 6,689 1,375 4,316 85 Corn............................................................ 71,245 20,269 39,299 83 Cotton.......................................................... 16,931 5,612 10,210 93 Dry beans....................................................... 2,069 306 1,310 78 Grain Sorghum................................................... 9,454 2,429 4,984 78 Oats............................................................ 6,336 510 1,103 25 Peanuts......................................................... 1,538 335 1,111 94 Potatoes........................................................ 1,398 430 506 67 Rice............................................................ 3,121 2,003 1,034 97 Soybeans........................................................ 62,575 18,479 32,287 81 Sugar beets..................................................... 1,445 337 998 92 Sunflowers...................................................... 3,478 380 2,947 96 Tobacco......................................................... 663 290 359 98 Wheat........................................................... 69,132 17,182 41,002 84 ----------------------------------------------- Total 1995................................................ 256,074 69,937 141,466 ---------------------------------------------------------------------------------------------------------------- FEDERAL CROP INSURANCE CORPORATION, PRINCIPAL CROPS PARTICIPATION BY DELIVERY SYSTEM--1994 [Acres in thousands] ---------------------------------------------------------------------------------------------------------------- Reinsured Insurable FCIC net net 1994 total Crop acres insured insured percent acres acres insured ---------------------------------------------------------------------------------------------------------------- Barley.......................................................... 7,159 117 2,526 37 Corn............................................................ 79,175 474 28,956 37 Cotton.......................................................... 13,720 94 5,685 42 Dry beans....................................................... 2,016 13 972 49 Grain Sorghum................................................... 9,827 73 3,037 32 Oats............................................................ 6,639 34 733 12 Peanuts......................................................... 1,641 48 1,033 66 Potatoes........................................................ 1,416 26 275 21 Rice............................................................ 3,353 26 621 19 Soybeans........................................................ 61,670 376 18,837 31 Sugar beets..................................................... 1,476 16 707 49 Sunflowers...................................................... 3,567 27 1,585 45 Tobacco......................................................... 671 19 290 46 Wheat........................................................... 70,349 1,980 27,250 42 ----------------------------------------------- Total 1994................................................ 262,679 3,323 92,507 ---------------------------------------------------------------------------------------------------------------- program indicators Mr. Skeen. For the record, please provide a table of program indicators for crop years 1979, 1980, 1981, 1994, 1995, and 1996. [The information follows:] [Page 301--The official Committee record contains additional material here.] implementation of the government performance and results act (gpra) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at least five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The Risk Management Agency has been working toward the establishment of its GPRA Strategic Plan. This effort has been an intensive effort to plan the strategic direction and focus of RMA's programs. This process started with extensive internal USDA discussions, documented in our draft Strategic Plan. The next step of our process has been to share our draft plan with the Congress, private sector delivery partners, and farm and commodity groups in an effort to get their views. OMB is also part of the clearance process and will review RMA's strategic plan to ensure consistency with the Administration's long term objectives. Our goal is to develop a strategic plan that reflects, to a high degree, agreement by our stakeholders that we are doing the right things and moving in the right direction. Comments received from our private sector delivery partners are being reviewed and discussions held to determine appropriate actions. We have yet to receive comments from the Congress, OMB, or other groups. We expect that many of the comments received, both internally and externally, will be addressed as RMA implements the Annual Performance Planning part of GPRA. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. RMA has not identified or labeled any ``conflicting goals'' related to its program efforts. However, we are proposing legislative changes that will increase RMA's ability to successfully achieve its strategic goals. Generally, these legislative proposals include: reduction of delivery expense reimbursement to private reinsured companies; expansion of revenue insurance nationwide; reduction in loss ratio; and various initiatives to provide RMA more flexibility in managing the crop insurance program. Mr. Skeen. Strategic plans must be based on realistic assessments of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to a balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. RMA, in the development of its Strategic Plan, has used the experiential data of the Federal crop insurance program as a basis for decision-making regarding the level of resources required to achieve success. We are fully aware that this data, as well as additional data, will be more thoroughly examined through the Annual Performance Planning process. As a result of this examination, our expectations include validation of and refinements to our Strategic Plan. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. RMA is fully aware of the GRPA requirement that direct linkages between general goals in our Strategic Plan and the performance goals to be contained in our Annual Performance Plan. Progress in this requirement will not be visible until RMA is well into the Annual Performance Planning process. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. RMA has not yet begun its Annual Performance Planning process. However, significant planning has taken place to ensure that RMA resources will be available to support meeting GPRA requirements as they relate to Annual Performance Planning. Currently, RMA has some benchmark data as it relates to crop insurance, however, our Agency responsibilities go beyond these former boundaries requiring additional benchmarks to be established. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results--oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. The rigor and scope of Annual Performance Planning will allow RMA to validate and refine the performance measures currently identified in our Strategic Plan. It is our expectation that significant enhancements will be made to our performance measures. In RMA's efforts, planning has included the three major elements of GPRA (i.e., strategic plan, annual performance plan, annual performance report) as a collective and complimentary body. These elements cannot be developed in isolation from each other. Our process of GPRA implementation will ensure proper linkages and requirements are met. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act phase and how are those lessons being applied to agency-wide Results Act efforts? What steps are the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. RMA was not selected for the Results Act pilot phase. Additionally, RMA was not established as an Agency until October 1, 1996. However, RMA was requested to establish a Strategic Plan for the Secretary to review. RMA incorporated the GPRA requirements as part of its Strategic Planning process. Implementation of RMA's Strategic Plan will require mobilization of resources, monitorization of progress, and reporting of results. RMA has incorporated into its Strategic Plan the utilization of information systems and personnel requirements. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop the strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. RMA considers farmers and ranchers--i.e., producers--as its primary stakeholders. We surveyed a portion of our stakeholders before we began our strategic planning initiative. This survey included 175 producers spread across the country. Additionally, RMA considers the Private Sector Reinsured Companies to be a key component of its delivery structure. All 16 companies were included in the survey. The survey information collected enabled RMA to focus strategically on the identified issues providing a spring-board into our strategic planning process. Issues identified through the survey allowed the incorporation of strategies to address stakeholder needs. RMA has recently shared its draft with the Private Sector Reinsured Companies. Currently, RMA is collecting responses and conducting discussions to determine impacts to the plan. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. Under the direction of the Farm and Foreign Agricultural Services mission area, RMA has been an active participant at several meetings with its peer agencies--FAS and FSA--to ensure consistency and coordination of GPRA activities. Furthermore, RMA has established, or is in the process of establishing, interagency agreements/MOU's with other agencies in the fulfillment of its mission. [The information follows:] [Pages 304 - 309--The official Committee record contains additional material here.] Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by the Under/ Assistant Secretary--other relevant officials, the Senior Policy staff and the Secretary. Upon completion of the review, the Department plans to provide copies of the Strategic Plan--including an overall Departmentwide Executive Summary and the Strategic Plans for individual Mission Areas/Agencies--to relevant Congressional Committees. Thereafter, we will look forward to meeting with Members or Staff to discuss our Strategic Plan and to solicit their input and advice on refinements to that Plan. We plan to provide copies of the Department Strategic Plan to the following Committees: House Agriculture Committee House Appropriations Committee House Economic and Educational Opportunities Committee House Government Reform and Oversight Committee House Resources Committee Senate Agriculture, Nutrition, and Forestry Committee Senate Appropriations Committee Senate Energy and Natural Resources Committee Senate Governmental Affairs Committee Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision making to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? Response. RMA's GPRA activities have not produced impacts on the organization to date. However, as we advance through GPRA's requirements these impacts will materialize. Specifically, RMA expects our Annual Performance Planning to result in the implementation of necessary results-oriented changes. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. We are in the process of establishing specific performance elements for our senior management with regard to GPRA requirements. Additionally, it is our intent that the Annual Performance Plan will contain specific results expectations that can be attributed back to senior managements effectiveness. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. RMA intends to establish a baseline that contains the necessary benchmarks to gauge our level of effectiveness and efficiency. We are beginning that process today. Once we have established our Annual Performance Plan, we will have the components necessary to manage our daily operations. revenue insurance Mr. Kingston. As you know, cotton farmers in my home state of Georgia have the opportunity--although a very short (time-wise) opportunity--this year to purchase the popular Crop Revenue or CRC. I appreciate this fact and thank the Department and FCIC Board of Directors for taking this action. I have also reviewed your budget proposal which contains a legislative initiative that would make it appear that the Federal Crop Insurance Corporation does not have the authority to offer CRC or other revenue products on a nationwide basis. Could you help understand that position better, specifically: Does the Department feel that it does not have the authority to expand CRC or other privately-developed revenue products nationwide or is that restriction simply on government-developed products? Response. The Department does have authority to expand CRC on a nationwide basis. FCIC does not have authority to offer its own revenue products on a nationwide basis but is requesting an amendment to the FCIC Act which will authorize such. Mr. Kingston. Are the savings generated by the proposed reduction in the rate paid to private companies for administrative and operating expenses proposed solely as a means of funding the nationwide expansion of revenue in administrative and operating expenses? Response. No--the reduction is in part due to the joint GAO/FCIC study of the financial arrangements between FCIC and insurance providers for delivering crop insurance to producers. This study indicates insurance providers may have been compensated in excess of their actual administrative costs. Mr. Kingston. What is the revised loss ratio target that your revenue insurance expansion legislative proposal will contain? Response. The revised loss ratio target is 1.085 for the 1998 reinsurance year and 1.06 for 1999 and beyond. Mr. Kingston. When can we expect to see the legislative proposal? Response. It is our understanding that the legislative proposal is currently being reviewed by the Administration and will be forwarded to you as soon as possible. catastrophic coverage availability Mr. Fazio. What is the policy of the Risk Management Agency in providing catastrophic insurance to trade associations and cooperatives--what would be the benefit and drawbacks to changing the policy to permit this? Response. The Risk Management Agency's policy is that producers must pay administrative fees to purchase catastrophic coverage. Several insurance companies have entered into agreements with associations and cooperatives to purchase lists of member producers and an endorsement of the insurance company by that same association or cooperative. There is, however, no agreement between RMA and these associations and cooperatives to provide RMA with an opportunity to ensure that our policy regarding payment of fees is adhered to. RMA relies on the insurance company reinsured by FCIC to follow the established policy. Associations and cooperatives have attempted to pay fees for producers through these agreements. RMA is concerned that many of the cooperatives and associations may not understand the impact on RMA's ability to properly regulate the program. For example--RMA relies on third party verification of yield information. Many of the cooperatives and associations are responsible for tracking this information since the producer's crops are marketed through these organizations. Also, RMA needs unbiased input from many of these organizations in order to develop new crop programs and properly rate the product. The monetary incentives being offered by some insurance companies to these associations and cooperatives may undermine the integrity of this information and input. Most associations and cooperatives are endorsing CAT coverage. CAT may meet the needs of certain producers, however, CAT could not be expected to protect a producer's income when non-catastrophic losses occur. As a safety net--CAT coverage would only provide coverage for 50 percent of the producer's yield and 60 percent of the established price--a guarantee of 30 percent. RMA is concerned that CAT coverage on ``specialty'' crops, such as those grown in California and Florida, significantly increase the loss exposure to the Federal government-- specialty crops provide high dollar per acre coverage. This exposure coupled with the 100 percent subsidized premium for CAT coverage may significantly increase the Federal government's loss exposure. United States Agency for International Development cooperating sponsors Mr. Skeen. How does USAID encourage Cooperating Sponsors to develop food aid programs? Please provide any USAID guidance or notice from 1996 asking Cooperating Sponsors to develop and submit Title II programs to USAID? Response. There are many mechanisms USAID uses to support private voluntary organizations and encourage their participation in the P.L. 480 Title II program. These mechanisms cover the full range of non- emergency programs, including maternal and child health, food-for-work and school feeding. First, we maintain a continuous dialogue with the community of private voluntary organizations. Overall, USAID works closely with the Advisory Committee on Voluntary Foreign Aid (ACVFA), which represents the entire private voluntary organization community on a broad range of issues ranging from development assistance strategy to the federal procurement regulations. There are over 400 private voluntary organizations which have registered with USAID and which participate in this dialogue with USAID, either directly or through ACVFA. With respect to Title II food aid programs, USAID works closely with the private voluntary organizations through the Food Aid Consultative Group, an advisory group P.L. 480 provides to assure close consultation on all food aid matters. This group meets at least twice a year in formal session and has constituted several working groups to review and advise on food aid issues. Second, the private voluntary organizations review and contribute to USAID guidance and regulations on food aid programs, including mother-child care, food for work and school feeding. For example, they are now completing review of the guidance for so-called Development Activity Proposals, which document requests for new programs, and for requests for resources for ongoing programs. This guidance will soon be published in the Federal Register, to reach out to as broad a community as possible. Third, we have encouraged our USAID field missions to work closely with private voluntary organizations in the field and to include them as partners in deciding objectives for U.S. assistance programs. This involvement allows for outreach to organizations which may not be familiar to USAID in Washington but are interested in participating in field operations. So I believe we do a good job of reaching out to the private voluntary organization community and encouraging new Title II non- emergency programs. Just last year, for example, we received fifty eight proposals for new programs from eighteen private voluntary organizations. estimating commodity budget Mr. Skeen. The FY '98 budget request asks for $837 million to provide 2.4 million metric tons of commodities. How did you determine that this is a sufficient amount for that tonnage level? Response. The budget level was established by OMB based on their assessment of program needs. Since prices fluctuate, no direct linkage was made to tonnage levels. In the FY 1998 budget request, $837 million was requested, which will provide approximately 2,025,000 metric tons of commodity. This anticipated tonnage level was allocated among development and emergency activity commodity requirements for FY 1998. The total commodity requirement was then multiplied by the projected commodity prices (provided by USDA) and freight rates to arrive at the estimated total cost of FY '98 Title II activities. Mr. Skeen. Please provide the amount spent and tonnage provided from FY '94 through FY '96. Response. The table below shows the total tonnage and cost of that tonnage provided in each of the fiscal years you requested. P.L. 480 TITLE II ------------------------------------------------------------------------ U.S. Fiscal year MTN's (000) dollars in millions ------------------------------------------------------------------------ 1994.......................................... 2,092 $919.8 1995.......................................... 2,098 860.3 1996.......................................... 1,694 841.5 ------------------------------------------------------------------------ processed, blended, and fortified foods Mr. Skeen. What percentage of the tonnage in each of those years was comprised of processed, blended and fortified foods? Response. We are providing the requested information in tabular form. The right-hand column of the table below shows the percentage of the total Title II tonnage that was processed, blended and fortified foods. In addition, we are providing in the center column the percentage of Title II processed, fortified, and bagged commodities that were procured in adherence to Section 204(b)1 of PL 480 which establishes the minimum levels of value-added commodities the program should provide. P.L. 480 TITLE II Processed, blended, and fortified foods ------------------------------------------------------------------------ Percent of Fiscal year Value added total mandate tonnage ------------------------------------------------------------------------ 1994.......................................... 76% 86 1995.......................................... 77 86 1996.......................................... 75 79 ------------------------------------------------------------------------ title ii program Mr. Skeen. Please provide for the record the Title II program, by country and commodity, for fiscal year 1996. [Clerk's note.--The information can be found in the Foreign Agriculture Service written questions and responses.] internal transportation costs Mr. Skeen. What was the cost of internal transportation during fiscal years 1995 and 1996, and what is the estimate for 1997? [The information follows:] Fiscal year U.S. dollars 1995 (final)............................................ 98,691,400 1996 (final)............................................ 86,038,900 1997 (estimate)......................................... 87,000,000 Mr. Skeen. How do you determine what internal transportation costs are allowable under the program? Response. Internal transportation costs are those that are related to the movement of commodities from the point of entry or port of entry in the recipient country to the distribution site(s) where the beneficiaries receive the food. In accordance with Title II legislation, USAID only pays these costs when they are related to activities for urgent and extraordinary relief. Allowable costs under internal transport are those directly related to the internal transportation, storage, monitoring, and distribution of Title II emergency commodities. external transportation costs Mr. Skeen. What was the cost of external transportation during fiscal years 1995 and 1996, and what is the estimate for 1997? [The information follows:] [Dollars in thousands] ------------------------------------------------------------------------ Fiscal year Ocean Inland ------------------------------------------------------------------------ 1995 (final)............................ $200,359.1 $84,307.0 1995 (final)............................ 179,015.3 58,461.9 1995 (estimate)......................... 180,000.0 60,000.0 ------------------------------------------------------------------------ Mr. Skeen. Please describe what external transportation costs are allowable. Response. Title II may pay the ocean transportation costs incurred in the delivery of commodities from the port of loading in the United States to the primary discharge port in the recipient country. Also, in the case of a land-locked country, Title II may pay the transportation costs associated with the delivery of the commodity from the primary discharge port to the primary storage point in the land-locked country. school lunch program Mr. Skeen. Please describe the school lunch program under Title II, and let us know how many children were involved in this program during calendar year 1996. Response. A successful school feeding project will: (a) provide a nutritional supplement to school children coming from households in a country or region within a country which is clearly food deficit; and (b) encourage families to enroll/maintain their children in school. The project will have a demonstrated host government (policy and financial) commitment to education in general, and basic education in particular. Active community participation, in particular through parents' associations, is essential and the services required for operating a school feeding program--cooks, kitchen helpers, guards--are often covered by the community, either by providing such services itself or by contributing cash to compensate those engaged to perform the services. Based on fiscal year 1996 records, school feeding activities benefited over 3.85 million children. monetization of title ii commodities Mr. Skeen. Please explain monetization. In what programs is it used? How much was monetized in fiscal year 1996? Response. Monetization is the sale, by a Cooperating Sponsor, of Title II commodities in the recipient or neighboring countries to obtain foreign or local currencies to support humanitarian and development activities. The currencies generated by the monetization of Title II commodities are used to support activities related to household nutrition and agricultural productivity, such as maternal child health activities and food for work activities. In fiscal year 1996, approximately 189,780 metric tons, with a total commodity and freight value of over $86 million, were monetized. title iii agreements Mr. Skeen. During fiscal year 1996, what agreements were signed under Title III and in what amounts? Response. During FY 1996, the following Title III agreements were signed: Bangladesh--$7.5 million. Haiti--$10 million. Honduras--$5 million. Nicaragua--$4 million. Ethiopia--$25 million. The three-year, $20 million agreement for Eritrea was signed in FY 1996, with the first tranche of $9 million provided in early FY 1997. Mr. Skeen. Please describe how these title III funds were used. Response. Title III funds were used to support a variety of policy reforms and programs in agriculture, primary education and health care, and rural infrastructure development. In Bangladesh, Title III supported a primary education program for poor children; policy reforms to reduce government interventions in food marketing; and government and nongovernmental organization collaboration to increase agricultural productivity and food-based nutrition. In Eritrea, the Title III program is structured around the country's national food security policy. Disbursement of assistance is based on Eritrean demonstrated commitment to their own policies and to measurable results against these commitments rather than to USAID- determined benchmarks. The program reinforces not only Eritrean ownership of policy reform but also Eritrean leadership. In Ethiopia, the Title III program focuses on policies associated with liberalizing food markets and the development of targeted safety net programs. It also promotes restructuring and eventually privatizing state-owned enterprises engaged in agri-based manufacturing, distribution, and marketing; developing efficient agricultural input markets, with particular emphasis on fertilizer; and creating an environment supportive of private sector involvement in the grain and agricultural inputs markets. In Haiti, policy reform has focused on two objectives: (1) liberalization of the country's agricultural markets and (2) the development of a National Environmental Action Plan that also will address many of the numerous underlying constraints to increasing agricultural production and productivity in the country. The Title III local currencies were used to support the creation of short-term jobs to build or repair productive infrastructure and the expansion of agricultural productivity enhancing and soil conservation activities to reach additional poor hillside farmers. Funds were also used to support activities primarily in the social sectors being carried out by the three Title III cooperating sponsors. In Honduras, the current program builds on earlier program successes in improving food availability and access by implementing land tenure reforms begun under previous agreements; continuing commitments to the liberalization of agricultural trade; creating an agricultural marketing information system; strengthening agricultural research and extension; and privatizing state enterprises. A 1994 evaluation of the earlier program concluded that the Title III supported policy reforms had a significant and measurable impact on the availability and access to food among the country's rural poor. Title III local currencies were used to support the government's family assistance program, which provides a social safety net during the economic adjustment process, as well as land titling, market information, and small farmer access to financial, agricultural processing, and marketing services. In Nicaragua, the policy conditionalities in the FY 1993-1996 agreement required the Government to remove the ban on agricultural exports, eliminate the sale of donated food at below market prices, adopt open trade policies (including the elimination of some input taxes and the facilitation of the legal and administrative environment for exports), and to allocate at least 40 percent of the Ministry of Health's budget to primary health care. The economic reforms led to an increase in producer prices for basic grains which contributed to a substantial increase in the total value of agricultural exports and in food grain production. Title III local currencies were used to provide small farmers with technical and marketing support for both traditional and non- traditional crops, including assistance in agro-forestry, land titling and improved on-farm grain storage; microenterprise credit; and support for improvements in primary health care. title ii ngo proposals Mr. Walsh. An important element of the Title II program is that programs are sponsored overseas by non-governmental organizations. How does USAID ask private voluntary organizations to submit Title II proposals for such things as mother-child care, food-for-work and school feeding? For instance, does USAID send releases or notices encouraging PVOs to submit proposals? Response. There are many mechanisms USAID uses to support private voluntary organizations and to encourage their participation in the P.L. 480 Title II program. These mechanisms cover the full range of non-emergency programs, including maternal and child health, food-for- work and school feeding. First, we maintain a continuous dialogue with the community of private voluntary organizations. Overall, USAID works closely with the Advisory Committee on Voluntary Foreign Aid (ACVFA), which represents the entire private voluntary organization community on a broad range of issues ranging from development assistance strategy to the federal procurement regulations. There are over 400 private voluntary organizations which have registered with USAID and which participate in this dialogue with USAID, either directly or through ACVFA. With respect to Title II food aid programs, USAID works closely with the private voluntary organizations through the Food Aid Consultative Group, an advisory group P.L. 480 provides to assure close consultation on all food aid matters. This group meets at least twice a year in formal session and has constituted several working groups to review and advise on food aid issues. Second, the private voluntary organizations review and contribute to USAID guidance and regulations on food aid programs, including mother-child care, food for work and school feeding. For example, they are now completing review of the guidance for so-called Development Activity Proposals, which document requests for new programs, and for requests for resources for ongoing programs. This guidance will soon be published in the Federal Register, to reach out to as broad a community as possible. Third, we have encouraged our USAID field missions to work closely with private voluntary organizations in the field and to include them as partners in deciding objectives for U.S. assistance programs. This involvement allows for outreach to organizations which may not be familiar to USAID in Washington but are interested in participating in field operations. So I believe we do a good job of reaching out to the private voluntary organization community and encouraging new Title II non- emergency programs. Just last year, for example, we received fifty eight proposals for new programs from eighteen private voluntary organizations. Mr. Walsh. Could you submit to the Subcommittee any USAID releases or notices asking for PVO proposals for Title II programs? Response. We have submitted for the record the FY 1998 draft Title II guidelines for food aid development activities as requested. These guidelines, while admittedly detailed, are the product of a collaborative effort of USAID and members of the Food Aid Consultative Group, established by Section 205 of P.L. 40. We believe that these guidelines redefine and focus food security strategic objectives and promote the more efficient and effective management of food aid. [Clerks note.--The FY 1998 draft Title II guidelines for food aid development activities is too lengthy to print and is retained in the Committee files.] food security commodity reserve Mr. Walsh. In Mr. Rogers' testimony, he mentions the Food Security Commodity Reserve, which is important as a back-up for P.L. 480 Title II to provide food for emergency needs. However, it seems that there are some reimbursement and replenishment problems with the Reserve. I would appreciate it if both USDA and USAID could submit recommendations about how the Food Security Commodity Reserve could be improved to make it an effective means of providing food for emergencies. Response. (USAID) Unfortunately, there are no cost-free ways to restock this reserve. Additional appropriations would be one route, but they obviously are very difficult to come by in the current era of tight budgets. Another would be to provide new authority for USDA to use P.L. 480, Export Enhancement Program (EEP) and other funds remaining at the end of the year to buy commodities to restock the reserve. However, the amounts available are usually small and uncertain, so this approach might not accomplish the objective. A third would be to recycle the P.L. 480 funding which in short supply situations in the U.S. is used to ``buy'' commodities from the Food Security Commodity Reserve (FSCR). Under the current system, food stocks come from the FSCR but P.L. 480 funds go back to Commodity Credit Corporation (CCC) to make CCC whole for the initial procurement costs. Using the P.L. 480 funds to restock the reserve would mean CCC would be left holding the bag indefinitely for these initial costs, which were incurred in the early 1980's. As a practical matter, the Food Security Commodity Reserve is the last resort the U.S. has in responding to unanticipated food emergencies overseas. Since Section 416(b) surplus commodities are no longer available and supplemental appropriations are very difficult to obtain, the food reserve has become even more important. Since we do not see a likely means for replenishing the reserve, we are managing the resource carefully to preserve it for as long as possible. Response. (USDA) Mr. Walsh, we certainly agree with Mr. Rogers' testimony about the importance of the Food Security Commodity Reserve in helping to assure our ability to respond to emergency food needs. We also understand the difficulties, especially in this period of tight budgets, in addressing reimbursement and replenishment of the Reserve. We will, of course, be glad to work with both Subcommittee and USAID staff to see if there is an easier way to address these requirements or to identify any other ways to further improve the usefulness of this Reserve. title ii food aid for non-emergency programs Mr. Walsh. Mr. Rogers, I have several questions regarding some points you made in your written statement about the programming of Title II food aid for non-emergency programs. On page 4, you state that non-emergency Title II resources will concentrate on improved nutrition or agricultural productivity objectives. Although these both have merit, this seems to place severe limitations on the program and overlooks many other important contributors to food security. For instance, poverty is directly linked to food insecurity. Why can't programs be approved that help improve the incomes (and purchasing power) of the poor? Why is school feeding considered an unusual case for food aid, since it is one way to encourage poor families to send their children to school and education is particularly important for long-term human development? Since private voluntary organizations and cooperatives are responsible for designing and implementing Title II regular programs, and under section 205 of the P.L. 480 they must be consulted by USAID on the development of program guidance and procedures, do they support these programming limitations? Response. You are referring to the priorities which have been established for non-emergency Title II programs. These priorities provide guidance to the private voluntary organizations and USAID's field missions on those activities which are most likely to be successful in promoting food security in poor, food deficit countries. They were developed because we recognized there was a significant change in the environment in which the United States provides its food aid and also because GAO, in an audit of U.S. food aid programs, strongly recommended we develop such guidance. These guidelines provide program managers with a general sense of what works best in improving food security. As such, we expect that over time Title II resources will concentrate in these areas. I would like to emphasize, however, that they are not intended to exclude activities which might make a major contribution to food security in any specific country setting. You are absolutely right that there are good examples of other types of programs which improve incomes and as a result enhance food security. School feeding programs can also be worthwhile interventions. In fact, we have recently approved major school feeding programs in Burkina Faso and in Bolivia. The private voluntary organizations participated in developing this program guidance through an extensive series of briefings and through full and open discussion. While the private voluntary organizations represent a broad diversity of views, I believe they agree with these priorities. At the same time, I think it fair to say they would define the areas for intervention broadly, and they strongly support the position that other interventions can successfully enhance food security and should be given full consideration for approval. aid missions in sub-sahara africa Mr. Walsh. On page 4, you state that AID is ``decentralizing'' operational decisions to AID field missions. I understand that AID is phasing out many missions and that several food insecure countries in sub-Sahara Africa either do not or will not have missions. Which sub- Saharan countries have a mission, which do not and which are being phased out? Response. There are ongoing bilateral USAID assistance programs in 20 sub-Saharan countries. These are: Benin, Eritrea, Ethiopia, Ghana, Guinea, Guinea-Bissau, Kenya, Madagascar, Malawi, Mali, Mozambique, Namibia, Nigeria, Rwanda, Senegal, South Africa, Tanzania, Uganda, Zambia and Zimbabwe. In addition, USAID provides assistance through its regional programs (located in Botswana, Cote d'Ivoire and Kenya) to 14 sub- Saharan countries. These are: Botswana, Cote d'Ivoire, Central African Republic, Comoros, Congo, Djibouti, Equatorial Guinea, Gabon, Mauritania, Mauritius, Sao Tome and Principe, Seychelles and Sierra Leone. Finally, USAID provides limited humanitarian or emergency assistance programs to five countries: Angola, Burundi, Liberia, Somalia and the Sudan. USAID has closed its missions in twelve countries, starting in FY 1994, including Botswana, Burkina Faso, Burundi, Cameroon, Chad, Cape Verde, Cote d'Ivoire, Gambia, Lesotho, Swaziland, Togo, and Zaire. USAID expects to close Niger in 1998 and to graduate Zimbabwe, Namibia and South Africa in 2000. Countries without bilateral missions, however, can continue to participate in regional or USAID-funded private voluntary programs, depending on the nature of their development problems. Mr. Walsh. Under section 202 of P.L. 480, private voluntary organizations and cooperatives are eligible to develop and implement non-emergency Title II programs and such programs can be conducted in countries where there are no USAID missions or where the program does not fit into an USAID country strategy. What will be the impact of decentralization on the ability of private voluntary organizations and cooperatives to establish programs in countries without USAID missions or where the program does not fit into a USAID mission strategy? Do these organizations support this decentralization strategy? Response. Decentralization will not have any significant effect on the ability of private voluntary organizations to operate in countries without USAID missions or to operate where programs do not fit into a USAID mission strategy. The point of decentralization is to put responsibility for operational decisions into the hands of field managers. This allows the field team, consisting of both USAID and private voluntary organization personnel, to make direct operational decisions on how best to produce the results we are all seeking. Accountability for taxpayer resources, as represented by final authority to sign and approve official documents, will be decentralized to the USAID Mission Director. However, we intend that actual operational decisions will be made by the team managing the food aid program in the country. That team includes the private voluntary organizations. We hope ultimately to do something similar in countries where there is no USAID mission. We still believe the field managers should be the ones making the operational decisions. In this case, the private voluntary organization, perhaps in consultation with one of the USAID regional offices or USAID/Washington, would make the decisions. Final signing authority would rest with a USAID regional office or USAID/ Washington, but that would simply be a matter of routine. I would like to point out that we believe food aid programs are most likely to produce significant results where they are integrated with a USAID mission program. This is so because USAID can bring dollar-funded resources, usually in the form of technical assistance, to the joint activity. USAID also maintains close coordination with and can leverage the resources of other donors. And because we represent the U.S. Government, USAID usually has considerable influence with the host government. So for all these reasons, which have the effect of amplifying the scope and impact of an activity, we give priority to integrated private voluntary organization/USAID programs. In short, we give priority to these programs because we expect them to produce the greatest results. However, we do recognize fully that Title II programs where there is no USAID mission or where the food aid is not integrated into the mission strategy can also produce results and are therefore worthy of full consideration. With respect to whether the private voluntary organizations support decentralization, I believe they support the concept and agree that field managers are best positioned to make operational decisions. The private voluntary organizations are also willing to work with USAID to see if an acceptable process for implementation can be developed. We are now working on three pilot cases--Ethiopia, Peru and Bangladesh. We will proceed based on mutual agreement that decentralization improves the efficiency and effectiveness of the Title II program. So in the end, we will all agree that decentralization is a good idea, or we will revert to some form of the current system in which many decisions are made in Washington. developing u.s. agricultural export markets Mr. Fazio. In your testimony discussing both Title II and Title III food assistance, you mention the apparent win-win situation whereby our former recipients of humanitarian food assistance become some of our best agricultural customers. Can you provide some examples, and describe the distinction, if any, in the way this occurs with Title II and Title III assistance? Response. At present, one-third of U.S. farm acreage grows crops for export. Most of the growth in U.S. agricultural exports is expected to come from two sources: countries in the developing world and countries whose economies were once state-dominated and are now in a transition to a free market. Nine of the top ten consumer nations of American agricultural products were once U.S. food aid recipients. Such countries as Brazil, Indonesia, Thailand, Korea, Pakistan and Zimbabwe now purchase our farm products in quantities worth many times the value of the U.S. food aid they once received. Title II and Title III programs presently prioritized those countries that need food most and where food insecurity is greatest. Even though the two programs are different and address food security problems differently, they both foster economic strength and purchasing power thereby providing a link to long term sustainable development. Mr. Fazio. You note that Title III assistance to encourage agricultural reform poses no real threat to U.S. agricultural exports-- can you elaborate? Response. First, the program is small compared to U.S. exports. In 1995, U.S. agricultural exports surged to an unprecedented $54.1 billion. The United States is now exporting commercially more than $1 billion in agricultural products a week. In contrast, our Title III program this past year shipped 147,000 metric tons of grain worth $51.5 million to five chronically food insecure countries. Second, the poor countries in which Title III is now focused do not have any real prospect of becoming U.S. competitors in agricultural export markets, even if they do improve their agricultural productivity. They need to produce more food in order to feed their own people. [Pages 319 - 666--The official Committee record contains additional material here.] Wednesday, March 12, 1997. FOOD SAFETY AND INSPECTION SERVICE WITNESSES THOMAS J. BILLY, ADMINISTRATOR PAT STOLFA, ASSISTANT DEPUTY ADMINISTRATOR CRAIG REED, DEPUTY ADMINISTRATOR KAYE WACHSMUTH, ACTING DEPUTY ADMINISTRATOR JILL HOLLINGSWORTH, ASSISTANT DEPUTY ADMINISTRATOR WILLIAM WEST, BUDGET OFFICER STEPHEN B. DEWHURST, BUDGET OFFICER Operating Remarks Mr. Skeen. The committee will come to order. This afternoon we want to welcome Mr. Thomas Billy, better known as Tom Billy, the Administrator of the Food Safety and Inspection Service. Mr. Billy and the folks who work at FSIS have one of the most important missions in all the U.S. Government and that is to protect the meat and poultry products of the American consumer. This is an agency and a responsibility that the committee has strongly supported. Last year I believe that FSIS was the only major agency to receive its full funding request. Tom, if you would please, make any necessary introductions and proceed with your statement. After that, we may even have time to take on a few questions about user fees. We do want to welcome you. Your entire text will be in the record. Mr. Billy. Thank you, Mr. Chairman. Mr. Skeen. It's good to see you. Mr. Billy. It's good to see you too. opening statement I'm pleased to appear before you today to discuss the President's fiscal year 1998 budget request for the Food Safety and Inspection Service. As you may know, I became the Administrator of FSIS in October of 1996, after serving as Associate Administrator since October of 1994. Now, I've seen food safety from several sides; having worked at the National Marine Fisheries Service, with its Voluntary Seafood Inspection Program, at the Food and Drug Administration, and now at FSIS. Today, I will be assisted by Dr. Craig Reed, our Deputy Administrator for Field Operations; Ms. Pat Stolfa, Assistant Deputy Administrator for Policy; Dr. Kaye Wachsmuth, our Acting Deputy Administrator in the Office of Public Health and Science; Dr. Jill Hollingsworth, our Assistant Deputy Administrator in the Office of Public Health and Science; and Mr. William West, our Director of Budget and Finance. First, I'd like to thank you very much for supporting our 1997 budget request. With the full funding you provided us last year, we were able to make giant steps forward in implementing our two major goals; to make food safer by finding better ways to control pathogens, and to make better use or our resources. pathogen reduction and haccp The agency reached a milestone last July with publication of the final rule on pathogen reduction and Hazard Analysis and Critical Control Point System, or HACCP, which will directly target and systematically reduce harmful bacteria on raw products, as well as other likely hazards. It will equip FSIS inspection personnel with the scientific and regulatory tools they need to ensure that slaughter establishments meet specific standards for food safety performance, in terms of such bacteria. And we will also reinforce all plants' responsibilities for food safety. We began implementation of the rule a little more than a month ago. On January 27, all plants had to have plant-specific sanitation standard operating procedures or SOPs to ensure that they are meeting their responsibility for proper sanitation of facilities, equipment, and operation. In addition, most slaughter plants were required to begin testing for generic E. coli to verify process control effectiveness in preventing fecal contamination, the primary pathway for pathogenic bacteria. The implementation of these two requirements went very smoothly. The implementation of HACCP will begin in January of 1998 for the largest meat and poultry plants. Smaller plants will have more time. In recognizing the specific difficulties that small plants will face, we have initiated an aggressive program to provide assistance to these plans such as developing model HACCP plans and scheduling additional conferences and meetings to answer their questions. Now, by January 25, 2000, all provisions of the final rule will have been implemented. The final rules set an important framework for change in FSIS, but by no means is it the completion of our strategy for change. We must now envision our food safety and consumer protection goals in a HACCP world. fsis reorganization We realized early on that FSIS would need a new organization to make the changes necessary to achieve these goals. In fiscal year 1996 we began implementing a sweeping reorganization that will help us carry out our regulatory responsibilities in a more scientific and efficient manner. We are flattening and streamlining management structures, both at headquarters and in the field, and consolidating four former independent field structures into one. Our 46 field offices will be reduced to 18. And we will start opening these new district offices shortly. We've also established a Technical Services Center in Omaha, Nebraska, which will open this summer. Our new structure will accommodate the agency's need to function with fewer non- front line staff. As we streamline the organization, we will increase the proportion of resources deployed to the front line work force--food inspectors, in-plant veterinarians, import inspectors, laboratory personnel, compliance officers, and first-line supervisors. haccp opportunities for change In addition to streamlining the agency, we believe HACCP implementation provides us additional opportunities to improve the way we carry out inspection activities, to both improve food safety and to make better use of our resources. We want to make improvements in our inspection approach and redeploy some of our current input inspection work force both to HACCP verification tasks, and to new tasks outside of the traditional plant setting, in furtherance of our farm-to-table strategy. We are planning demonstration projects to explore improved methods for conducting inspection, and we will follow a public process to obtain input from all stakeholders. regulatory reform I also want to take a moment to discuss the FSIS regulatory reform strategy. As you know, we have initiated a comprehensive review of our entire operations to reduce costs and burdens on industry and consumers without compromising public health and safety. As a part of this effort, I'm pleased to report that we are well underway with our efforts to eliminate a number of regulatory provisions and convert others to performance standards needed for HACCP. In December 1995 we published an advance notice of proposed rulemaking in the Federal Register describing our regulatory reform strategy. At the same time, we published three other documents: A final rule streamlining our prior approval system for labels; a proposal to cooperate more closely with the Food and Drug Administration on ingredient approvals; and a proposal to allow deviations from FSIS standards of identity and composition to produce products with reduced fat, cholesterol, and sodium. Since then, we have published a proposal to eliminate prior approvals for blue prints, equipment, and certain partial quality control programs; a proposal to shift from detailed command and control requirements in existing regulations to performance standards for certain meat and poultry products; and an advanced notice of proposed rulemaking to evaluate the continuing need for meat and poultry standards of identity and composition. When our regulatory reform is completed, we will clarify the proper roles of government and industry in ensuring safe, wholesome, and properly labeled foods. emphasis on public health Achieving a significant reduction in the incidence of foodborne illness requires the cooperative efforts of public health agencies at the Federal, State, and local levels, as well as all other parties responsible for and concerned about food safety. president's food safety initiative On January 25th, the President announced the Administration's Food Safety Initiative, which is designed to improve the safety of the nation's food supply. FSIS has responsibility for a portion of that initiative. In our 1998 budget request, we are asking for additional funds to expand surveillance areas, and to include Campylobacter infections in the Sentinel Sites case-control study. As you may recall, these Sentinel sites were established to provide the baseline estimates for the national incidence of the major foodborne diseases and to explore what relationships may exist between specific pathogens and the types of meat, poultry, or other food products associated with them. With the Sentinel site information, FSIS can measure progress under HACCP, review HACCP programs, and trigger changes to prevent further outbreaks of foodborne illness. FSIS' other portion of the Food Safety Initiative involves funding for HACCP training for State and local food regulatory officials. These grassroots regulators have responsibility for ensuring food safety at retail shops and restaurants, an area where foodborne illness problems can also arise. The requested funding will allow us to begin a two-year program to train the trainers in HACCP. 1998 budget request In terms of our 1998 budget request to continue making food safety improvements and to accomplish our goals in 1998, we are requesting $591.2 million, an increase of $17.2 million over the amount provided in 1997. This proposal includes increases of $13.7 million for statutory pay increases, $1.1 million for the increased cost of State inspection programs, and a net increase of $2.4 million for program investments. In fiscal year 1998, FSIS will again continue the process of transforming the inspection process with no requested increase in staffing levels. We are requesting an increase for pay costs to maintain current inspection staffing levels so that we can cover the slaughter lines and processing operations, avoid disruption of the production process, and meet industry growth. In fiscal year 1998, FSIS proposes to build on the changes and the investments we have begun during the last two years. I am confident that the results will improve both food safety and FSIS' efficiency. user fee proposal With respect to user fees, the Administration believes that the collection of user fees is essential to the successful long-term implementation of meat, poultry and egg products inspection reforms. Of the $591.2 million total, legislation will be proposed to recover $390 million in new user fees to pay for the cost of salaries and benefits, for personnel providing direct inspection services. The user fee proposal would result in the industry paying about 70 percent of the total cost of the program. For 1998 we are requesting an appropriation of $201 million to cover the remainder of our budget, which involves providing laboratory support for inspection, animal production food safety investments, investments in new inspection system improvements designed to enhance safety and productivity, and program administration. This proposal is intended to ensure that resources are available now and in the future to provide the level of inspection necessary to meet the demand for such services and to maintain consumer confidence, within a balanced budget framework. The Federal government must share with industry, who derives direct benefits from inspection, the fiscal responsibility for providing services that are essential to ensuring food safety. To accomplish a balanced Federal budget, cost burdens must be shifted from taxpayers to those who benefit directly from the provided services. The food industry profits in the marketplace from the level of consumer confidence provided by the Federal inspection programs. Additionally, the inspection programs provide a level playing field in maintaining standards of safety, wholesomeness, and labeling among individual industry entities competing for market advantage. Mr. Chairman, this concludes my statement. Thank you for the opportunity to testify on how FSIS is meeting its responsibilities to improve the safety of meat, poultry, and egg products, and thereby reduce the incidence of foodborne illness. We would be happy to answer any questions that you or other Members of the Subcommittee may have. Thank you. [Clerk's note.--Mr. Billy's written testimony appears on pages 868 through 900. Mr. Billy's, Ms. Stolfa's, Dr. Reed's, Dr. Wachsmuth's, and Ms. Hollingsworth's biographical sketches appear on pages 863 through 867. The Food Safety and Inspection Service explanatory statement appears on pages 901 through 902.] user fee proposal Mr. Skeen. Well, thank you very much, Mr. Billy. Let's get to the subject that I know you're eager to discuss with us. Let's get down to brass tacks on this user fee situation. The Administration's request would eventually result in about a 70 percent financing of FSIS through user fees which require authorization. And you say you have legislation that will be introduced when, for the authorizing committee? Mr. Billy. Yes. I'd like to ask Stephen Dewhurst to address that in terms of the status of the legislation. Mr. Dewhurst. That legislation is going to be a part of a government-wide budget piece of legislation the Administration is going to submit. As of this morning, we were advised that would be done within the next couple of weeks. Mr. Skeen. So, within a few weeks. Mr. Dewhurst. Yes. Mr. Skeen. Well, we've been through this exercise before. I think you're talking about the $201 million which is your total budget, would come from appropriated funds. Is that correct? Mr. Billy. Yes, sir. Mr. Skeen. All right. I'm tempted to say that we'd like to tell you today that you can have the $201 million along with our sincere and best wishes in trying to get the user fees authorized. This is going to be a tough, tough battle, I believe. In February OMB told us we'd see legislation that would authorize the user fees by March 1. It is now March 12 and no legislation. Mr. Billy, you and this subcommittee share a common burden, and unlike OMB we have to work with the real world and real money. My first question is, and you've answered that I think, about the legislation that will be sent to Congress. Steve, you did a good job about telling us within a couple of weeks. We will set the clock ticking, but we won't hold you to it. Suppose the legislation would actually get signed into law this year. How long would it take the Department to produce the final regulations for the implementation of the program? Mr. Billy. Mr. Chairman, we would be under a very tight time frame to propose and finalize regulations that would implement a user fee scheme or system to meet the deadline of October 1st for fiscal year 1998. Towards that end, we have held a public meeting to begin the process of thinking about how to develop and implement such a user fee system. We believe that there are certain key criteria that need to be carefully weighed. They include equity, that is equity across the entire industry; integrity, and by integrity we're thinking of an approach that will not in any way compromise the inspector and the role that the inspector is expected to play from a public health perspective in carrying out his or her duties in a plant; and then minimum cost. We want to make sure that we don't have such a complicated system that it's going to cost us an arm and a leg to implement and maintain it. So, these are some of the criteria that we're looking at. We also recognize that we will need to do a complete cost benefit analysis. And we've asked our economists in the Department to begin the process of looking at the information we will need to carry out such an analysis. It's real important that we maintain the level of funding for our agency so that we can complete the process of transforming the agency in the manner that I've outlined over the next several years. That's very critical from a public health point of view. It's also critical from an industry point of view as well. interstate shipment Mr. Skeen. Last year the Department told the Committee that it would consider the federal ban on interstate shipments of meat from certain plants. The State of Ohio has asked a federal judge to overturn this ban arguing that imported meats can be shipped interstate but state-inspected products can not. What is the Department's position on interstate shipment of meat? Is it possible that additional state-inspected plants will be able to ship interstate? Mr. Billy. Mr. Chairman, we provided a fairly detailed report to the Congress in July 1996, on this issue. In that report we made it clear that we are not philosophically opposed to the idea of changing the law to provide for such interstate shipment. However we recognize that there are several important issues that would have to be addressed. We've identified those issues. And to ensure that they're fully examined, the Department has announced its plans to hold two public meetings. We're planning those for June. At those meetings we will invite all interested parties to provide to us their input, their views in terms of how we address this important issue. incidence of foodborne illness Mr. Skeen. A great deal of federal resources are devoted to discovery and prevention of contamination in plants and public places. Do you have any estimates of the incidence of foodborne illnesses that are caused in the home as a result of poor food handling or preparation? Mr. Billy. Mr. Chairman, in fact this is an area where unfortunately there is not good data to provide the kinds of estimates that you're asking for. Toward that end, we have joined forces with FDA and the Centers for Disease Control and Prevention in implementing the Sentinel Site project which we're now planning to expand, consistent with the President's Food Safety Initiative, into what we're calling ``Food Net.'' That project will develop the kinds of estimates that you're asking for. We think it's very important that we have good reliable data, not just in terms of what happens in the home, but what happens in every stage in terms of the course that food follows to the consumer. It is our intent to provide that kind of data to all of you. In addition, we have provided a report in the last couple of days to the Congress in terms of the data that's available from the first year of that project. We encourage you to look at this information and we'd be happy to answer any questions. Mr. Skeen. Do we have it? Mr. Billy. Yes, sir. We just provided it within the last couple of days. Mr. Skeen. Well, the reason we bring that up is because we've heard an awful lot about the inspection process and what the government can do and so forth. And we have a great system in the United States about the purity and sanity of our food. There isn't any question about it, to the point where we've got people today that take too much for granted about the preparation and the handling of food in the home. They'll let it sit out too long or something of that kind. But it reflects back on the government programs to do the inspections. That's a real tragedy when that happens. So, I'll hold the rest of my questions for a time. Mr. Fazio, we'll let you get your turn and then we'll go vote. inspection of exotic species Mr. Fazio. Well, thank you, Mr. Chairman. Welcome to all of you. I have a unique situation out in my part of California where we have an exotic industry that's developing, Emu Ratite. Some people even attempt to domesticate ostrich. And yet they can't be handled in USDA inspection facilities without unique and additional costs for veterinary attendants which can make it prohibitive. What criteria or threshold do specialty meat products have to reach in order to come under the same consideration that traditional poultry, beef, or other domesticated animals currently are dealt with? How can we broaden the consideration to some of the new and more innovative products that are gaining credence in restaurants that are developing followings because of, say, low fat content or other benefits that some people think can be derived without inordinately burdening the Department? Mr. Billy. I'd like to ask Dr. Reed to respond to that please. Dr. Reed. We have a number of folks that are interested in receiving voluntary inspection, which is the inspection that you referred to where the packing house bears the entire cost of inspection. Right now we do voluntary inspection for ostrich, emu, rhea, and game products on the meat side. Mr. Fazio. When you say game, you're talking deer and elk? Dr. Reed. Buffalo, deer, yes; if they wish to have them inspected. There is not a requirement that those products be inspected right now. Mr. Fazio. But for all practical purposes you can't sell them to restaurant trade or in the market unless you have. Dr. Reed. There are State and local governments that ask for those products to be inspected before they're allowed in their State. Mr. Fazio. And many consumers would. Dr. Reed. Yes. Mr. Fazio. Most restaurateurs would. Dr. Reed. I would think so. Mr. Fazio. So, for practical purposes, you need it. Dr. Reed. Yes. Mr. Fazio. So, how can we move to a more affordable program that will accommodate the more innovative product? Dr. Reed. Well, certainly I think we're trying to make sure that we don't over staff when we provide inspection to those local establishments, and make sure that the fees we charge are not only reasonable, but that they are accurate to recover the government cost to provide an inspector for that activity. And I think we have discussed internally, and those things still are under discussion, to see whether there needs to be another look at the definitions in the poultry regulations concerning the classes of poultry. Our policy people are reviewing those areas right now. We haven't reached any conclusions on that yet. I will tell you that we have an inspection force that is stretched right now; and additional demands for mandatory inspection are going to be met by pulling resources from other places in the program. Mr. Fazio. Mr. Billy, did you want to comment? Mr. Billy. Yes. The other thing I would add is I would not want the availability of inspection to be an impediment to the development of those new industry sectors because it is important that the consumer be confident about those products. We're now providing inspection services to what is really a brand new industry sector on a voluntary, user fee basis. But as appropriate, we need to look at it and see if we in fact need to shift and cover that through mandatory inspection. Mr. Fazio. Well, what is it that would bring you an awareness that we are creating an impediment? I mean there is additional costs for a veterinary meat inspector. And there are travel costs involved in bringing people to places where they normally wouldn't be. You wouldn't require a veterinarian to be on site. It's obvious to me that it's beginning to be an impediment. And that there are exotic products, and there are game products that are ready to move into the market but are being held back because your resources apparently aren't sufficientto reach them. Do you think there is validity to my assertion? Mr. Billy. As Dr. Reed indicated, we in fact are now looking at that very question because there are increasing demands for that kind of inspection support. We need to reach a decision about whether we should request additional funds that would be necessary to provide that additional inspection. Mr. Fazio. Well, I appreciate your attention to it. I'd like to be back in touch with you to see if we can focus your concern a little more specifically. We will be working with you on that. Mr. Skeen. With your forbearance, we will recess for awhile and go get this vote out of the way. We will be right back. Thank you, Mr. Billy, and thank you panel. [Recess.] Mr. Skeen. We're back on the record. Mr. Fazio. species covered by poultry regulations Mr. Fazio. Thank you, Mr. Chairman. I'll wrap up here so we can have Mr. Latham take some time. I understand that some conversation has occurred since we recessed that makes it clear that the ratite, or at least the ostrich, industry might be allowed to be counted as a part of the National Poultry Improvement Plan under APHIS. Is there some legal authority for this strange bird to be a part of our poultry inspection? Perhaps you could answer more explicitly. Dr. Reed. Yes. Through our regulation, we define poultry as chickens, turkeys, geese, guineas, and ducks. Ostrich and other ratite are not included. So, there is not an inclusion in our regulation of any ratite. Mr. Fazio. So, we'd have to make changes. You don't have the authority to do any of this administratively. Dr. Reed. It would be a regulatory change. Mr. Billy. We do have the authority. Mr. Fazio. You have the authority. You haven't exercised it. Mr. Billy. You have to do it through regulation. Mr. Fazio. Yes. Mr. Billy. We could do it through legislation, I suppose, but maybe we wouldn't have to. I don't know. Dr. Reed. My understanding of the existing legislation is that it is generic in terms of poultry. So, I'm not sure that it would require a legislative change. Mr. Fazio. Well, perhaps we could have some more questions placed in the record at this point. And we will see what we can gather. I'm interested in that way of establishing a threshold, as I indicated earlier, which I didn't really get a response to. I don't think there is much of a process at this point that we could point to. I do hope we can follow-up with some cost estimates too of just how much of a market that there is out there, and at the same time what it might cost to treat it more in the normal process of inspecting as we would a domestic animal. Thank you. [The information follows:] FSIS has no reliable data on ratite production. Estimates of live animal production from the various ratite associations vary widely. FSIS provides voluntary inspection for ratites upon request. However, the Agency does not record the slaughter of ratites as a separate category in its animal disposition reporting system. FSIS is unable to estimate the cost of inspection due to considerable uncertainty regarding the scope and growth of the industry at this time. Anticipated costs would comprise both Agency and industry costs associated with implementing a mandatory inspection programs. Agency costs may include the cost of additional inspectors; training activities; program development activities; chemical residue analysis; and microbial baseline studies. Industry costs would involve developing and implementing HACCP plans as well as meeting other regulatory requirements. Mr. Skeen. The Department doesn't want to do anything to stick it's neck out on these ostriches right now. Mr. Latham. cost impact of user fee proposal Mr. Latham. Thank you very much, Mr. Chairman. I'll be very brief. I've got another hearing I have to attend at 2:00 p.m. It's expected that the cost of the user fees for meat inspection will be passed on to the consumer. Have you estimated how much affect this will have on the feeding programs at USDA and the poor people who are purchasing meat? Mr. Billy. No, we haven't, sir. We have started that process and asked our Economic Research Service to develop those kinds of analysis. They're in the process of doing that. Mr. Latham. When would you expect to know what the cost is going to be? Mr. Billy. I'm not sure. I could go back and check and let you know. I mean I haven't gotten any kind of an estimate from them. So, I'm uncertain. [The information follows:] The ERS user fee analysis has not been completed. FSIS expects the analysis to be completed by the end of June may 1997 and a copy will be provided to the Committee at that time. hepatitis a Mr. Latham. Just briefly, there is another real concern I have; regarding the food safety initiative with Salmonella and E. coli. One foodborne illness that's not covered is Hepatitis A. And it's a local issue for me in that there was a community- wide outbreak in Sioux City back in 1995. And just this week in Council Bluffs, Iowa there was another outbreak. There is data supporting the fact that there is more Hepatitis outbreaks in restaurants and delis than E. Coli. Isn't this an important problem and why isn't that included? Mr. Billy. I would like for Dr. Wachsmuth to address that. Before she joined us from FDA, Dr. Wachsmuth worked for over 20 years at the Centers For Disease Control and Prevention and is a recognized expert. Mr. Latham. I understand. Hepatitis can be prevented with a vaccine. Am I right? Dr. Wachsmuth. Yes. It can. I think one reason we don't include this in the same way that we talk about Salmonella and E. Coli is that it's generally transmitted person-to-person. When it is through food, it's usually through food handling; almost always. The organism source is human. So, there is a different route and a different way to control it. I think our efforts at retail that Mr. Billy described earlier, in terms of trying to get HACCP into retail so that people think in terms of the process and where a packaging might come into the food chain is how we're approaching this particular problem. We do also offer advice through pamphlets and through our hotline if anyone calls in terms of food handling problems. Mr. Latham. Isn't it also a fact though that most of the other problems are also in the handling? Dr. Wachsmuth. Well, there are animal reservoirs for most of these other pathogens that we're talking about. And for Hepatitis A, it's the human reservoir. So, it's a little different epidemiologically. So, your control measures will be a little different. Mr. Skeen. That's a very interesting question. And by the way, here is a map of the incidents of Hepatitis. It's from the CDC. The West Coast and Southwest have a real problem. Mr. Walsh. haccp implementation Mr. Walsh. Thank you, Mr. Chairman. Welcome. Thank you for your testimony. I'd like to ask some questions regarding the HACCP implementation if I may. With the implementation of the new regulations, what obstacles have you confronted within the agency or within the industry at this point? Mr. Billy. To this point I think the principal challenge we and the industry both had was the training that was needed to understand what was required. Mr. Walsh. Training of food safety inspection? Mr. Billy. Food safety inspection personnel, as well as the training that industry needed to address the sanitation SOPs, and the sampling for generic E. Coli. I think the other key challenge was communication. And I mean it in a very generic way. Getting the word out to over 6,000 plants in a manner that people understand. They had questions about doing SOPs in a way that will satisfy FSIS. We addressed that concern through a hotline that we established well-before the deadline. In fact, we've continued that hotline. So, anyone, our own personnel or plant personnel, can call and ask questions to ensure that they have an understanding and feel confident in moving forward to meet the requirements. So, I think it's those two keys. It was the training and the communication that were so important. I think the results we accomplished, and how smoothly it went is testimony to those two being the real key. Mr. Walsh. I'll get back to that in a second as far as the communication is concerned. But have there been any physical or structural problems for the industry adapting to HACCP, perceived or otherwise? Mr. Billy. Sir, for the HACCP part of the rule, the first deadline is January of 1998. So, we're really on the front edge of that being phased in. What's happened so far is the implementation of the sanitation standard operating procedures, SOPs. This will be followed next year by the big plants written plans and implementing of HACCP plans and verification by our inspectors. I'm not aware of any structural problem. The feedback we've gotten from industry and across the board is that it's worked pretty well. communication with stakeholders Mr. Walsh. Prior to the promulgation of HACCP, USDA agreed to host a series of meetings, round tables. I think the industry was pleased that USDA agreed to that. Can you give us your impression of those sessions and what has come out of it? Did that help this communication problem? Mr. Billy. These sessions helped communication immensely. They were invaluable. We were able to share with all of thestakeholders our current thinking at that time on the final rule based on all the public input we had received to-date. The further dialogue that occurred, not just with us, but between the different stakeholders, influenced the final rule in several ways. For example, the selection of generic E. Coli as the organism to monitor and measure the effectiveness of the slaughter sanitary control activities in slaughter plants. The time frame for implementing HACCP, shifting from a process approach which we had in the proposal to one based on the size of the plant, grew out of those discussions. There are many more examples. So, in fact, the dialogue that occurred was very valuable to the agency in finalizing the rule. regulatory reform Mr. Walsh. That's terrific. I think all the sides, everybody, that was involved in those had a very positive feeling. I think it bodes well for public and private cooperation. I think all of the departments can learn from that experience. One of the issues that remained was this issue of layering or de-layering. The Secretary wrote to me awhile back now that the USDA would review, revise, and repeal its existing regulations as needed. Since then, FSIS has sought public comment on ways to de-layer inspection and is reportedly conducting a study. That study, I'm told, will not be available for another 18 months. Would you care to comment on that and what can be done to accelerate that process? Mr. Billy. In fact, the examples that I offered in my formal testimony and highlighted in my oral comments are examples of existing regulations that need to be changed to make them compatible with HACCP and the HACCP approach. And there are many others. We are just about ready to publish a proposal that will completely revamp all of the existing regulations that address sanitation. I think everyone will be amazed at the kinds of changes that we're going to be proposing to streamline those regulations, as well as combine separate meat and poultry requirements into one set. And wherever possible, we are shifting from a command and control type requirement to a performance standard. We will be saying here is the end result. We expect you to figure out how to accomplish it. We recently provided to the Department a schedule for the completion of our regulatory reform activities. And I'd like to provide it to you and for the record so that you can see the schedule we have established for completing that process. Mr. Walsh. That will be very helpful. Mr. Billy. I will supply a draft of this review schedule? [The information follows:] [Pages 679 - 731--The official Committee record contains additional material here.] changes in inspection Mr. Walsh. Can any of these steps be implemented prior to the completion of that report? Mr. Billy. In terms of the study that I think you're referring to, one of the areas that we want to look at in terms of our inspection responsibilities is how we carry out carcass- by-carcass inspection. There are two parts to that. There is the ante-mortem part of it; ensuring that live animals are acceptable for slaughter. And then the post-mortem part of inspection in terms of ensuring that there aren't any disease conditions present, as well as the sanitation aspects of slaughter. We believe that there is a possibility to modify how we carry out those inspection activities. Only in part do those inspection activities relate to food safety, however, which is what HACCP is about. The other part of it is about unwholesome or unacceptable conditions that animals may have that you would not want to allow into meat or poultry products. We want to carry out a public process, not unlike the one we've just talked about for HACCP, that will engage all of the interested parties in taking a fresh look at how we do carcass- by-carcass inspection as mandated in the law. We think we can change our approach, and as a result free up some resources to allow us to do some of the new HACCP tasks, as well as new inspection tasks in the distribution of product to the marketplace. Some of that will have to wait for the study. We currently define in regulations how we do those inspections in slaughter plants. We need data to support any changes. And then we would have to follow that by rulemaking. So, that 18-month estimate is tied to a process of collecting the data, sharing that with everyone, and then going through a rulemaking process. It's very important for us to complete that in the time frame that you've referred to. It only, in part, addresses food safety. There are other reasons for some of that inspection activity that need to be looked at from a separate perspective. sentinel site survey Mr. Walsh. Once HACCP is fully implemented, do you have qualitative goals that you anticipate in terms of improving the safety and the reduction in some of these transferrable diseases? Do you have any idea what you expect to get from this? Mr. Billy. We haven't established specific qualitative goals. What we have done is through the initiation of the Sentinel site project and the data that's being collected now-- -- Mr. Walsh. What is the Sentinel Site Project? Mr. Billy. It is a project we are jointly doing with the Food and Drug Administration and the Centers For Disease Control. We're currently at five sites around the country. These are geographic areas. There is a very pro-active collection of data on illnesses that are associated with food products, where we will have much better data to work with in terms of, in our case, the extent to which meat and poultry products are associated with disease. That data, because of the way the Sentinel Site Project is designed, can be extrapolated to the U.S. population. The data that's being collected right now, which I referred to earlier in the initial report from the first year of work, will be our baseline. And as we phase in HACCP and the Salmonella Performance Standard, we will in fact get a direct measure of the impact of these regulatory requirements. That's what we want to do. The current data system that's available would not allow us to get a good measure of the impact. But the specific answer to your question is we have not established numerical targets at this time. Mr. Walsh. I'd just finish by saying, I think that the process toward this goal of fully implementing HACCP, and ultimately having an even better and safer food supply can be a model for the world. Mr. Billy. I agree with that. Mr. Walsh. And with all of the transference of food in the world today, it's just going to accelerate. By setting ahigh standard for our own products, we can set a high standard for the world. I think it's a good thing. Thank you. Mr. Skeen. Ms. DeLauro. food safety training Ms. DeLauro. Thank you, Mr. Chairman. Welcome. Thank you very much. The Administration's plan for improving our food safety calls for better use of scientific analysis. Obviously, the scientific analysis is critically important because of the many harmful pathogens that cannot be detected under current inspection methods. I would expect that the success of the scientific testing, however, will depend on the skill of the inspectors who are out in the field. Can you tell us a little about how the Department is going to train inspectors so that they have the skills to be able to implement the improved Food Safety Standards? Is training a significant part of the Food Safety Initiative? Mr. Billy. I think I'll have Dr. Reed, who is overseeing that training, lay that out for you. Dr. Reed. We have a number of formal training efforts going on right now. The bulk of them are at Texas A&M. We're training our work force to understand the reasons and the underpinnings of what they do rather than to just perform tasks as written. Ms. DeLauro. How large is that work force? Dr. Reed. It's 6,500 employees. We've just finished our second class at Texas A&M for college credit in food safety. It is not an easy course. It's not an attendance certificate. It's difficult and it's important for them to grasp the concepts to start understanding the HACCP system that they're going to be involved in. So, we're pursuing that vigorously. We also have a number of other training efforts going on for our supervisors. Of course, this includes all of the technical training we have to do just to get people doing the new procedures that they're expected to do. But we know we can't do it without upgrading the education level of all of our work force. So, we're pushing that very hard. Ms. DeLauro. What's the length of time that they are trained? What's the period of time in which they're in a session? Dr. Reed. Congresswoman, we started with an arrangement for a very intensive four-week course, in addition to all of the training and experience the inspectors already have, to even get their position and do their job. We think that will help them. We've always encouraged our inspectors to take any number of college courses, and other training activities. The agency reimburses them for successful completion of courses in Food Science Technology, understanding of basic chemistry, and microbiological sciences. Mr. Billy. Part of the reason for the time frames that we established in the HACCP Rule, of phasing it in over a three and a half-year period, was to allow us the time to provide the appropriate training to all of our work force. When you're up in the thousands of people and all of those people have jobs that tie them to plants on a daily basis, the logistics of providing that training is a very complex undertaking. So, we've chosen the just-in-time approach for the HACCP part of the training, not what Dr. Reed is referring to, but the basic training on the tasks that our inspectors will carry out under HACCP. And we are carrying the training to our inspectors. We have trained 104 facilitators that will use the training materials and go out into the nation and provide training for groups of five, 10, or 20 inspectors consistent with where they're located throughout the country. That minimizes our cost and maximizes, we believe, our effectiveness. It's not just one training program or one segment. It will come in several segments. We'll build one on top of the other to gear up our inspectors to carry out their tasks under HACCP. So, you can expect that this training will be ongoing for the next three years. It will be done in waves as we implement HACCP throughout the country. food safety risks Ms. DeLauro. What would happen if we didn't implement the final ruling on HACCP? What risks do we run if we don't have the final implementation? Mr. Billy. Well, we know from the available data from the Centers For Disease Control that foodborne illness is increasing. And we further know that meat and poultry products are one of the major sources of foodborne illness. Given that, it's just critical that we have the kind of shift in our inspection approach to one that's based on preventative controls, relying on the science that's available, and ensuring that the measures that are carried out in the plant in fact impact the pathogens that can be present on the products at that point in time. That's what the rule is designed to do. We have a performance standard in it for Salmonella. We have generic E. Coli monitoring by the plant at the slaughter level. These measures, we believe will have a big impact in terms of reversing that trend that I've referred to at the outset. But we can't stop there either. farm-to-table strategy We can't focus all of our energy on slaughter and processing plants. We know that problems can occur in distribution. A truck isn't properly chilled when it's carrying product to the marketplace. It's stored somewhere that's inappropriate, or it gets into a retail setting and it's mishandled at the retail level. That's why we've talked about a farm-to-table strategy. And we believe that what I was referring to earlier with Mr. Walsh in terms of identifying a way to redeploy some of our resources to focus on those other areas is very important if we're going to address this whole problem in an effective way. advanced meat recovery Ms. DeLauro. We've all heard a lot about Mad Cow Disease. Let me just ask you this question. It affects the central nervous system elements such as the spinal cord. What does the Department of Agriculture do to ensure that spinal cords are removed from bones before those bones enter advanced meat recovery systems? Mr. Billy. We have responded to concerns that were raised with us about whether spinal cords were being removed from neck material that's processed in those advanced meat recovery systems. And to determine whether in fact the plants using that equipment were effectively removing the spinal cord consistent with our definition of meat. We did a survey. As a result of that survey, which we published and made available a couple of weeks ago, we did find a number of samples where there was evidence of spinal cord material in the product that was produced. Given that, we have indicated our intent to put out a directive that will identify an additional task that inspectors will carry out to make sure that the spinal cords are completely removed before the raw material is processed through those machines. That's important because the way we define meat does not allow for the inclusion of spinal cord as a raw material for that type of processing. So, that directive will come out in the next several days. And we also generated a lot of additional data in that study that is requiring us to go back and look at the existing regulation that addresses this type of equipment to determine what other changes we need to make to ensure that the equipment is operated properly by the plants that use it. Ms. DeLauro. Thank you very much. And thanks for the work that you do. Mr. Skeen. Mr. Kingston. incidence of foodborne illness Mr. Kingston. Thank you, Mr. Chairman. Mr. Billy, what is the percentage of foodborne illnesses that happen outside of the plant? Mr. Billy. I don't know. Mr. Kingston. If you could provide that for the record. [The information follows:] The percentage of foodborne illness linked to product from a federal plant versus restaurants or from improper handling by the consumer is not known at this time. In the past two years, 1995 and 1996, there were two foodborne disease outbreaks attributed to product from a federal plant. The Sentinel Site Study, recently named FoodNet, will help explain the prevalence of causes of foodborne illness next year when two years of data will be available for extrapolation to the U.S. population. The President's proposed expansion from five to eight sites will strengthen FoodNet and create the early warning capability described by the President. Such a system could detect large outbreaks as they begin, then quickly alert State and federal agencies, whose rapid response could avert further foodborne illnesses and deaths. Epidemic investigations as well as planned case-control studies within the expanded surveillance network will identify specific foods or food processing activities associated with pathogens and human illness. By identifying and implementing corresponding control or prevention practices throughout the food chain, the risk of foodborne illness could be reduced nationwide. Mr. Kingston. I know CDC did a study on it and found an overwhelming amount of it actually took place outside the grocery store and really happened a long, long way from the farm. I'm going to guess that it was as much as 70 percent, and I think that it's very important to the Members of this committee. In our discussion, we very honestly think you're doing a great job at the packing plants. And we can beat up on packing plants all we want. That's not where the real problem is. It's as fundamental as putting the meat back on the plate that you-- the cooked meat, that you put the uncooked meat on. It is just things like that. meat and poultry hotline You're spending a lot of money advertising on that too, I noticed. How much are you spending or does that come through a different department? Mr. Billy. We don't do any of that type of activity. Mr. Kingston. So, that goes to a different department? Because USDA spends a lot of money advertising on that. Mr. Billy. It's not a part of our agency. So, I'm not aware of that. Mr. Kingston. That's interesting. So, you don't do any public awareness at all? Mr. Billy. Well, we do consumer education. For example, we operate the meat and poultry hotline which addresses questions that consumers have aboutthe use of meat or poultry products. For example, around the Thanksgiving period is our peak annually. We get thousands of calls asking questions about how to safely prepare a turkey. We just celebrated about a month ago our millionth call to the hotline. And we think it provides an important service to the public in helping them understand the role that they need to play. And they do have responsibilities for safely preparing, not only meat and poultry products, but all food products. Mr. Kingston. Could you send me something on that? Mr. Billy. Sure. Mr. Kingston. How much it costs? Who calls and the nature of those calls; the breakdown of it? Mr. Billy. Absolutely. I'd be happy to. [The information follows:] The costs associated with the Meat and Poultry Hotline were approximately $515,000 in fiscal year 1996 and are expected to be about the same for fiscal year 1997. These costs include $450,000 in salaries and benefits, based on 8.5 staff years, plus $65,000 in additional operating costs. It is difficult to pinpoint an exact cost for this program because Meat and Poultry Hotline staff contribute in many ways to the overall consumer education efforts of the Agency. In fact, at least 25 percent of the staff time of each Technical Information Specialist on the Hotline is spent on duties other than answering consumer telephone calls--for example, developing educational materials. It should be noted that a significant portion of callers to the Meat and Poultry Hotline are educators and communicators--17 percent, or 6,750 callers in 1996, who pass hotline information along to many other people. Therefore, the number of calls to the Hotline does not convey the total number of consumers served. For the record, I will provide the most recent report for USDA's Meat and Poultry Hotline, for calendar year 1995, ``Making the Connection: An Update''. [The information follows:] For 1995, 84 percent of the calls to the FSIS Meat and Poultry Hotline were made by individual consumers. In addition, thousands of calls were received from business and professional clients. (See page 8, Figure 2: Meat and Poultry Hotline Callers, 1995.) Callers' concerns ranged from food handling to causes and prevention of foodborne illness, from labeling and nutrition to the use of technology in food processing. Callers had concerns about many subjects, including E. coli 0157:H7, Salmonella enteritidis and eggs, animal health, turkey roasting, ground beef, power outages and floods, new products, and ratite species. (See pages 3-6.) [Pages 738 - 752--The official Committee record contains additional material here.] Mr. Kingston. Last year I believe we quizzed you guys about a fish hotline and found out that it was almost a recipe swap. Who was that? Mr. Billy. I can share some information about that. When I worked for the Food and Drug Administration, we established a similar hotline for seafood. Mr. Kingston. Okay. Mr. Billy. That hotline is operated by the Food and Drug Administration. user fee proposal Mr. Kingston. All right. Now, on the fees, one of your panelists said that you are deadlocked because the fees are a part of the budget. And as you know, the President worked very, very hard to kill the balanced budget amendment promising that he would put in a balanced budget, which has been proven now that his budget does not balance in the year 2002. Congress, today, will be voting on urging the President to submit a balanced budget. Could you please do your part to make sure that happens? There just doesn't seem to be any kind of good faith when we're killing balanced budget amendments and then not submitting a balanced budget. It makes it very difficult to drum up support for fee increases. Mr. Billy. I will carry the message back, sir. redeployment and streamlining Mr. Kingston. Just to drive politics into a non-political dialogue here. Another discussion item; in terms of HACCP, when it's fully increased, fully implemented, would the number of inspectors decrease or increase? Let me tell you where I'm going. And you might want to touch on this one. When we implemented it we talked about also the fact that we didn't want to layer. Is there layering going on? What steps are being taken to make sure that, that doesn't happen? So, where I'm headed is I hope you're going to say that it should decrease the number of inspectors. Mr. Billy. Well, I'm going to disappoint you then, because a couple of years ago, in terms of a budget approach, our Department shifted from the traditional one of each year asking for increases in the number of inspectors to handle industry growth and additional second shifts. We indicated our intention to maintain and redeploy resources through several steps that we were taking. The one I referred to in my testimony is the reorganization. Streamlining efforts, administrative reductions over the last two fiscal years, and the current reorganization have enabled us to reduce non-frontline staff by 200-300. In a similar way, what I talked to Mr. Walsh about in terms of this study that we're embarking on looking at how we carry out our carcass-by-carcass inspection at slaughter. We similarly expect that we will be able to free-up some inspectors or inspector time that can be redeployed to implementing HACCP; carrying out our HACCP inspection tasks, and also using some of that inspector capacity to do a better job after a product leaves the slaughter and processing plant. That is what I think you were referring to earlier about where things can happen beyond those plants. We agree with that. And we think that we need to have an effective broad-based approach. That's all about re-deployment. What we're trying to do is to accomplish all those changes, carry out the training and the other things that we've talked about without any increase in the number of inspectors. Believe me, that is a huge challenge, but that's what we're trying to accomplish. cost of haccp implementation Mr. Kingston. Say, the industry cost right now I think is about $1.1 billion in terms of their share of it. Mr. Billy. That's our estimate for the long-term cost of industry implementing the HACCP and pathogen reduction regulation. Mr. Kingston. Is that number a function, say, of percentage or a factor of, and I don't know how it would be measured, say, number of bird units, number of carcasses of beef? The reason why I'm asking is could you project theincrease in revenue because of the increased demand of the product? Five years down the road we know that we probably will be consuming more. So, your costs are going to be more. But will that cost be a percentage of something; a 5 percent, a 10 percent? Is there any kind of ratio that we would know? Mr. Billy. I wouldn't know the answer to that. But what I could recommend and will provide to you is the detail cost benefit analysis that was associated with the final rule. And it goes into some detail in terms of what those costs are; how they'll be accrued the first year and on out. And then the benefit side of it as well. [The information follows:] [Pages 755 - 757--The official Committee record contains additional material here.] Mr. Kingston. Yes. It would be useful just to see if that number is tracking. I think it would be a lot easier for us to sell fee increases or whatever if we knew that, that number was a percentage and it was in line. I do want to reiterate what the Chairman has said, that I think overall you do a great job. The American public expects to have safe food, and generally takes it for granted these days. I think it is a reflection of a lot of what you're doing. So, let me yield back. Mr. Skeen. Mr. Nethercutt. incidence of foodborne illness Mr. Nethercutt. Thank you, Mr. Chairman. Mr. Billy, welcome; Ladies and Gentlemen. I want to follow-up on this a little bit with regard to complimenting you on the safety of our food nationally. High standards with good compliance. I was reading your testimony and it looks like there were 7,259 laboratory confirmed cases of diarrheal illness in the calendar year 1996 at five sites. Is that correct? Mr. Billy. Yes. That's the Sentinel Site Project results; right. Mr. Nethercutt. Right. And this project is designed to get some sense of problems in the country, in terms of foodborne illness? Mr. Billy. That's right. Dr. Wachsmuth can shed some light on that from her experience at CDC. Mr. Nethercutt. Well, maybe as we move to that. Is this number going down or is it be going up? Dr. Wachsmuth. This is the first time that we've had this precise a number. We were establishing a baseline in the way that we are doing the surveillance. So, we can't say right now if it's up or down. But this is where we are right now. Mr. Nethercutt. Okay. What is your sense of where we have been without understanding that we have a baseline? Is your sense that it's better than it was a year or two or five years ago? Dr. Wachsmuth. That's very difficult to say, but it's different. The trends are different because people are eating different kinds of food. They're eating outside of the home. The food industry, the types of fast food and rapid dissemination of product provide the opportunity for these large outbreaks. So, the trends are very different, but the data we're getting now eliminates a lot of the artifacts that we used to have because a part of the project is to interview people to see how many people go to a doctor when they get ill. How many doctors would prescribe a culture? As you know,that just doesn't happen very often either way; and then what a laboratory can do in terms of detecting a pathogen. Then we factor in all of those artifacts to get a more precise number of cases. And we know the population base at each site. We've never had that kind of information before to compare. So, we really cannot say in numbers what we had in the past. Our data before were 6 to 33 million as a baseline. president's food safety initiative Mr. Nethercutt. I hope it's 6 instead of 33 million. That would be more encouraging. With that background, I want to lead into, a discussion here for the record of the Food Safety Initiative. I know the President was in a radio address that came forward with this Food Safety Initiative. What can you tell us was not being done or is not being done that this so-called Food Safety Initiative will be assured will be done? What problem existed that created the need for the Food Safety Initiative? And what will we be doing differently from now on? Dr. Wachsmuth. With the surveillance, what I just described is brand new. This is one year of data. When we initially started, we wanted ten sites instead of five. But it's very expensive. We have five sites now and that's about 13 million people for a denominator, a population. What will happen with the increased sites that the President has proposed is we will have something more like 10 percent of the population under surveillance rather than 5 percent. So, it gives the associations we make with pathogens and with food more statistical power so that we can make really focused intervention in terms of HACCP and other regulations. Mr. Nethercutt. How many agencies are involved and how much money is spent, or will be spent in the next year on this Food Safety Initiative? Dr. Wachsmuth. Well, it's not just the agencies. We have FDA, USDA, CDC, but also the Sentinel sites are States or counties that have their own infrastructure for public health. Their resources are going into it too, but in terms of Federal money, I think it's running $300,000 to $350,000 a site. It's a little complicated because the sites are designed to address emerging infections in general. What we're doing is tieing into that larger program to look at foodborne diseases. So, the whole emerging infection cost is even higher for each site. Mr. Nethercutt. I know that your testimony related mostly to beef and eggs. What about seafood? How does that factor into the Food Safety Initiative? Mr. Billy. It factors in very directly. I think you received earlier some testimony from the Food and Drug Administration. They have the jurisdiction for seafood. Of the $43 million request that is represented by the Food Safety Initiative, about $24 million of that will go to the Food and Drug Administration. My understanding is that a significant percentage of that is for seafood inspection. You'd have to contact FDA to get the specific numbers. But it is an integral part of this whole initiative. Mr. Nethercutt. Is seafood outside your jurisdiction? Mr. Billy. Yes, sir. Mr. Nethercutt. Is that by statute? Mr. Billy. Yes, sir. Mr. Nethercutt. Of course, being from the Northwest we have substantial seafood consumption. Speaking as a consumer we certainly want to be sure that's safe as well. early warning system My final question, if I may Mr. Chairman, would relate to the proposed early warning system. Would you explain to us how that will work and what benefits you see because of it? Mr. Billy. It really is what Dr. Wachsmuth has already described as the basic components of it, which is a very proactive effort to go out and identify in these sites illnesses that are caused by food products. And most importantly to identify what the agent is; what organism has been associated with this illness. Mr. Nethercutt. I'm thinking more from a practical standpoint. Let's say I'm out at a site, within the jurisdiction of a site. You find out that I've become ill because of something. What will happen? Mr. Billy. Dr. Wachsmuth can give you the specifics. Dr. Wachsmuth. Another part of the President's announcement about increasing the early warning sites was the technical component; how you transfer the laboratory information. I think that's the real key with the early detection. There is already a prototype of a system where if a Sentinel site detects an E. Coli 0157:H7, they can fingerprint the isolate and electronically transmit that to a data base at CDC where they can compare the fingerprint of that strain to other strains. So, if the State of Washington submitted an isolate today, tomorrow the State of Oregon submitted a very similar isolate, that system would feed back to each state to say, there is another isolate like this. In that way it's interactive. It's not just CDC looking at everything that comes in. And it happens in real time. As the procedure is being recorded, it is fed into a computer that transmits that information to CDC. But this is a prototype; it's just the beginning. The money that the President has asked for in the initiative is going to be necessary to really make that gel in terms of putting everybody on-line, including our laboratory. So, that if there is an outbreak and we're trying to track a product, if we find a pathogen, we can make sure it's the same pathogen and not one of a background number of pathogens. The possibilities are tremendous. Mr. Nethercutt. You sound like you all have high hopes and expectations for this. Dr. Wachsmuth. We do. Mr. Billy. From a regulatory point of view, two examples immediately come to my mind. One is if, in fact, in that scenario that was described, there is the same organism causing illness in what's called sporadic illness, then we really don't have much access to that kind of information right now. If we can get that kind of information in close to real time, and see that in fact there is a pattern and it actually is an outbreak, we can then react in terms of dealing with a recall, and take whatever steps we need to take to protect consumers; not only in the area of sporadic illness, but much more quickly than what is currently possible. That's in the public interest. The other thing it allows us to do is identify whether we see a certain pattern of illness that is being associated with a particular type of product that we regulate. With HACCP being implemented, what it will allow us to do is look at the plants that are producing that type of product and work with them to refine their HACCP approach so that the problem is resolved, rather than what I'll characterize as sort of the classic sledge hammer approach to regulation when you're trying to deal with these kinds of situations. So, I think this electronic transmission of laboratory information will introduce for us a much more sophisticated way of dealing with these kinds of problems. Mr. Nethercutt. And probably in a more acceptable model to the industries that are affected and those who produce the product. Mr. Billy. That's the feedback we're getting, absolutely. Mr. Nethercutt. Well, thank you very much for being here. Mr. Skeen. Mr. Bonilla. hepatitis a Mr. Bonilla. Thank you, Chairman. Mr. Billy, I'd like to start out by talking about foodborne diseases, specifically in San Antonio, we're having a problem with hepatitis. It's two or three times above the national average. And 81 percent of those cases occur in persons of Hispanic origin. I think some people might be surprised to learn that according to the numbers I have from the CDC, data shows that there is significantly more foodborne Hepatitis A infections than E. Coli. E. Coli gets a lot of headlines, I know, and it's very important. But realizing that Hepatitis A is viral in nature and because of that different control techniques have to be employed. I'm wondering if you think that the foodborne Hepatitis A is in fact a serious food safety risk? Mr. Billy. We think it is a very serious public health problem. I'd like Dr. Kaye Wachsmuth to address your specific concerns about why that's happening. Dr. Wachsmuth. I think I'm aware of the information that you're citing. There was an MMWR report--Morbidity and Mortality Weekly Report--from CDC the first of this year. But it summarized some data from 1994 and earlier. Truly Hepatitis A was ubiquitous. It was widespread in this country ten years ago. And we've made great headwayin reducing the number of people who have that infection. It's generally a person-to-person infection. I think less than 3 percent of the Hepatitis A cases in the country are foodborne. The food becomes a problem when the person who is infected is handling the food and contaminates it, and then that food is consumed without a process to inactivate the virus. In other words the food is contaminated. Hepatitis A can be eliminated by cooking. But if the food doesn't receive that heat treatment, then it can be infectious. So, more or less, CDC considers this a person-to-person mode of spread. The new vaccine for Hepatitis A may be a very effective control to prevent spread of the infection within a community. It's an efficacious vaccine. It's new, so it's not widely used at this time. But there are a lot of asymptomatic infections. And those people who don't know they're ill could be the food handlers. We're addressing the problem in some ways through retail, through education of food handlers so that even if a person doesn't know they're ill, they take precautions in terms of wearing gloves, or washing hands. Mr. Bonilla. So, in other words, again acknowledging the low percentage of the disease being spread strictly by food, you're saying then that food can come into a facility that's safe and has been inspected and has gone through the process, and the infection or the disease then begins when the handler gets it, and not necessarily before that in most cases. Dr. Wachsmuth. The concept now is that the reservoir for the pathogen is the human being; much like Shigella. This is a bacterial example. There is not a known animal reservoir. So, we think that the spread is primarily human-to-human. Mr. Bonilla. In light of the fact that the numbers that I have here from 1988 to 1992, there were 2,109 Hepatitis cases versus 244 E. Coli cases, acknowledging that the percentage of those that may have been affected by food may be lower. It still may be, in some cases, higher than E. Coli. So, my question is, should Hepatitis A, be covered by the Food Safety Initiative so that we can study this problem. Dr. Wachsmuth. It will be. Mr. Bonilla. Even considering that the numbers are so much higher? Dr. Wachsmuth. Right. But it is included in a different way than the bacterial pathogens because specifically FSIS has asked for funds under that initiative to take HACCP all the way to the consumer, to the retailer. That would include concepts of where pathogens enter the food chain and educating people at retail on where pathogens occur so that they can control them properly. The Food Safety Initiative requests money to be used for education. That's education of consumers, retailers, veterinarians; really, all those involved in the food chain. Specifically at FSIS, we've been aware and have been asked about Hepatitis A many times; we have a brochure that's available to the public that talks about how the virus is transmitted and personal hygiene that would control its spread. Then, again, I think CDC also has programs for education and for vaccine use; for prevention. Mr. Bonilla. Programs like that are very useful because often times, like anything in this country, it's just a matter of educating and getting information to people. I would nonetheless urge FSIS to push to include all foodborne diseases in the President's Food Safety Initiative because the numbers are kind of scary down in my part of the country and then perhaps in other parts of the country as well. So, it's something that I wanted to put on your radar screen. It's something we're concerned about in South Texas. I'd like to turn now to user fees which I'm sure you probably think you've heard enough of by now. But in looking at it in a little different perspective, I asked the Secretary the other day, the same question in terms of percentages. user fee proposal In your justification, you characterized meat processors and the public as joint beneficiaries of the Meat Inspection program. Yet your budget proposal places 70 percent of the cost of food inspection on the meat processors. I understand that 70 percent is simply the total cost of salaries for on-sight inspectors. Is there any other reason you chose that 70/30 cost share ratio percentage? And do you think the processors benefit more than the public from the Meat Inspection program? Mr. Billy. The basis for the 70 percent is really capturing the cost, the salaries and benefits of the inspectors that are providing the inspection activity in the plants. It turns out that 70 percent of the cost is associated with inspection. That's a way of breaking it down in terms of the direct cost associated with the benefits that those plants derive from having the inspection and using the inspection marks that are available. The other 30 percent in costs would be for the administration of the program, for the laboratory activities, and the other costs we have. That 70 percent, the user fees, would be charged for inspection. It remains to be seen how those costs that the plants would incur would be distributed in terms of the extent to which that would represent a price increase at retail versus costs being passed back to the producers. We have asked the Economic Research Service to look at that and estimate for us how that would likely occur so that we have that type of information available when we move forward to promulgate regulations to implement a user fee. Mr. Bonilla. I asked the question because it seems a little out of whack as to who benefits the most. First of all, considering I think the general public benefits the most from having safe food, but also considering and always acknowledging that nobody is perfect, and every industry has its bad apples. But the majority of meat processors are doing a pretty good job of getting our food out the door in a safe and very competent manner and they would indeed then be having to carry the load to the tune of 70 percent. So, I'm trying to just draw a parallel between what they pay for and how the ratio is imbalanced from who benefits; especially, again, when it's imposed on people who are already complying with the law. I wonder if you anticipate a public perception problem resulting from the 70 percent of the funding for meat inspection coming from the industry being regulated itself? In other words, do you think the public will have the same level of confidence in our meat inspection program knowing that the vast majority of the funding for this comes from the industry that is actually being regulated? Mr. Billy. That's a very legitimate concern that Ibelieve needs to be addressed in determining how we establish such a user fee system. We have identified what we've labeled the integrity of the user fee system to address that very question. We need to make sure that in fact the public has confidence in the inspection system and what our inspectors are doing on a continuing basis. It is a very real issue that needs to be examined and an approach identified that will address that specific concern. It should be noted, and if you look at our current budget, we in fact now charge user fees for overtime and for holiday work where it is unexpected. That will be nearly $90 million for fiscal year 1998. It is important to note that there is strong confidence in the program, notwithstanding the fact that presently user fees are charged. So, I think we need to build on that; look at how that has worked as we look forward to the question of how to develop such a system. new technology Mr. Bonilla. My last question is just about how an idea like this could impact on the private sector, on the industry of developing new technologies for safer food. Are you concerned that they could be discouraged from--it's as if they would have to theoretically pay user fees. It takes a lot of their money versus money they're putting into new technology to ensure the product is safe. Mr. Billy. Again, I think that's a very legitimate issue that needs to be looked at in terms of the cost of making the investments that are important to address these pathogen issues that we're trying to resolve through the HACCP and pathogen reduction rule, as well as the other costs that industry needs to bear. It is a legitimate issue that needs to be looked at as a part of this overall approach. One of the things that Congress did was provide us in our current year, funding to help adapt new technology to small plants in particular. technology for small plants This would help the very small plants, the so-called mom- and-pop operations that are a family carrying out slaughter, but don't have the resources to follow new technology, let alone figure out how to get it integrated into their small operation. We are very actively pursuing that and have solicited proposals. We've received several, I think six now. And we're looking at how we can facilitate adapting new technology so it works in a small plant setting. We think that's an important contribution we can make to ensuring that those small plants can take advantage of the kinds of technology you're talking about. Mr. Bonilla. I appreciate that very much. As you know, some of these questions we raise is because we have those very concerns. Mr. Billy. Yes. Mr. Bonilla. Not just to get a clear answer from you. We understand that. Thank you very much. Mr. Skeen. Ms. Lowey. incidence of foodborne illness Ms. Lowey. You are very kind. And it's always an honor to be with you, Mr. Chairman. Mr. Billy, I wanted to be here, first of all, to thank you. You have released the report that we requested in last year's bill detailing the incidents of foodborne illnesses in the United States. Congresswoman Kaptur, who unfortunately couldn't be here today, and I were very concerned last year as you know about the lack of reliable data on this issue. In our judgment one of the first steps towards eliminating illnesses associated with contaminated food is to have accurate information about the scope of the problem. So, I do want to thank you. And it certainly demonstrates your commitment to the issue. grant of inspection In the report, accompanying last year's bill, we also asked FSIS to revise its grant of inspection to acquire expanded information from plants about their operations and certification from these plants; that they are complying with food safety laws before FSIS enters into a contract with them. Can you share with us what you've done in response to this request by the committee? Mr. Billy. Yes. We've addressed that in part through the new HACCP and pathogen reduction regulation where we have modified the requirements that a new plant must meet in order to be granted inspection. They have to have a HACCP plan developed and make it available to us. That HACCP plan will address a number of the issues that you've identified before inspection is granted. We will see whether the HACCP plan that they're working under in fact works effectively during regular operation. And that will be done through our verification activities when they first operate under HACCP inspection. It doesn't address the full scope of what you've asked for. So, we are separately looking at that area. That is one of the regulatory reform projects that we will complete through that process that I've talked about earlier. So, we're following through. We're just doing it in two different steps. plant violations Ms. Lowey. I look forward to continuing to be in contact with you. Last year we also raised an important issue regarding FSIS' response to plants that are in violation of our food safety laws. In the past FSIS has responded to these plants by sending more inspectors in to bring the plants into compliance. And I raised the concern, as well as several of my colleagues, that the practice seems to shift the burden of compliance from the plant owner and the manager to FSIS and the taxpayers. In other words, the more trouble you're in, the more inspectors we send and the faster you can get through the process. It didn't quite make sense. Can you tell us what you've done to address that problem? Mr. Billy. Yes. Again, that problem has been primarily addressed through the new HACCP and pathogen reduction regulation. In that regulation, we have changed our approach whereby documented failure to have an SOP, a standard operating procedure, or follow it would result in regulatory action on our part. If a plant fails to meet those regulatory requirements, then we will take the steps to withdraw inspection. And the same will apply to HACCP. So, we have restructured our approach in that regulation in terms of how we would address the issue that you've identified. We haven't at this point in time eliminated our established procedure which is called progressive enforcement. But that's now under review as a part of this transition to the new HACCP approach. It's a matter of timing. The first plants don't have HACCP. So, we've got to get it started and then make that transition into the regulatory approach that we've identified under the new regulation. civil penalties Ms. Lowey. Lastly, and it's a related point. I offered an amendment, as you remember, to the fiscal year 1997 bill that would have allowed the Secretary of Agriculture to levelcivil monetary penalties against plants that violate food safety laws. This would have provided us another enforcement mechanism to ensure that our food supply is safe. Perhaps you can expand upon that. Have you explored how you can use this authority when you're talking about regulatory authority. Is this what you're considering frankly to better protect Americans from foodborne illnesses? Mr. Billy. I'm going to respond to that from my own point of view. This does not represent the Department or Administration's position. As a regulator, the availability of civil penalties and the procedures that are associated with them are a useful tool in terms of enforcing the kinds of regulations that we have. Civil penalties would be a useful tool for us to have. Ms. Lowey. Are we moving in that direction at all? Mr. Billy. We're looking at it, but we're looking at it in the context of all of the other changes that we have underway and how well firms respond and implement the SOPs which now are underway. And then HACCP will, I think, guide us in terms of whether that kind of legislative change would be needed or help us in what we're trying to accomplish. So, I think it's a step at a time. We've got a big set of challenges on our plate now in terms of implementing what we've put in place. I'd like to see how we do with that and then use that as a measure of what additional provisions we might need. Ms. Lowey. I thank you, Mr. Billy. And as we have all stated many times, I think we are very fortunate in the United States to probably have among the safest food supplies in the world, if not the safest food supply in the world. However, last year both Ms. Kaptur and I, among others, talked about how we're still not satisfied in the thousands of deaths that result each year have to be taken very seriously. So, I would hope with your competent agency you can continue to move in several directions so that we can continue to make progress. And I thank you very much for the report and for the work you've done. And I thank you very much, Mr. Chairman. Mr. Skeen. Mr. Fazio. rendering Mr. Fazio. I just have a couple of questions. I don't have any idea what the answer to this is. I assume that rendering facilities are regulated by FDA. Is that correct? Mr. Billy. Yes, sir. Mr. Fazio. How closely are you entwined with them in that regard? I mean after all, it is a product that comes out of the other end of the process you're deeply involved in. Mr. Billy. We're working very closely with FDA in terms of the development of the proposed rule that they now have under consideration for finalization to deal with the rendering area. We were actively engaged in that area of developing the proposed rule and have formally supported that proposal. There are a number of instances where we have rendering facilities associated with certain types of slaughter operations. Mr. Fazio. I would think so. Mr. Billy. In that instance, our jurisdiction ends at their door, if you will, and then we look to FDA to deal with the activities that go on in the actual rendering. But, you know, we work with them and cooperate any way we can. Mr. Fazio. A product that's consumed after rendering would, by definition, be consumed by other animals. Mr. Billy. Right. Mr. Fazio. So, there is no rule for meat inspection for the Food Safety and Inspection Service. Mr. Billy. That's right. Yes. There are certain types of instances where certain types of edible products can come out of rendering. And in that instance, if it's meat or poultry derived, then we would have some jurisdiction. Mr. Fazio. What kind of products are we talking about that come out of the rendering process that would be then consumed by humans? I guess there are some chemical products that might ultimately get back into the food chain. Is that correct? Mr. Billy. Well, let me give you the easiest example of rendered pork fat that gets used by consumers very often in this country. There are other edible oils from animals that go through an edible rendering process, as opposed to an inedible rendering. Mr. Fazio. A totally different scientific process and then a different regulatory agency. Mr. Billy. Absolutely. Mr. Fazio. You're involved in that. Mr. Billy. Yes. Mr. Fazio. I appreciate that. Thank you. Mr. Skeen. The issue of the ambient temperature for transportation of shell eggs has been debated since legislation passed in 1991. You mention in your testimony that FSIS and FDA are working closely to develop standards. You also mention the conference you held in November last year. Where are you now on this issue, when will the studies and consultation end and when will we see a final result? Mr. Billy. Our two agencies have drafted jointly an advanced Notice of Proposed Rulemaking which has only in the last few days hit my desk. So, I'm now reviewing it. We will pursue that through the regulatory process and establish a comprehensive approach for dealing with that public health issue. Mr. Skeen. Thank you. We are adjourned. [The following questions were submitted to be answered for the record:] Food Safety and Inspection Service inspector vacancies Mr. Skeen. How many inspector vacancies have there been per year from 1992 through the current year? [The information follows:] End of Year Inspector Vacancies \1\ 1992.......................................................... 501 1993.......................................................... 372 1994.......................................................... 441 1995.........................................................\2\ 728 1996.......................................................... 678 1997.......................................................... \3\ 0 \1\ Inspection assignments covered through temporary combination of inspector assignments. \2\ Early out retirement option caused a one-time, short term increase of 190 in permanent full-time vacancies. \3\ Appropriations fully funded President's budget request. No further funding through supplemental is needed. Mr. Skeen. Please provide a table showing levels of permanent full- time employees and other employees from fiscal year 1990 through 1998. [The information follows:] [Page 769--The official Committee record contains additional material here.] pilot programs Mr. Skeen. Please identify all pilot programs FSIS has in operation and include those pilot programs to be established in fiscal year 1997 and those proposed for fiscal year 1998. Please also provide beginning and ending dates for the projects and estimated costs of each. [The information follows:] [Pages 771 - 774--The official Committee record contains additional material here.] report on foodborne illness Mr. Skeen. What is the status of the FSIS, FDA and State health department project on foodborne disease mentioned in last year's testimony? Response. The Sentinel Site Study, now known as FoodNet, is a comprehensive effort by CDC, FSIS, FDA and health departments at five sites, to track major pathogens that cause food-borne illness. The FoodNet is an ongoing effort of all involved. A report on the findings from the first year's data for calendar year 1996 is provided. [Pages 776 - 792--The official Committee record contains additional material here.] field management consolidation Mr. Skeen. What closings or consolidations of field offices will be completed by the end of fiscal year 1997? Response. By the end of fiscal year 1997, we will open 18 new District Offices and of the 18 locations, 17 are at locations where the Agency had prior offices. The locations are: Springdale, Arkansas; Alameda, California; Boulder, Colorado; Atlanta, Georgia; Chicago, Illinois; Des Moines, Iowa; Lawrence, Kansas; Greenbelt, Maryland; Boston, Massachusetts; Jackson, Mississippi; Albany, New York; Raleigh, North Carolina; Pickerington, Ohio; Salem, Oregon; Philadelphia, Pennsylvania; Dallas, Texas; and Madison, Wisconsin. In addition, FSIS will open a district office in Minneapolis, Minnesota. The Agency has also opened a Financial Processing Center in Urbandale, Iowa and consolidation of the field finance functions is expected to be completed by the end of fiscal year 1997. In addition the Agency will complete the consolidation of supply functions at the Department of Agriculture's Landover, Maryland Center and the consolidation of field personnel functions at a previously existing personnel office in Minneapolis, Minnesota by the end of fiscal year 1997. As part of the Agency's reorganization, the Agency is establishing a Technical Service Center in Omaha, Nebraska. The Center is expected to open in the fall of 1997. FSIS has an ambitious plan to close a total of 44 program field offices by the end of fiscal year 1997. However, completion of employee transfers and termination of building leases are likely to continue into fiscal year 1998. The offices scheduled for closing are provided for the record. [Page 794--The official Committee record contains additional material here.] Mr. Skeen. What do you plan for fiscal year 1998? Response. Closure of the Program Review Office located in Lawrence, Kansas is scheduled to begin in fiscal year 1997, and will be completed in fiscal year 1998. Mr. Skeen. What personnel transfers will be required as a result of any closings or consolidations? Response. As a result of the office closures and consolidations indicated above, we expect to have about 150 personnel transfers over the period of fiscal year 1997 and fiscal year 1998. The Agency has minimized the movement of personnel by opening 17 of the new District offices in locations where a prior Agency Office existed. As a result many of the positions needed in the new offices will be filled by employees already in those locations. The Agency also is very committed to minimizing the impact of the reorganization on our existing workforce and therefore has offered a position in the new structure to every existing employee. Mr. Skeen. Please provide a chart showing the number of field offices FSIS will have by the end of fiscal year 1997 with a comparison of fiscal year 1996 and the proposed number for fiscal year 1998. [The information follows:] [Page 796--The official Committee record contains additional material here.] research projects Mr. Skeen. What joint or coordinated research is FSIS conducting with the Agricultural Research Service (ARS) and other USDA agencies? Response. FSIS coordinates 35 long-term, on-going research projects with ARS. These long-term projects frequently branch off into related research projects over time, according to changes in FSIS research needs, without generating new, and separate, project titles. Consequently, they are carried forward and represent the research that ARS will conduct for FSIS in 1997. Included for the record is the ``1996 Progress Report on Food Safety Research Conducted by ARS'' that describes each ongoing project that ARS is conducting for FSIS. [Clerk's note.--The report was too lengthy to print and is retained in Committee files.] ratite inspection Mr. Skeen. According to press reports, consumption of ratite meats is increasing. Is FSIS considering a change in its policy on mandatory inspections? Response. FSIS has no plans to change policy on mandatory inspections of ratite meats. We will continue to provide voluntary fee- for-service inspection for all ratites, which includes ostrich, emu, and rheas. inspected establishments Mr. Skeen. Please provide a table showing the number of plants inspected in fiscal year 1995 and 1996 and the number estimated for fiscal years 1997 and 1998. [The information follows:] FEDERALLY INSPECTED ESTABLISHMENTS ------------------------------------------------------------------------ 1995 1996 1997 1998 actual actual estimated estimated ------------------------------------------------------------------------ Slaughter plants................ 294 297 279 262 Processing plants............... 4,376 4,402 4,364 4,327 Combination slaughter and processing plants.............. 996 996 981 966 Talmadge-Aiken plants \1\....... 259 245 231 215 Import establishments........... 160 162 150 150 Egg plants...................... 82 78 81 82 --------------------------------------- Total..................... 6,167 6,180 6,086 6,002 ------------------------------------------------------------------------ \1\ Federal slaughter, processing, and combination plants that are inspected by State employees under federal supervision. Note.--This does not include plants that are inspected on a voluntary basis only, or inspected food warehouses. sanitary and phytosanitary cooperative efforts Mr. Skeen. How does FSIS work with other agencies in USDA and with other U.S. government agencies on trade-related matters such as Sanitary and Phytosanitary regulations, new requirements under trade agreements and trade disputes? Response. FSIS cooperates with USDA's Foreign Agricultural Service and the U.S. Trade Representative on sanitary issues affecting international trade. FSIS officials participate in the Codex Alimentarius Commission, a world standard-setting body, as well as in bi-lateral negotiations with foreign countries in order to resolve trade disputes, promote acceptance of the U.S. inspection system and remove barriers to the acceptance of U.S. meat and poultry products by our trading partners. FSIS works with Agricultural Attaches in foreign Embassies to resolve problems with specific export shipments and to communicate new inspection policies to countries that export meat and poultry to the United States. With regard to sanitary and phytosanitary standard development in the Codex Alimentarius Commission, FSIS staff carry out two roles. One is in the general coordination and management of U.S. participation in the Commission and the deliberations of its subordinate committees. The second is in substantive participation in the elaboration of issues in the Committees. The former involves work at both the policy levels and technical levels in the Department of Health and Human Services, Department of Commerce, and the Environmental Protection Agency, and within the Department, FAS, AMS, APHIS, GIPSA, and ARS. The latter involves participation as Chairpersons of Committees, U.S. delegation heads to Committees, and delegation members. These latter roles are also carried out by employees from several agencies in the Department. Technical staff from several agencies and departments will frequently work together as members of delegations to Codex Committees. state equivalency Mr. Skeen. FSIS is responsible for assessing the effectiveness of state meat and poultry inspection programs. What happens when a state program is found to be inadequate? Response. FSIS regularly schedules reviews of each state's program. When a state program is found to be not ``equal to'' the federal, USDA designates the state for full federal inspection of all plants. Designation means Federal assumption of a State inspection program. Mr. Skeen. Are any states currently operating substandard programs? Response. No states are currently operating substandard programs. Mr. Skeen. What are Talmadge-Aiken plants? Response. Talmadge-Aiken plants are federal slaughter, processing, and combination plants that are staffed with State employees who serve as federal agents under federal supervision. field automation and information management Mr. Skeen. Last year you proposed delivering 1,889 computers by the end of FY 1997 to field inspection staff under the Field Automation and Information Management Project (FAIM). Is this program on schedule? Response. Yes, the program is on schedule. The number of computers represents those delivered during the FAIM pilots plus the first and second years of nationwide implementation. Through fiscal year 1996, a total of 1,103 computers have been provided to the field inspection staff, and an additional 814 computers are expected to be provided in fiscal year 1997, for a total of 1,917. Mr. Skeen. What is the current schedule for completion of the FAIM project? Response. Nationwide FAIM implementation is scheduled to be phased in over a five-year period. Implementation started in fiscal year 1996 and is on schedule to be completed at the end of fiscal year 2000. Mr. Skeen. Is the FAIM project coordinated with the Chief Information Officer? Response. Yes, since the inception of the FAIM project, FSIS has coordinated closely with USDA's Office of Information Resources Management (OIRM), which is now under the Chief Information Officer (CIO). The agency worked closely with OIRM to obtain technical approval for the FAIM project and provides OIRM with an annual status report. The agency provides briefing on implementation of the FAIM project for the OIRM agency liaison officer as well as the CIO, who was most recently briefed by the agency's CIO and the FAIM project manager in October 1996. In January, FSIS requested and received an Information Technology (IT) wavier from the CIO to conduct computer acquisitions for the FAIM project. The waiver indicates that the agency is effectively coordinating the FAIM project with the CIO, and this coordination has enabled FSIS to continue the scheduled implementation of FAIM through the purchase of desktop and notebook computers for use by FSIS inspection personnel. condemned products Mr. Skeen. What quantities of poultry, livestock and liquid eggs were found unfit in fiscal year 1996? What has been the trend for those products in terms of volumes of unfit commodities? Response. The following table shows the heads, or carcasses of meat and poultry condemned from fiscal years 1990 through 1996 and millions of pounds of liquid egg products condemned for the same period. CONDEMNED PRODUCT ------------------------------------------------------------------------ Thousands of heads Liquid egg ------------------------ products (millions Poultry Livestock of pounds) ------------------------------------------------------------------------ Fiscal year: 1990............................ 71,056 410 95 1991............................ 74,282 386 104 1992............................ 72,154 401 109 1993............................ 63,927 385 113 1994............................ 69,192 412 128 1995............................ 79,998 469 139 1996............................ 82,665 546 145 ------------------------------------------------------------------------ Mr. Skeen. How much of these products were imported? Response. Since the early 1990's, less than one percent of product presented for entry into the U.S. has been refused entry and rejected as unfit. Imported product that has passed inspection at the port of entry is subsequently treated as domestic product and not accounted for separately if it is later found to be unfit during further processing. progressive enforcement action Mr. Skeen. Under Progressive Enforcement Action (PEA) Stage II, a plant that is found to be not complying with FSIS requirements can be given 180 days to make required corrections? Response. PEA was designed to deal with chronic, recurring deficiencies. FSIS is in the process of phasing out the PEA program and replacing it with more effective enforcement programs envisioned by the Pathogen Reduction/HACCP rule. The majority of cases are already covered by the SSOP requirements now in effect. Once all plants are covered by HACCP enforcement, PEA will be completely replaced. The normal term of the Establishments Requiring Additional Inspection Effort (ERAIE) stage of PEA was 180 days. This term may have been shorter for plants that demonstrate substantial compliance during the first 90 days under ERAIE; or FSIS might have moved to withdraw inspection immediately in cases of gross negligence. Mr. Skeen. During this 180 day period, is the plant allowed to process and sell its products? Response. Plants could still process and sell products during this period but do so under increased inspection surveillance. Noncompliance at this stage of PEA could have resulted in withdrawal of inspection and a subsequent suspension of plant operations. In no cases, would FSIS allow plants to ship known adulterated or misbranded products. Mr. Skeen. What is the average length of time the 200 federally inspected plants were under some level of PEA in fiscal year 1996? Response. During fiscal year 1996, approximately 200 plants were under some level of PEA at one time or another. At the end of the fiscal year there were 60 plants in the program. The average length of time an establishment operated under PEA during fiscal year 1996 was 5.8 months. grant of inspection process Mr. Skeen. Did FSIS make any changes to the grant of inspection process in FY 1996 and 1997? Response. Beginning January 27, 1997, it was required that an establishment have an FSIS approved Sanitation Standard OperatingProcedure (SSOP) prior to approval of a grant of inspection. This is the first of a series of substantive changes in the grant of inspection process. FSIS plans to form a task force in the latter part of 1997 to examine grants of inspection as part of a comprehensive review of FSIS prior approval requirements under a HACCP inspection system. Under the pathogen reduction rule there are four basic conditions of inspection: 1) that an approved SSOP be in place; 2) in slaughter plants, that e- coli testing be conducted; 3) that national performance standards for salmonella be met; and 4) that a HACCP plan be in place. A goal of the task force will be to assure that industry clearly understands the responsibilities conveyed to an establishment with the Grant of Inspection and that the information each establishment must provide the Agency under the Grant of Inspection is the minimum required to perform effective regulatory oversight. As we reform our regulations to bring them in line with the Pathogen Reduction/HACCP final rule, we plan to further review and evaluate changes to provisions relating to the grant of inspection. early retirement response Mr. Skeen. What was the response to the early retirement plan offered to FSIS employees last year? Response. In fiscal year 1996 we offered early out retirement to FSIS employees from February 16, 1996 to August 3, 1996. During this period we had 11 early out retirements. haccp benefit/cost analysis Mr. Skeen. Did you complete the cost and benefit analysis for HACCP and, if so, please summarize the result? Response. The cost and benefit analysis for HACCP was completed and the summary results were published in the final rule. The cost estimates were based on data for average wages, the cost of specific processing equipment or the cost of conducting specific laboratory analyses. I will provide a copy of this analysis for the record. [Pages 801 - 803--The official Committee record contains additional material here.] office of the under secretary Mr. Skeen. Please provide the number of people assigned to the Office of the Under Secretary for Food Safety including those detailed from other agencies or from other offices in FSIS? Please also provide the job title for each of those persons? Response. Currently, no one is assigned to the Office of the Under Secretary for Food Safety and no one is detailed to this office from other agencies or from other offices in FSIS. Until mid-November 1996, the office included the former Acting Under Secretary, one special assistant, and two clerical staff. A new Under Secretary is expected to occupy the office before the end of fiscal year 1997, and new staffing arrangements will be made at that time. poultry enhancement program Mr. Skeen. What effect does HACCP have on the Poultry Enhancement Program? Response. On July 13, 1994, FSIS published a proposed rule, ``Enhanced Poultry Inspection,'' in the Federal Register (59 FR 35659) to implement a single system of postmortem inspection for all poultry species. Establishment personnel would have been required to pre-sort birds before inspection to exclude those with diseases and condemnable conditions. All reprocessed birds would have been returned to the main processing line for inspection and mandatory use of antimicrobial rinses would have been required. The ``Pathogen Reduction: Hazard Analysis and Critical Control Point (HACCP) Systems'' final rule (61 FR 38805-38989, July 25, 1996) establishes a more comprehensive framework for food safety protection than did the 1994 proposal, and therefore, supersedes it. HACCP is a comprehensive, preventive food safety strategy to reduce the incidence and prevalence of foodborne illness in the United States. In addition, on February 4, 1997, FSIS published a final rule revising the finished product standards with respect to fecal contamination of poultry carcasses (62 FR 5131). This revision had originally been proposed as part of ``Enhanced Poultry Inspection.'' FSIS is planning to hold a public meeting to discuss inspection concepts consistent with HACCP principles. New inspection concepts will be designed to effectively and efficiently achieve food safety and consumer protection in a regulated industry operating under HACCP. The meeting will cover issues related to in-plant production in inspection establishments, including slaughter inspection of carcasses and methods to evaluate and verify industry implementation of HACCP. The meeting will also explore methods to provide oversight of the distribution of meat and poultry products in commerce. disposition differences between meat and poultry Mr. Skeen. In red meat inspection, only the veterinarian can make the final disposition on a diseased carcass, whereas in poultryinspection, the inspector can make final disposition under veterinary supervision. Why is there a difference? Response. Uniform inspection standards and procedures are to be applied during the postmortem inspection of each meat and poultry carcass. The regulations covering meat and poultry inspection provide that in red meat inspection, only the veterinarian can make final disposition on a diseased carcass, whereas in poultry disposition, the inspector can make a final disposition under direct veterinary supervision. Although the food inspector can condemn obviously diseased carcasses in poultry, the veterinarian is responsible for the uniform dispositions made by the food inspector. This is accomplished by setting standards and observing how inspectors handle normal as well as abnormal conditions. In both meat and poultry the inspector designates questionable carcasses for veterinary review and final disposition. A major factor in this difference has to do with the difference in the financial consequences of condemning a chicken vs. an animal carcass. pathogen reduction task force Mr. Skeen. Was the Pathogen Reduction Task Force active in FY 1996? Response. The work of the Pathogen Reduction Task Force was completed in fiscal year 1995 with the publication of the proposed Pathogen Reduction HACCP rule which was finalized in fiscal year 1996. pathogen reduction program and haccp Mr. Skeen. How does the Pathogen Reduction Program fit into HAACP? Response. FSIS has addressed the immediate need for pathogen reduction by implementing programs including Sanitation Standard Operating Procedures, E. coli testing and Salmonella testing. Pathogen reduction will be further addressed by establishments as the HACCP plans are implemented. lab accreditations Mr. Skeen. Please update the table that appears on page 537 of last year's hearing record showing the total number of labs that were accredited, the total number of accreditations, and the cost to include fiscal year 1996 actual and estimates for fiscal year 1997. [The information follows:] ACCREDITED LABORATORIES [Dollars in thousands] ------------------------------------------------------------------------ Accredited Number of laboratories accreditations Cost ------------------------------------------------------------------------ Fiscal year: 1990..................... 265 297 $902 1991..................... 227 292 926 1992..................... 231 313 1,024 1993..................... 243 323 1,091 1994..................... 149 186 672 1995..................... 148 184 440 1996..................... 150 186 360 1997..................... 150 185 418 ------------------------------------------------------------------------ Mr. Skeen. What is the amount in accreditation fees that was collected in 1996 and so far in fiscal year 1997? Response. In fiscal year 1996 the agency collected $477,500 in accreditation fees. Through February of 1997, we have so far collected $392,000 in fees. Mr. Skeen. Are fees collected from accredited foreign plants and, if so, how much was collected in fiscal year 1996? Response. FSIS does not accredit foreign laboratories. appropriations transfers Mr. Skeen. Were there any transfers made to or from your agency in fiscal year 1996? If so, please list where the transfer came from along with a brief explanation as to why they were made. Response. As provided by the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1996, Public Law 104-37, the Office of the Assistant Secretary for Congressional Relations transferred $309,000 to FSIS to maintain personnel at the Agency level. Mr. Skeen. Have there been any transfers so far this fiscal year? Response. As provided by the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 1997, Public Law 104-180, FSIS has received one transfer of $309,000 from the Office of the Assistant Secretary for Congressional Relations to maintain personnel at the Agency level. inspection exemptions Mr. Skeen. An establishment is exempt from Federal and/or state inspection if the product is for the sole use by the owner of the livestock, the owner's family, or nonpaying guests. How many exempt plants are there? Response. There are about 1,800 state plants and about 2,800 federal plants involved in conducting custom exempt operations. performance based inspection system Mr. Skeen. Please provide the Committee with the current status of the Performance Base Inspection System (PBIS). Response. PBIS continues to function as originally intended in scheduling of processing inspection activities. FSIS initiated implementation of off-line Slaughter activities (Process 03) into PBIS during FY 1996. Implementation was completed on a national basis during the first quarter of FY 1997. FSIS is currently developing a strategic plan for standardizing and improving the flow of PBIS-generated inspection data from the field level to headquarters. Part of this strategic plan is the PBIS Centralization and Reporting Project which will establish a central point for PBIS administrative operation schedule production and distribution, and feedback entry. The ability to access Management reports will be provided at locations other than a central point. PBIS will provide the vehicle for implementation of agency responsibilities pertaining to the HACCP regulation to be phased in through the year 2000. There also is the potential to expand PBIS to include egg products inspection in the near future. Mr. Skeen. A Data Quality Study was conducted to identify potential causes of inaccurate data in the PBIS system. What is the status of the recommendations based on the findings of the study? Response. Following are the recommendations and the resulting changes: 1. Recommendation: Correct the minor data processing problems causing certain systematic errors. Agency Response: All software was reviewed and minor errors in data summary programs were corrected prior to reports being issued. This activity was completed in 1995. 2. Recommendation: Re-evaluate the current national reports to ensure that national PBIS data is relevant and reported accurately and consistently. Agency Response: At the time of the study, PBIS reports were issued without regard to need by a particular staff or office. Now such reports are only issued to those requiring them. Each report is specifically designed for the requester's needs. This activity was completed in 1995. 3. Recommendation: Develop a standardized data entry and audit procedure for area offices. Agency Response: The most recent software revision provides a more standardized data entry capability with built-in computer error checks to insure that data entry is performed in a consistent manner with fewer data entry errors. 4. Recommendation: Incorporate a routine update of the plant specific monitoring plan in the PBIS procedures. Agency Response: A directive issued in August 1995 outlines procedures, responsibilities, and, a new, computer-assisted worksheet for updating the monitoring plan. The directive provides that the plan will be reviewed and updated when a change in plant conditions occurs or at least on a yearly basis. 5. Recommendation: Re-evaluate the Plant Profile form to ensure it meets the needs of field personnel and Agency management. Agency Response: The Plant Profile form has been revised to accommodate the integration of Process 03 (slaughter inspection) into PBIS. microbiological test kits Mr. Skeen. Has FSIS finalized the evaluation of data from the field test of microbioligical test kits? Response. The Fast Antimicrobial Screen Test (FAST) was successfully validated for cows and bob veal and is currently being used in these slaughter establishments. The FAST validation study in swine was terminated in fiscal year 1996, because of inspector shortages in the plant selected for study and the generation of an insufficient number of FAST positive samples during the course of the study period. For statistical purposes, a minimum of 150 FAST positive samples were required. At an estimated residue occurrence rate of about 5 percent, this would require the testing of 3,000 carcasses by both FAST and STOP to generate the needed 150 FAST positive samples. During the course of the study, only around 30 FAST positive samples were found in testing over 200 carcasses. The study was not completed due to a lack of time by the inspection force in the plant selected for the study. eligible exporting countries Mr. Skeen. How many countries are eligible to export to the U.S.? Response. There are 46 countries eligible to export to the U.S. in fiscal year 1997. Mr. Skeen. Please provide a list of these countries as well as the type and volume of product that was imported in fiscal year 1996. [The information follows:] [Pages 807 - 813--The official Committee record contains additional material here.] Mr. Skeen. Has the number of eligible countries increased over fiscal year 1995? Response. The number of eligible countries increased by two, from 42 in fiscal year 1995 to 44 in fiscal year 1996. Mr. Skeen. Provide a table showing the number of countries eligible to export to the U.S., the number that actually export products to the U.S., and the number of new countries that have applications pending to export to the U.S. for each of the fiscal years 1993 through estimates for 1998. [The information follows:] COUNTRIES ELIGIBLE TO EXPORT MEAT AND POULTRY TO THE U.S. ------------------------------------------------------------------------ 1997 1998 1993 1994 1995 1996 est. est. ------------------------------------------------------------------------ Eligible countries............ 42 42 42 44 46 48 Exporting countries........... 32 35 34 34 34 34 Countries with pending export applications................. 31 33 33 33 31 30 ------------------------------------------------------------------------ Mr. Skeen. How are exporting countries certified? Response. A country makes application to FSIS for eligibility to export to the U.S. FSIS conducts a document review and an on-site review to determine if the country's inspection system is equivalent to the U.S. system. If FSIS judges the system laws, regulations, and operations to be equivalent, a regulatory proposal is published in the Federal Register. Once a country becomes eligible, the chief inspection official in the country is responsible for certifying annually to FSIS the names of individual plants that meet all applicable standards and are authorized to export to the U.S. Mr. Skeen. How often are slaughter and processing plants in other countries reviewed by your agency? Response. Countries are reviewed by FSIS from one to four times annually. FSIS randomly selects plants within a country for auditing during a country review. library of foreign country requirements Mr. Skeen. What is the cost to maintain the Library of Foreign Country Requirements? Response. The cost of maintaining the on-line Library of Foreign Country Requirements is about $26,000 annually for staff and operating costs. Mr. Skeen. How many requests for information did you receive from the export library system in fiscal year 1996? Response. We received approximately 10,000 requests in fiscal year 1996. food safety research Mr. Skeen. What is the total amount you spent on research in fiscal year 1996, both internally and externally? Response. FSIS does not allocate any funds to research. FSIS research needs are performed by the Agriculture Research Service (ARS). Mr. Skeen. How much do you anticipate spending in fiscal years and 1997 and 1998? Response. FSIS does not anticipate spending any funds on research in 1997 and 1998. Mr. Skeen. How much did you spend on scientific research in the area of microbial methodology in fiscal year 1996? Response. No funds were spent on microbial methodology scientific research. All of FSIS research needs are performed by ARS. fast antimicrobial screen test Mr. Skeen. Will the Fast Antimicrobial Screen Test (FAST) be extended to pork inspection? Response. The FAST Antimicrobial Screen Test FAST was successfully validated for cows and bob veal and is currently being used in these slaughter establishments. The FAST validation study in swine was terminated in fiscal year 1996, because of inspector shortages in the plant selected for study and the generation of an insufficient number of FAST positive samples during the course of the study period. For statistical purposes, a minimum of 150 FAST positive samples were required. At an estimated residue occurrence rate of about 5 percent, this would require the testing of 3,000 carcasses by both FAST and STOP to generate the needed 150 FAST positive samples. During the course of the study, only around 30 FAST positive samples were found in testing over 200 carcasses. The study was not completed due to a lack of time by the inspection force in the plant selected for the study. Mr. Skeen. How widely is FAST being used? Response. FAST is currently being used in approximately 80 percent of all cow and bob veal slaughter plants in the USA. All other species, including swine, use the STOP test. sos, stop, fast tests Mr. Skeen. Please update the table that appears on page 548 of last year's hearing record showing the number of SOS, STOP, CAST, and FAST tests performed to include fiscal year 1996. [The information follows:] RESIDUE TEST BY FISCAL YEAR ---------------------------------------------------------------------------------------------------------------- 1992 1993 1994 1995 1996 ---------------------------------------------------------------------------------------------------------------- SOS...................................................... 106,133 101,118 127,742 26,273 17,682 STOP..................................................... 117,858 116,600 93,428 74,632 41,428 CAST..................................................... 79,666 85,033 54,783 79,542 19,448 FAST..................................................... (\1\) (\1\) 17,831 68,410 96,805 ------------------------------------------------------ Total.............................................. 303,657 302,751 293,784 248,857 175,363 ---------------------------------------------------------------------------------------------------------------- \1\ FAST final analysis completed July 1993. Mr. Skeen. What were the results of these procedures? Response. In fiscal year 1996 there were 1,372 total violations detected, including 26 by SOS tests, 344 by STOP tests, 111 by CAST tests, and 891 by FAST tests. voluntary inspection Mr. Skeen. In total, how many inspection hours were performed in fiscal year 1996 on a voluntary basis and how much was reimbursed to FSIS? Response. In fiscal year 1996, 126,453 hours were spent on inspections not required by law. Fees paid for this inspection totaled $4,075,620. fsis committees and working groups Mr. Skeen. Please provide the Committee with an updated list of committees and working groups that have been established within the agency and briefly describe their activities. [The information follows:] office of field operations The following groups have disbanded and are no longer meeting: Technical Service Center Working Group District Working Group Circuit Supervisors Working Group Worker's Compensation Working Group Process 03 Work Group Preparing for the Future--Day Two Ongoing and new groups include: Glass ceiling working group This group is identifying possible promotion barriers within Field Operations in order to develop strategies for overcoming barriers that prevent qualified women, minorities, and physically challenged individuals from reaching their full potential within the organization--the ``glass ceiling''. A report was issued by the group to the Administrator in early 1997. Members of the group are currently training FSIS managers and employees in issues related to the ``glass ceiling''. Labor Management Transition Working Group This group is examining all personnel procedures and policies, levels of dealing, and other issues where the new organizational structure may impact on current Labor-Management policies and practices. This working group is also meeting with the bargaining unit to address and resolve issues and to develop new procedures acceptable to both union and management. Safety and Health Steering Committees The Occupational Safety and Health (OSH) Steering Committee monitors and assists the Agency with in-plant safety issues by providing an open channel of communications between labor, management, and safety/health professionals. The Steering Committee's principal functions include; monitoring and evaluating performance of existing OSH programs; reviewing and evaluating new OSH programs before implementation; and advising or making recommendations concerning existing and/or proposed FSIS OSH programs. Compliance and Enforcement Working Group This group will develop plans for the transfer of enforcement systems and records to the new district offices and to ensure the continuity and uniformity of the enforcement program. This group will absorb the Electronic Forms Working Group. Salmonella Testing Project Team The Salmonella Testing Project Team is charged with completing program development work associated with the testing program for determining industry compliance with the Agency's performance standards for Salmonella under HACCP. This includes sample collection procedures, decision rules for sampling products and testing frequencies, development of training materials and training of inspection personnel, distribution of analytical results, and definition of the regulatory processes for enforcing the Salmonella performance standard in a HACCP- Based environment. The work of the project team will continue throughout the implementation period of the final rule. HACCP Implementation Work Group This group is designing and developing the training materials and delivery strategies to equip the inspection and compliance workforce to effectively carry out the Pathogen Reduction and HACCP requirements. office of public health and science Ongoing and new groups include: Food Safety Research Working Group This interagency group is charged with developing a food safety/ public health research needs assessment and agenda. Executive Risk Advisory Committee The committee advises the Office of Risk Assessment Cost Benefit Analysis (ORACBA) on the development of programs supporting riskassessment and facilitates communication among USDA agencies on issues on concerning risk analysis. Bovine Spongiform Encephalopathy (BSE) Working Group The group reviews the science and developments in animal health, food safety and public health related to BSE and recommends appropriate actions. office of policy, program development and evaluation Interagency Coordinating Committee on Animal Production Food Safety The committee is composed of representatives from Federal agencies with public health, animal health, agricultural marketing or agricultural research responsibilities. These meetings provide a forum for discussion of current issues, seek to develop collaborative approaches which avoid duplication of effort, and strengthen working relationships between participants. A portion of each meeting is reserved for non-government speakers to present reports on activities or issues related to animal production food safety. The following groups made presentations to the committee during fiscal year 1996: National Pork Producers Council, National Turkey Federation, National Milk Producers Federation, American Veal Association, American Meat Institute, American Sheep Industry, and the National Poultry Improvement Plan. The U.S. Codex Steering Committee The committee consists of policy-level government officials from USDA, FDA, and EPA that provide direction and guidance with respect to U.S. representation to Codex. The U.S. Codex Technical Committee The committee consists of technical experts from USDA, FDA, and EPA providing technical expertise in matters relating to U.S. Codex. Lincoln Multi-Cultural Middle School Committee The committee oversees the various activities (e.g., mentoring and tutoring) provided to the Washington, D.C., inner-city school by FSIS volunteers. Program areas within FSIS designate representatives to serve on the council. FSIS makes a special effort to assist the students with their science fair projects. Standing Committee on Pathogen Control in Processing This ad hoc committee consists of subject matter experts who evaluate questionable meat and poultry processing practices. The committee is able to quickly evaluate potentially hazardous processing procedures and make recommendations for safety processing and labeling practices. The committee first formed to handle policy development related to mettwurst, a meat product traditionally expected to be ready-to-eat, but which supported the growth of Salmonella. The committee worked with industry representatives to identify and correct this potential food safety hazard. Examining Process of Reviewing Foreign Countries Working Group The group consists of representatives from the International Policy Development Division and Program Review who are looking at how the Agency can best conduct reviews of foreign countries. Issuance System Review Project Group Reviews the Agency's issuance system to ensure that all program related issuances provide inspectors with instruction and guidance they need to enforce the meat and poultry regulations. Also, ensure that all issuances are consistent with the goals of the Agency. HACCP Policy and Procedures Work Group This group is designing and developing the framework and operating procedures for use by inspectors to determine a plant's conformance with the Pathogen Reduction and HACCP requirements. office of management Occupational Safety and Health Committees These committees are at the national, program, laboratory, and sub- organizational levels. These committees meet periodically to discuss safety and health issues and emerging trends. The committees' recommendations help shape the Agency's safety and health programs. grants to states Mr. Skeen. Update the table that appears on page 562 of last year's hearing record showing a cost breakout, by state, of the Grants to States program to include fiscal year 1996 actual and fiscal year 1997 estimates. [The information follows:] [Page 818--The official Committee record contains additional material here.] volume and cost of meat and poultry inspected at slaughter Mr. Skeen. Please update the table that appears on page 562 of last year's hearing record showing the volume of meat and poultry inspected at slaughter to reflect the separate cost associated with each to include fiscal years 1996 and 1997. [The information follows:] VOLUME AND COST OF MEAT AND POULTRY INSPECTED AT SLAUGHTER [Dollars in millions] ---------------------------------------------------------------------------------------------------------------- Millions of pounds Slaughter inspection cost ------------------------------------------------- Red meat Poultry Meat Poultry Total ---------------------------------------------------------------------------------------------------------------- 1986.......................................................... 37,042 24,273 ........ ........ $203 1987.......................................................... 36,300 25,700 ........ ........ 212 1988.......................................................... 36,885 28,213 ........ ........ 225 1989.......................................................... 37,400 30,268 ........ ........ 237 1990.......................................................... 38,413 31,932 ........ ........ 248 1991.......................................................... 36,190 33,959 ........ ........ 262 1992.......................................................... 38,727 35,679 ........ ........ 282 1993.......................................................... 40,688 37,095 ........ ........ 296 1994.......................................................... 41,091 39,626 $138 $173 311 1995.......................................................... 43,663 41,303 134 180 314 1996.......................................................... 44,689 43,572 133 185 318 1997 estimate................................................. 45,011 44,262 136 189 325 ---------------------------------------------------------------------------------------------------------------- Note.--The separate cost of meat and poultry slaughter is not available prior to Fiscal Year 1994. fsis enforcement activities Mr. Skeen. Also, update the table that appears on page 563 of last year's hearing record showing the number of FSIS enforcement activities, to include fiscal year 1996. [The information follows:] [Page 820--The official Committee record contains additional material here.] training center Mr. Skeen. Your agency has a training center located at Texas A&M University. Please update the table on page 563 of last year's hearing record showing the annual costs to operate the Donald L. Houston Training Center since it was first established. [The information follows:] FSIS program training costs, Texas A&M University [In thousands of dollars] Fiscal year: Contract costs 1988.............................................................. $780 1989.............................................................. 2,372 1990.............................................................. 2,691 1991.............................................................. 2,562 1992.............................................................. 2,997 1993.............................................................. 2,748 1994.............................................................. 2,495 1995.............................................................. 2,852 1996.............................................................. 3,106 Mr. Skeen. How many FSIS employees are located at this training center? Response. Currently, there are 36 permanent full-time and one permanent part-time FSIS employees at the training center in College station, Texas. Mr. Skeen. Do you plan to add or reduce staff at this center in fiscal years 1997 or 1998? Response. We have no plans to add positions to the staff during either fiscal year 1997 or fiscal year 1998. We do, however, plan to reduce the number of positions of the training center through attrition over the next few years. Mr. Skeen. How many employees were trained at the center during fiscal year 1996 and how many do you anticipate training during fiscal year 1997? Response. During fiscal year 1996, 1,515 FSIS employees were trained, and in fiscal year 1997, we expect to train up to 2,555 employees. This figure includes training provided for the implementation of the Field Automation and Information Management (FAIM) project as well as the new Food Safety Educational Program being conducted in cooperation with the Texas A&M University. Mr. Skeen. Please provide a status report on FSIS' work with Texas A&M on developing new methods of training. Response. Our efforts to improve the design, development, delivery, and evaluation of training programs continues to go very well. We are working independently as well as in collaboration with Texas A&M in the effort. I would like to update you on several of our efforts. During the last year, we have been working with Texas A&M on the development of a Digital Library. The concept originated as a method to catalog the numerous slide and video images maintained by the Human Resource Development Staff (HRDS). It has quickly expanded to be a vehicle for allowing remote access to training and educational activities. We have an Internet homepage and recently distributed material from our pre-HACCP training via the Library. In addition, HRDS is working with our National Correlation Center to incorporate images and explanatory material that will help inspection personnel in the plants compare situations actually occurring in the plants with information available on-line. This can be both a vehicle for continuing education as well as help in bringing about greater consistency of dispositions nationwide. Currently, we have incorporated approximately 250 poultry correlation images in the library. HRDS and the National Correlation Center will continue to expand the information in this area on poultry and begin to move to other species such as swine and cattle over the next few months. HRDS is also continuing its efforts to develop computer-based training programs (CBT's) for use in FAIM computers as well as the classroom. Ultimately, these too may become a part of the digital Library system which will permit remote access, but also instant updating of information. A number of these programs are being developed in conjunction with Texas A&M University. We have disseminated modules for our veterinary Intern Program in the poultry specialty area and are completing more CBT's for the comparable red meat specialty. These will be primarily utilized at our field training stations across the country. HRDS has been working closely with our Import Program personnel and has completed a series of training modules for use with FSIS field trainers. In addition, FAIM has provided Library CBT and is developing a HACCP CBT. By the end of fiscal year 1997, an estimated 10,000 training CD's will be distributed to field inspection personnel, five for each of the nearly 2,000 FAIM computers. Video tapes are also an important tool for training. While this is not a new methods, videos are seeing increased use in the implementation of new inspection methods. What is new is that the programs are being developed to deliver the key messages in a consistent way and at the same time, permit facilitators at field locations the opportunity to introduce discussions, workshops, and case studies that support that message and increase the effectiveness of the learning. HRDS produced approximately 75 percent of the videos used in the recent pre-HACCP training and expects to be even more involved in the development of videos for the next phases of HACCP training later this year. In addition, HRDS developed a video in conjunction with the Department of Transportation that will help vehicle inspection personnel at the Federal, state and local level involved in the transportation of meat and poultry products to identify common signs of product abuse which can threaten product safety. This video was completed and delivered to DOT in November. HRDS is also utilizing video-conferencing technology to aid in the delivery of classroom instruction. Using this technology, HRDS has brought a wider group of subject matter experts to the student enabling greater learning and with less cost than travel to the Training Center. At the same time, we are working with the Association of Food and Drug Officials (AFDO) on the development of programs to bring greater understanding of food safety issues to the state and local level. We are using video-conferencing to pilot the programs on a nationwide basis and receive feedback from AFDO on the programs content and effectiveness. We are also working very closely with Texas A&M on the new Food Safety Educational Program. The first, four week session of the program was delivered in January at the Training Center. The program is an academic program that will cover topics such as microbiology, environmental sanitation, statistical process control, and risk assessment. These individual topics are integrated together to form a seamless program that will better prepare our inspectors for their future roles in a HACCP environment. Students successfully completing the program will receive academic credit for their effort which can be used toward an undergraduate degree at Texas A&M or other institution near the student's home. We expect to offer nine programs this year and plan to offer as many as 24 programs during fiscal year 1998. There will be 30 students in each class. Finally, we are also trying to encourage FSIS personnel to make training and educational efforts a career long endeavor. With the significant geographic dispersion of the FSIS workforce, we need to develop a flexible program that can address their diverse learning needs. HRDS was designated by the International Association of Continuing Education and Training as a Certified Provider of Continuing Education Units (CEU's). HRDS therefore can give employees CEU's for participation in programs designed and developed within FSIS. Using this designation as a foundation, HRDS developed the Certificate of Excellence Program. The program currently offers basic, intermediate, and advanced certificates in several major areas such as inplant activities, compliance, and supervision and management. Employee pursuing a certificate will have a virtual menu of programs to choose from including audio visual and self study material owned by HRDS. In addition, training and educational courses offered by both FSIS and outside institutions can be used to complete a certificate. The Certificate Programs pulls together the many different activities available to FSIS employees and helps them structure their learning in a focused and graduated fashion. The certificate that employees will receive in the future will be a tangible reward for their effort and a demonstration of their commitment to meet the challenges of regulating in a HACCP environment. amount of poultry inspected Mr. Skeen. Please update the table that appears on page 566 of last year's hearing record showing the number of poultry carcasses inspected. [The information follows:] POULTRY CARCASSES INSPECTED PER FISCAL YEAR [In millions] ---------------------------------------------------------------------------------------------------------------- Young Mature Year chickens chickens Turkeys Ducks Other ---------------------------------------------------------------------------------------------------------------- 1985..................................................... 4,427 189 172 21 1.1 1986..................................................... 4,593 187 192 23 1.2 1987..................................................... 4,929 193 223 23 1.6 1988..................................................... 5,149 197 237 24 3.4 1989..................................................... 5,422 184 244 22 3.0 1990..................................................... 5,787 184 267 21 3.6 1991..................................................... 6,146 171 278 21 5.5 1992..................................................... 6,369 181 280 18 5.1 1993..................................................... 6,613 171 277 20 5.3 1994..................................................... 7,014 174 278 21 5.2 1995..................................................... 7,303 163 279 19 5.5 1996..................................................... 7,517 154 290 20 5.3 ---------------------------------------------------------------------------------------------------------------- labeling program Mr. Skeen. Please update the two tables that were provided last year to include fiscal years 1996 and 1997 data. One showed the staff years and cost of the labeling program and the other showed the number of labels processed and approved. Be sure to include the footnote on the staff year table to reflect the total staff year level devoted to actually reviewing labels. [The information follows:] [Page 824--The official Committee record contains additional material here.] organic foods production act Mr. Skeen. Are any funds being devoted to the Organic Foods Production Act in fiscal year 1997? Response. No FSIS funds are being devoted to the Organic Foods Production Act in fiscal year 1997. codex alimentarius commission Mr. Skeen. What responsibilities does FSIS have on the Codex Alimentarius Commission? Are there any new responsibilities in light of the GATT/WTO agreement? Response. The GATT Uruguay Round Agreements Act designated USDA as the lead agency for U.S. participation in the sanitary and phytosanitary standards-setting activities of the Commission. FSIS coordinates U.S. participation in these activities. The Act also established a requirement for annual public notice of the Codex standard-setting activities. FSIS published such notices on May 23, 1995, and June 4, 1996. A May 1997 notice, covering the period of June 1, 1997 to May 31, 1998, is anticipated. number of livestock inspected at slaughter Mr. Skeen. Update the table that appears on pages 569 and 570 of last year's hearing record showing the number of livestock inspected at slaughter, by species, to include fiscal year 1996. [The information follows:] LIVESTOCK INSPECTED PER FISCAL YEAR [In thousands] ---------------------------------------------------------------------------------------------------------------- Year Cattle Calves Sheep Goats Swine Equines ---------------------------------------------------------------------------------------------------------------- 1986................................................ 34,822 3,215 5,411 147 77,246 171 1987................................................ 34,811 2,779 5,096 159 76,388 246 1988................................................ 32,790 2,437 4,802 236 79,129 300 1989................................................ 31,340 2,177 5,059 230 82,111 343 1990................................................ 33,034 1,872 5,141 230 83,856 315 1991................................................ 29,620 1,463 4,449 191 81,298 236 1992................................................ 30,759 1,353 5,129 225 89,210 244 1993................................................ 32,569 1,210 5,094 289 90,481 184 1994................................................ 33,179 1,191 4,645 365 90,206 109 1995................................................ 35,681 1,395 4,512 333 94,490 113 1996................................................ 37,690 1,723 4,268 421 93,397 113 ---------------------------------------------------------------------------------------------------------------- meat and poultry exports Mr. Skeen. Provide a list of countries that received U.S. meat and poultry exports, how much they received, and the dollar value for fiscal year 1996. [The information follows:] [Pages 826 - 829--The official Committee record contains additional material here.] fiscal year 1998 budget request Mr. Skeen. Provide a table showing a complete breakout, including all proposed increases and decreases, of your budget request to the Secretary, the Secretary's request to OMB, and the OMB allowance. [The information follows:] [Page 831--The official Committee record contains additional material here.] egg products inspection and salmonella enteritidis Mr. Skeen. Please describe FSIS responsibilities for egg products inspection and Salmonella enteritidis. Response. The Egg Products Inspection Act (EPIA), Public Law 91- 597, was passed by Congress in 1970 to provide for mandatory continuous inspection of the processing of liquid, frozen, and dried egg products to protect the health and welfare of consumers of these products. The Act and its associated regulations (7 CFR Part 59) set forth requirements to assure that eggs and egg products are wholesome, otherwise not adulterated, and properly labeled and packaged. Prior to the Department of Agriculture Reorganization Act of 1994, Public Law 103-354, the Poultry Division of the Agricultural Marketing Service (AMS), U.S. Department of Agriculture (USDA), was responsible for administering the mandatory egg products inspection program under authority of the EPIA. On May 28, 1995, the Food Safety and Inspection Service (FSIS) of USDA assumed this responsibility from AMS. The term ``egg products'' refers to eggs which have been removed from their shells, processed, pasteurized, and packaged or shipped in bulk for institutional, food service, or retail sale. They include liquid, frozen, and dried whole eggs, egg yolks, egg whites, and various blends of these with or without non-egg ingredients added. Each plant in the United States which processes egg products is assigned one or more resident USDA egg product inspector(s). Inspectors are responsible for continuous supervision of sanitation and processing, which may include breaking, formulation, pasteurization, packaging, labeling, freezing, and/or drying. They also monitor the performance of experimental work or special approvals granted by the national office to assure they are carried out as intended. The staff of the national office is responsible for uniformly applying inspection procedures and standards for sanitation, processing, sampling, facilities and equipment, and product labeling at all establishments under Federal inspection. They are also responsible for assuring that imported egg products are wholesome, properly labeled, and equivalent to domestically-produced products. They carry out these responsibilities through review and approval of the following: plant blueprints, facilities, and equipment; formulations and all labels used to identify egg products; individual plants and inspection systems of foreign countries that wish to export egg products to the United States; and alternate processes or procedures not provided for in the regulations. Egg safety is very important to the Agency. In early 1996, we established an interagency review team on Salmonella enteriditis (SE) to summarize the current situation regarding SE and to make recommendation which address the issue. The report has been released to the public, and a copy is provided for the record. [Pages 833 - 849--The official Committee record contains additional material here.] As directed in the House-Senate Appropriations Conference report for fiscal year 1996, FSIS stopped all Salmonella enteritidis (SE) program operations in fiscal year 1996. FSIS closed the FSIS-Animal Production Food Safety field office in Lancaster, Pennsylvania, the Pennsylvania Operations Center, which participated in active surveillance and verification of the voluntary Pennsylvania Egg Quality Assurance Program (PEQAP). Activities of the Pennsylvania Operations Center continued on a limited basis from mid-March until the end of June to allow for a smooth and orderly transition essential to assure continuation of the program. Two key personnel, a Veterinary Medical Officer and an Animal Health Technician, were detailed to the Pennsylvania Department of Agriculture (PDA) to assist in the transition of program duties. Their roles included: training Pennsylvania personnel in computer data base management, field activities, and acting as technical advisors for the program. Additionally, USDA provided computer equipment and supplies necessary to continue this industry-driven food safety program. The Agency provided $75,000 to support the Pennsylvania State Laboratory testing program for Salmonella enteritidis through June 30, 1996. FSIS is working closely with the Food and Drug Administration (FDA) to develop science-based regulatory standards for proper cooling of shell eggs and is looking at how best to implement the statutory shell egg requirement in the context of our HACCP-based farm-to-table food safety strategy for eggs. In close cooperation with the FDA, FSIS has undertaken a number of activities to address shell egg safety. In November, 1996, FSIS and FDA published an advance notice of proposed rulemaking (ANPR) to seek input on ways to improve food safety during transportation and storage. With FDA, we conducted a conference in November to receive information on temperature control interventions and verification techniques in the transportation and storage of meat, poultry, seafood, eggs and egg products. We are seeking comment on how the Federal government should be involved in this area. We are conducting a science-based, quantitative risk assessment for shell eggs and egg products to guide any actions taken to address the human health risks identified. The assessment will also consider various implementation strategies and costs. The project is being conducted by a multi disciplinary team of scientists from USDA, FDA, CDC, and academia. It includes a public process to provide the opportunity for input from all stakeholders. FSIS and FDA are also considering ways to solicit information through the rulemaking process on issues of comprehensive food safety in shell eggs from production to food preparation. An ANPR on Shell Eggs will be published soon by FDA and FSIS. We fully support the forum provided by the Conference for Food Protection for developing the best model code for State adoption. We are committed to strengthening how the existing Code addresses meat, poultry, and egg products. We also are committed to providing appropriate assistance to see the Food Code adopted nationwide. The Centers for Disease Control and Prevention (CDC) and others expressed the need for an ongoing forum for information exchange on SE. FSIS chaired a meeting at the International Poultry Exposition in Atlanta, GA on January 21, 1997 to bring together all parties interested in continuing coordinated efforts which reduce the public health risks from SE. This forum was well attended by federal agencies including CDC, FDA, APHIS, AMS, ARS, and FSIS, State Departments of Agriculture, academia, industry and consumer groups. The purpose of the meeting was to improve communication and promote constructive dialogue about SE. We plan to continue to facilitate such forums in the future. exporting procedures Mr. Skeen. Is the recommendation from the Office of the Inspector General report on exporting procedures that has been open since 1987 still unresolved? If so, why? Response. Before the end of fiscal year 1997, we expect to resolve the recommendation, which has been delayed as a result of numerous program changes since 1987. The Agency has reevaluated its position on the issue of Finished Product Standards (FPS) in light of the recent rulemaking on Pathogen Reduction and HACCP Rule. The Agency is now in the process of revising the Finished Product Standards. We will define different action levels for the potential food safety and consumer protection groups of nonconformance; establish FPS for poultry necks and giblets; set tolerances at the same level for all poultry classes; and separate the conditions which have the potential for transmitting foodborne illnesses. FSIS expects to complete revision of the Finished Product Standards before the end of fiscal year 1997. meat and poultry hotline Mr. Skeen. How many calls did the Meat and Poultry Hotline receive in fiscal year 1996? Response. USDA's Meat and Poultry Hotline received 113,026 calls during the twelve-month period ending September 30, 1996. This marks the fourth consecutive fiscal year in which the Hotline recorded more than 100,000 calls. The Hotline recently celebrated the one millionth call to the service. Mr. Skeen. How does this compare with the two previous fiscal years? Response. The total number of calls for fiscal year 1996 is lower than the numbers in fiscal year 1995 and fiscal year 1994. There have been decreases of approximately three and eight percent, respectively. Fiscal year Number of calls 1996.......................................................... 113,026 1995.......................................................... 116,530 1994.......................................................... 126,244 Events such as product recalls and foodborne illness outbreaks are expected to increase calls to the Hotline. Thus, some year-to-year fluctuation is normal. However, given that call volume has declined in two consecutive years, the Hotline has identified the following factors that may have contributed to that decline. There are more sources of food safety information available today. Many of these, including the FDA/CFSAN 800 line, were not in existence in the early days of the USDA Meat and Poultry Hotline. These new sources of information include a large number of online databases such as the National Food Safety Database at the University of Florida, many of which rely heavily on materials produced by FSIS and the Meat and Poultry Hotline. FSIS itself has instituted two new information retrieval systems for consumers and professionals. These are (1) the ``FSIS Fast Fax,'' an automated fax-on-demand system that consumers can call toll-free, and the FSIS HomePage on the World Wide Web. Again, these systems offer publications produced by the Meat and Poultry Hotline based on trends in Hotline inquiries. Media are reporting on food safety more frequently. If that reporting is accurate, particularly on the basic food handling messages, consumers would not need to call a government hotline for clarification. In fiscal year 1996, the Hotline received 861 media and ``information multiplier'' calls. Hotline senior staff spend considerable time working with food and health editors to ensure the accuracy of the information the reporter will convey. In addition, Hotline staff produce information packages four times a year that are distributed to media and food safety educators. These information kits generate many articles, stories and programs that relay food safety information based on Hotline callers concerns or misconceptions. When the media produce a story, a much wider audience is reached with the food safety message. Downsizing has impacted available staffing for the Hotline. While the addition of phone lines could bring in more calls to the Meat and Poultry Hotline, especially during peak times, there are fewer specialists available to handle these calls than in either fiscal year 1995 or fiscal year 1994. The addition of more telephone lines could adversely impact customer service and increase expenses, and is not seen as a prudent action at this time. The Hotline is a vital and important part of FSIS' public health and consumer education initiatives and the value can not be judged on call volume alone. export certification information system Mr. Skeen. When will the Export Certification Information System be implemented? Response. The system as described in a 1993 proposed rule is not planned for implementation. FSIS continues to explore methods of automating the export certification process. ergonomically designed poultry inspection Mr. Skeen. What is the status of the ergonomically designed poultry inspection station that is being developed to help reduce the potential for cumulative trauma disorders? Response. FSIS contracted for fabrication of a prototype ergonomically designed leaning/standing stool. A test plant was identified, but subsequently declined to allow the test of the stool. No further action has been taken on the stool at this time because an inspection station with ergonomically designed features is part of a pilot for a new evisceration system in a poultry slaughter plant. inspection system guide Mr. Skeen. Have there been any modifications to the Inspection Service Guide in fiscal year 1996? If so, please describe them. Response. Modification to PBIS has been completed to provide for inspection tasks associated with the Sanitation Standard Operating Procedures, SSOPs, which went into effect January 27, 1997. The Inspection System Guide (ISG) was modified extensively during FY 1996 to reflect implementation of Process 03, off-line slaughter inspection. The incorporation of slaughter inspection into PBIS involved the addition of approximately 60 tasks to the ISG. Along with Process 03, regulatory changes pertaining to Prior Approval of Labeling required modification to Process 07 of the ISG. Some modification of Process 06 of the ISG was necessary prior to publication of FSIS directive 7160.1 pertaining to inspection of advanced meat recovery systems. fsis staff years Mr. Skeen. For the record provide a table showing a breakout of your staff years by inspectors and non-inspectors for fiscal years 1990 through 1997. [The information follows:] APPROPRIATED FUNDS ------------------------------------------------------------------------ Inplant Non- inspection inplant staff staff years years ------------------------------------------------------------------------ Fiscal year: 1990.......................................... 7,495 1,711 1991.......................................... 7,593 1,693 1992.......................................... 7,644 1,742 1993.......................................... 7,667 1,857 1994.......................................... 7,829 1,782 1995.......................................... 8,025 1,773 1996.......................................... 7,915 1,555 1997 (estimated).............................. 8,054 1,569 1998 (estimated).............................. 8,054 1,553 ------------------------------------------------------------------------ Note: Fiscal years 1995 and later include the Egg Products Inspection and Animal Production Food Safety programs transferred to FSIS during USDA reorganization in 1995. on-farm investigations Mr. Skeen. What type of on-farm investigations does the Food and Drug Administration (FDA) do? Response. The Food and Drug Administration conducts on-farm investigations related to violations of the Federal Food, Drug,and Cosmetic Act. These are primarily related to the illegal manufacture, distribution or use of animal drugs and veterinary medical devices and/ or to follow-up on reports of violative animal drug residues in animals submitted for slaughter. FDA also conducts follow-up investigations on Salmonella enteritidis reports in shell eggs. Mr. Skeen. Does FSIS conduct on-farm investigations? Response. FSIS does not conduct on-farm investigations. haccp forum Mr. Skeen. Are you continuing to hold field hearings around the country to explain the Pathogen Reduction and HACCP programs? Response. We have found that conducting meetings around the country to explain Pathogen Reduction and HACCP is extremely beneficial and we plan to continue such meetings throughout the implementation period. We have recently announced 10 meetings to be held around the country starting on April 12. The purpose of these meetings is to discuss with establishment owners/operators information and communication needs. Additional meetings will be planned and held as needed during the implementation of the Pathogen Reduction/HACCP final rule. Mr. Skeen. Where were these meetings held in fiscal year 1996 and what are the plans for FY 1997? Response. During fiscal year 1996 FSIS held regional HACCP implementation conferences in the following locations: Chicago, Illinois; Kansas City, Missouri, Dallas, Texas; Oakland, California; Boston, Massachusetts and Atlanta, Georgia. Topics covered at these meetings included: Overview of the final rule; Sanitation Standard Operating Procedures; E. coli testing; Salmonella Testing; HACCP training; and the potential impact of in-plant HACCP implementation of food animal production. During fiscal year 1997 FSIS will hold 10 field meetings to improve communications between FSIS and federally-inspected plants, as HACCP is implemented. Meeting sites selected so far include Nashville, Tennessee; Philadelphia, Pennsylvania; Boston, Massachusetts; and Kansas City, Missouri. FSIS has held, and will continue to hold during 1997, HACCP-related meetings on specific topics in the Washington, D.C. area. animal production food safety program Mr. Skeen. Please describe the operation of the Animal Production Food safety program. Response. The Animal Production Food Safety (APFS) program provides leadership for USDA on public health concerns associated with animal production, transportation, marketing,and pre-processing preparation of livestock, poultry and eggs. It is responsible for outreach and liaison to create and sustain voluntary risk reduction strategies in the raising of live animals intended for human consumption. Approaches include: (1) Working with other Federal agencies with food safety responsibilities to ensure that efforts are coordinated. (2) Fostering collaborative opportunities and initiatives for public/private investment in APFS risk reduction activities and strategies. In carrying out this role, the APFS program provides assistance and leadership to foster the research needed to develop voluntary, science- based good production and verification programs for animal production that will reduce the risk of chemical, physical and microbial contaminants from entering the food chain. The staff develop and maintain cooperative relationships to support FSIS public health and commodity food safety initiatives. In addition, they communicate information needed by the animal production community to assist them in meeting reasonable and science-based requirements of animals at the receiving stage of processing as HACCP systems are implemented. The Animal Production Food Safety Program is carried out by a staff of five professionals and three support staff. During FY 1997 the Program is funding cooperative agreements and contracts related to animal production food safety. On February 27, 1997, FSIS published in the Commerce Business Daily a request-for-proposals for a series of pilot demonstration animal production food safety projects in the non-fed Beef, pork, poultry and sheep areas. The projects are intended to demonstrate the application, feasibility and effectiveness of current technologies for controlling contamination with particular emphasis on pre-slaughter pathogen reduction. Animal identification will be a required element of the nonfed beef project. An animal identification element will be encouraged, but not required, in the pork and sheep projects. Additional projects include promoting the adoption of producer programs which improve the ability of food animal producers to maintain sustainable operations as they address food safety responsibilities and possible requirements of slaughter plants implementing HACCP systems; evaluating the specific needs of economically disadvantaged small producers to meet their food safety responsibilities; supporting the development of the Food Safety Digest to serve as a reliable source for multi-species animal production food safety information and promote the adoption of voluntary food safety practices by animal producers; and expanding the ability of the Food animal Residue Avoidance Databank to provide pharmacokinetics and withdrawal time information for animal drugs and pesticides used in minor food animal species. illegal and unapproved chemicals and drugs Mr. Skeen. The Inspector General's most recent report identifies illegal and unapproved chemicals and drugs smuggled into the United States by a Wisconsin company and its parent company in the Netherlands. What quantities of these drugs and chemicals were smuggled into the U.S.? Response. It is alleged that between 1988 and April 1994 the Vitek Supply Corporation, Oak Grove, Wisconsin sold over 1.7 million pounds of products containing unapproved drugs, valued at almost $1.3 million. The drugs identified were clenbuteral, a drug associated with reversible toxicity in humans in Europe who consumed livers from cattle fed the drug and slaughtered before the chemical had depleted from the tissue; Avoparcin, an antibiotic not approved by FDA that might stimulate development of antibiotic resistant bacteria; and nitrofuran compounds that have not been approved by FDA since 1985 and 1992 due to evidence that they are carcinogenic in animals. Mr. Skeen. What is the status of the investigation? Response. On January 21, 1997, U.S. district Judge Thomas J. Curran sentenced Jannes Doppenberg, president of Vitek Supply Corporation to 44 months in prison. Vitek and Doppenberg were convicted in June 1996 on 12 felony counts stemming from a scheme to smuggle into the United States and distribute unapproved drugs for use in veal calves. Fines levied to Doppenberg and Vitek related to the incident were $25,000, $29,452, $705,814, and $350,000. laboratory recognition program Mr. Skeen. Why did FSIS terminate the Laboratory Recognition Program? Response. Several years ago, USDA's Office of Inspector General (OIG) recommended that the Laboratory Recognition Program (LRP) either be brought up to the standards of the Accredited Laboratory Program and conducted on a user fee basis or that it be terminated. The agency decided to terminate the program because the laboratories were used relatively infrequently and, because of FSIS audit testing, the total number of samples actually processed solely by LRP laboratories without concomitant FSIS analysis amounted to a few hundred samples per year. It would have been cost-prohibitive to bring the program up to Accredited Laboratory Program standards, as recommended by OIG, for so few samples each year. Mr. Skeen. Where do companies now send samples previously sent to LRP member laboratories? Response. FSIS has made arrangements for samples to be analyzed in its own laboratories, and for rapid reporting of results to establishments. pennsylvania district office location Mr. Skeen. Last year, the Department changed a decision to base an FSIS district office in Harrisburg and move it to Philadelphia. According to Secretary Glickman's letter of December 31, 1996, the decision for Philadelphia was changed because of a Civil Rights Impact Analysis. Shouldn't food safety be the critical factor in location of field offices? How much weight is a civil rights impact analysis given over other factors? Response. The selection of district offices, which are responsible for field program administration, was based on a complete business analysis which balanced a range of factors, including costs and convenience of travel. Using the selection criteria, Harrisburg scored slightly higher than Philadelphia which is the location of one of the five existing FSIS Regional Offices. As part of the Department's review and approval process for the proposed reorganization, FSIS prepared a comprehensive Civil Rights Impact Analysis. This analysis included a reconsideration of all decisions on office locations from the point of view of FSIS employees. The analysis determined that locating the Pennsylvania District Office in Philadelphia rather than Harrisburg would result in separation of an estimated six fewer employees. Because the program criteria were closely matched between Harrisburg and Philadelphia, with Harrisburg having only a slight advantage, and because adverse impact on employees could be lessened by selection of Philadelphia, FSIS made the decision to change the initial decision and select Philadelphia as the site for the Pennsylvania District Office. haccp implementation Mr. Skeen. How many plants in the United States have gone ahead with a HACCP system? Response. A number of plants have incorporated a number of the HACCP principles into their operation. Prior to the implementation of the HACCP/Pathogen Reduction Rule the Agency had no system in place for counting plants with HACCP programs. However, large plants will be required to have them in place by January 1998, small plants by January 1999 and very small plants by the year 2000. At this time there is no reporting requirement that plants inform FSIS of the adoption of a voluntary HACCP program. haccp impact on foreign countries Mr. Skeen. What effects will the new HACCP rules have on imported products? Response. Imported products will be required to have been subjected to an inspection process that is equivalent to that of the United States. Mr. Skeen. How are foreign plants that export to the United States approved through the new HACCP system? Response. In order to export to the United States, a foreign plant must be certified by the foreign country's chief inspection official as meeting all U.S. requirements, including the HACCP regulation. FSIS will determine if the country is implementing HACCP or equivalent measures by reviewing the countries regulations, directives and other documents implementing the requirements and by conducting on-site verification reviews. Mr. Skeen. Is there a timetable for foreign plants to meet HACCP standards? Response. Foreign countries are required to comply with the timetable established in the HACCP regulation for U.S. plants. sentinel sites Mr. Skeen. Please provide the location of the existing sentinel sites and the three new sites for the food safety initiative. Response. The five existing sentinel sites include selected counties in Northern California; Oregon; the Minneapolis/St. Paul, Minnesota metropolitan area; the Atlanta, Georgia metropolitan area; and Connecticut. The additional sites include the Rochester, New York area and the Baltimore, Maryland area. The eighth site is as yet to be determined. Mr. Skeen. What are the criteria for selecting these sites? Response. The Centers for Disease Control and Prevention (CDC) manage the selection of sites. Site applications are ranked by a scoring system based on the State's existing infrastructure and ability to perform the programs. The criteria used by CDC in selecting the sentinel sites are part of their overall effort to establish Emerging Infections Program (EIP) projects with State and local health departments. These cooperative agreements will assist local, State, and national efforts to conduct surveillance and applied epidemiologic and laboratory research in emergency infectious diseases. CDC administers the EIP projects through an application and award process. Eligible applicants are the official public health agencies of States or their bona fide agents. Mr. Skeen. How much do FSIS and CDC respectively budget for the sentinel sites program? Response. For fiscal year 1997 FSIS provided $1 million to CDC for the Sentinel Site Survey, recently named FoodNet, which covers 5 sites. The fiscal year 1998 budget requests an increase of $500,000 to cover Campylobacter case control studies at 8 sites. For FY 1998, the CDC budget requests $14.5 million to establish a new National Early Warning System for outbreaks of foodborne illness which builds on the existing Sentinel Site Survey, recently named FoodNet. This request represents an increase of $10 million over fiscal year 1997. increases in object classification Mr. Skeen. Please explain the increase in Object Class 25.2, Other Services for both fiscal years 1997 and 1998. Response. The increase in Object Class 25.2 Other Services for fiscal year 1997 of $4.6 million is primarily associated with investments to support a more science-based, modernized inspection system. The 1997 increase includes $2.6 million for small business HACCP-related technology and technology applications for food safety inspection, $1 million for laboratory renovation, $0.3 million for microbiological sampling and testing, and $0.7 million for Animal Production Food Safety projects. The increase for fiscal year 1998 of $0.7 million includes a $0.5 million increase for the Sentinel Site Survey, recently named FoodNet, to cover Campylobacter case control studies at the expanded eight sites. In addition a $0.2 million increase is needed for a two-year program to provide training in HACCP principles to State and local regulators of retail stores and restaurants. The increase will provide training materials for State, county and city inspectors across approximately 3,000 government agencies. Mr. Skeen. Please explain the increase in Object Class 31, Equipment, for both fiscal years 1997 and 1998. Response. The increase in Object Class 31, Equipment, for fiscal year 1997 of $3 million is primarily associated with $2.2 million of increased obligations for microbiological sampling and testing, and laboratory renovations. the increase will provide equipment, such as laboratory benches and hoods, incubators, refrigerators and computers. This additional and upgraded equipment is needed to adequately cover the workload increase associated with HACCP implementation. The balance of the increase is FAIM funding that was ``carried over'' to 1997 from the 1996 appropriation for purchasing a new hardware/software platform. The increase for fiscal year 1998 of $0.6 million reflects a net increase for upgrading automated data processing and telecommunications technology in support of the Agency's streamlined organizational structure. faim project expenditures Mr. Skeen. Please provide a table showing expenditures for the FAIM project from its first year with estimates for fiscal year 1998 and subsequent years. Response. Direct FAIM expenditures from the pilot phase of the project through the budget year estimates total $25.5 million. Estimates for subsequent years are as yet to be determined. FIELD AUTOMATION AND INFORMATION MANAGEMENT [In thousands of dollars] ------------------------------------------------------------------------ Fiscal year Expenditures ------------------------------------------------------------------------ 1996...................................................... $7,230 1997 estimated............................................ 9,720 1998 estimated............................................ 8,525 ------------------------------------------------------------------------ relocation benefits Mr. Skeen. Are the relocation benefits described on page 13-13 of your budget justification standard for all USDA agencies? Response. The following relocation allowances described on page 13- 13 of the budget justification are not only standard among USDA agencies, but required to be paid by all Federal agencies, under 5 U.S.C. Sec. 5724 and 5724A: subsistence expenses for the employee and family to travel to the new duty station, transportation and storage of household goods; real estate expenses associated with the sale and/or purchase of a residence, and miscellaneous expenses. Relocation services include the home sale service, which is authorized under the real estate expense allowance. Section 302-12.2 of the Agriculture Travel Regulations states, ``Agencies must offer relocation services to all eligible transferring employees.'' Agencies have some latitude with the house hunting and temporary quarters allowances. However, it is the practice of all USDA agencies to authorize these allowances in some combination to their transferring employees. government performance and results act (gpra) Mr. Skeen. GPRA, known as the Results Act, requires each executive agency to issue, no later than September 30, 1997, a strategic plan covering at lease five years. In addition to a mission statement grounded in legislative requirements, the plans are to contain general goals and objectives that are expected to be outcome or results oriented (such as to improve literacy) as opposed to output or activity oriented (such as to increase the number of education grants issued). What progress is the agency making in developing its strategic plan, including defining its mission and establishing appropriate goals? Response. The Agency submitted its strategic plan with a mission statement, goals, objectives, and measures to the Secretary on March 3, 1997. Additional review and refinements to the plan's performance measurements will occur during the summer of 1997. Mr. Skeen. Has the agency identified conflicting goals for any of its program efforts? If so, what are the performance consequences of these conflicting goals and what actions--including seeking legislative changes--is the agency taking to address these conflicts? Response. The Agency has identified three goals for its strategic plan. Goal 1 incorporates the scientific methods of HACCP charges industry with greater responsibility for food safety, and should result in a safer food supply as stated in Agency's mission. Executive discussions on the Plan led to the creation of goal 2 for a farm-to- table food strategy and Goal 3 on cultural change. These goals are in harmony for the Agency to realize its public-health oriented food safety mission. Performance considerations are being addressed through discussions with other agencies regarding the following cross-cutting issues contained in the strategic plan: Collaborative Efforts to Address Food Safety/Good Management Programs in Animal Production Import/Export of Meat, Poultry, and Egg Products Regulatory Impact Analysis Animal Well-being Transportation/ Distribution Export Related Program Coordination Education Food Security Issues Research Nutrition Education Mr. Skeen. Strategic plans must be based on realistic assessment of the resources that will be available to the agency to accomplish its goals. As you are developing your strategic plan, how are you taking into account projected resources that likely will be available-- especially as we move to balanced budget? What assumptions are you making? How are you ensuring that your goals are realistic in light of expected resources? Response. For FY 1998 and on, FSIS assumes a new user fee will provide the means for funding the Agency's inspection activities. These include primary and second shift slaughter, processing, egg, and import export inspections. Laboratory services, pathogen reduction activities, grants to States, other support services, and administrative costs will continue to be supported through appropriated funds. In addition to the appropriated funds, FSIS charges fees for inspection services provided on an overtime and, in some cases, holiday basis, and for voluntary services requested by the industry to accommodate business needs. In addition, the Agency also charges for accreditation of laboratories. Enactment of the new user fee proposal is essential in order to meet the agency's goal of ensuring sufficient inspection services are available to undertake all inspection requirements and meet the needs of the industry. The FSIS reorganization strategy offers an approach to make the Agency more efficient with its allocated resources. In early 1995 the FSIS Administrator announced the Agency would look at itself ``from top to bottom'' and redefine for the future its regulatory roles, resource allocation, and organizational structure in a manner consistent with the goals and strategies of the Pathogen Reduction/HACCP regulation. The resulting Top-to-Bottom Review was part of the Agency's overall initiative to improve the safety of meat, poultry, and egg products and better protect consumers. A significant guiding principle in this initiative was to streamline filed and headquarters management structures to foster effective decision making, make optimal use of management resources, and achieve administrative streamlining targets. The reorganizations proposal was approved by the Department on July 17, 1996, and took effect on November 11, 1996, when FSIS began the process of implementing the resulting changes. The new structure has eliminated one layer of management at the Agency's headquarters level, reduced the number of supervisory positions, centralized management of all policy, rulemaking and development activities, and improved the Agency's ability to make effective and efficient program changes. The resulting resource ``savings'' are being redeployed to front line activities. The reorganization has opened better communication pathways across program areas. It has resulted in a more efficientutilization of Agency resources. Improving the utilization of existing resources is the fundamental key to success during times of budgetary austerity, and instrumental to FSIS in meeting its strategic goals. Mr. Skeen. For Congress, the heart of the Results Act is the statutory link between agency plans, budget requests, and the reporting of results. Starting with fiscal year 1999, agencies are to develop annual performance plans that define performance goals and the measures that will be used to assess progress over the coming year. These annual goals are to measure agency progress toward meeting strategic goals and are to be based on the program activities as set forth in the President's budget. What progress have you made in establishing clear and direct linkages between the general goals in your strategic plan and the goals to be contained in your annual performance plans? OMB expressed concern last year that most agencies had not made sufficient progress in this critical area. Response. The Agency's initial experience in dealing with the elements of an Annual Performance Plan (APP) occurred when drafting a response to President Clinton's regulatory reform initiative of March 4, 1995. The President's directive required the establishment of a Regulatory Performance Measures Plan, similar to a performance plan, for two areas: regulatory reform and employee performance. FSIS developed a plan to review and restructure its performance measures to reflect its purpose and mission. The Agency also developed a strategy to review and revise employee performance measures to reflect results instead of employing a ``score keeping'' approach and punitive actions. These accomplishments will be experiences on which the Agency will draw as it begins to prepare its Annual Program Performance Plan for submission in September 1997 for fiscal year 1999. The Agency has also developed a Performance Plan for Goal 1 or HACCP. This plan cuts across organizational boundaries and calls for ``Events Managers'' to coordinate the various components of the activities. This is an experimental approach designed to ensure not only that the ultimate goal is met but also that the Agency complies with the commitments made during the finalization of the Pathogen Reduction/HACCP rule. Performance plans supporting the other goals will be developed during the fiscal year 1999 budget process later this year. The Agency recognizes the importance of linking its performance plans to its budget proposals. To accomplish this, the budget and planning staffs are working together to ensure that future budget submissions reflect the performance elements contained in the Agency's performance plans. Mr. Skeen. More specifically, how are you progressing in linking your strategic and annual performance goals to the program activity structure contained in the President's budget? Do you anticipate the need to change or modify the activity structure to be consistent with the agency's goals? Response. In the 1998 Budget, FSIS proposed a new, streamlined program activity structure which would reduce the number of activities from eight to five. In the Explanatory Notes, FSIS justified this change because it: 1--facilitates strategic budgeting and performance measurement by combining similar functional activities (new activity of Federal Food Inspection combines former activities of Slaughter, Processing and Egg Products Inspection; former Pathogen Reduction eliminated and included in all activities.) 2--streamlines Agency budget reporting and allows flexibility to better manage available funds and meet Congressional mandates. 3--improves tracking of obligations with fewer activities. The new structure, while not designed specifically to do so, is broad and flexible enough to permit linkage with strategic and annual performance goals, especially as these are fine tuned or even if they change over time. Mr. Skeen. Overall, what progress has your agency made--and what challenges is it experiencing--defining results-oriented performance measures that will allow the agency and others to determine the extent to which goals are being met? Response. There is a fundamental gap in knowledge regarding the frequency of foodborne illnesses caused by adulterated meat, poultry or egg products. Ultimately, this will be the performance measurement of the future. But until such time as this knowledge is available, the Agency and its stakeholders must rely upon other measurements and variables over which the Agency has jurisdiction and management authority. Additionally, the Agency is progressing in the implementation of HACCP, reorganization, and cultural changes away from command and control. With these changes comes the challenge of envisioning performance measurements for systems which are not in place at this time. As the Agency progresses, this process will become more defined. Mr. Skeen. If applicable, what lessons did the agency learn from its participation in the Results Act pilot phase and how are those lessons being applied to agency-wide Results Act efforts? What steps is the agency taking to build the capacity (information systems, personnel skills, etc.) necessary to implement the Results Act? Response. FSIS did not participate as a GPRA pilot. The Field Automation and Information Management (FAIM) initiative is the Agency's primary information resource management focus and will extend automation to inspection personnel, connect various FSIS application systems, and should improve the productivity, quality, and services of both inspection and administrative process. When fully implemented, this initiative will greatly enhance the capability to provide the baseline information necessary for reporting progress in meeting or exceeding performance standards. In addition, GPRA information has been made available to employees and management alike via the Agency's automated communication system. This information, which is updated periodically, has provided the necessary reference material to continue building personnel skills. Mr. Skeen. The Results Act requires agencies to solicit and consider the views of stakeholders as they develop strategic plans. Stakeholders can include state and local governments, interest groups, the private sector, and the general public, among others. Who do you consider to be your agency's primary stakeholders and how will you incorporate their views into the strategic plans? Response. The ongoing strategic planning process incorporates four phases to develop the FSIS strategic plan. It is intended to provide an opportunity for Agency managers, employees, and constituent groups to review the plan and provide feedback on its content. The fourth phase of this process specifically involves employee/constituent outreach and feedback. This phase is intended to promote employee and constituent group feedback on the strategic plan and to realize a general agreement on the acceptability of the Agency strategic plan to all constituent groups. The Agency is also working on distributing an all-employee letter which will address FSIS' future direction under the Pathogen Reduction/HACCP regulation. These communications may be accompanied either through holding public meetings for comment on the strategic plan or by publishing the plan in the Federal Register. However, the Agency has already been in frequent contact with its stakeholders while formulating policy and will continue to do so. In 1995 and 1996, the Agency held more than two dozen public meetings, informational briefings, conferences and hearings on the Pathogen Reduction/HACCP regulation, time and temperature issues during meat, poultry and egg transportation, scientific and technical aspects of E. coli and Salmonella, and small plant concerns with constituent groups of consumers, industry,academicians, State and local officials, union members, and public health officials. The Agency intends to continue to review how well its stakeholders are being served by its programs through frequent contact with its constituent groups and other customer service activities. Mr. Skeen. For the Results Act to be successful, agencies with similar missions, goals, or strategies will need to ensure that their efforts are coordinated. What other federal agencies are you working with to ensure that your strategic plans are coordinated? What steps have you taken to ensure that your efforts complement and do not unnecessarily duplicate other federal efforts? Response. FSIS has been in contact with the Food and Drug Administration (FDA) and will share strategic plans to identify common goals and objectives for both agencies. In addition, FSIS is working with the Centers for Disease Control and Prevention (CDC) and the FDA to monitor five foodborne illness ``sentinel sites.'' These sites were established to estimate the national incidence of the major foodborne diseases and to explore what relationships may exist between specific pathogens and the types of meat, poultry, and other food products associated with them. On January 25, 1997, the President announced the Administration's Food Safety Initiative, which includes an expansion of the sentinel site project into the Nation's Early Warning System. The current sentinel sites are an integral part of the Early Warning System, and the President has requested funding for FSIS, FDA and CDC to increase the number of sites from five to eight, better equip and link the sites, and make available state of the art laboratory and electronic technology. With sentinel site information, FSIS can review HACCP programs and, where appropriate, trigger changes to prevent future outbreaks of foodborne illness. FSIS also plans to work closely with FDA to develop science-based regulatory standards for proper cooling of shell eggs and transportation and distribution food safety issues. For the past couple of years, the Agency has been working closely with FDA and State government agencies to address food safety gaps in the transportation and retail areas. The new food safety research agenda was developed cooperatively by the Food Safety Research Working Group, which is composed of scientists with a broad base of expertise in food safety and public health issues from USDA, FDA, CDC, the National Institutes of Health, and the Department of Defense. The agenda recognizes that it will require the combined efforts of government, industry, and academia to meet the need for human health research. Mr. Skeen. The Results Act requires agencies to consult with Congress as they develop their strategic plans. Since these plans are due in September, now is the time for agencies to begin the required consultations. What are your plans for congressional consultation as you develop your strategic plan? Which Committees will you consult with? How will you resolve differing views? Response. All USDA Mission Areas/Agencies have prepared draft Strategic Plans which are currently being reviewed by the Under/ Assistant Secretary (or other relevant official), the Senior Policy Staff, and the Secretary. Upon completion of the review, the Department plans to provide copies of the Strategic Plan (including an overall Department-wide Executive Summary and the Strategic Plans for individual Mission Areas/Agencies) to relevant Congressional Committees. Thereafter, FSIS will look forward to meeting with Members or Staff to discuss the FSIS Strategic Plan and to solicit Congressional input and advice on refinements to the Plan. Mr. Skeen. In passing the Results Act, Congress sought to fundamentally change the focus of federal management and decision making to be more results-oriented. Organizations that have successfully become results-oriented typically have found that making the transformation envisioned by the Results Act requires significant changes in what they do and how they do it. What changes in program policy, organization structure, program content, and work process has the agency made to become more results-oriented? Response. Despite the successes of the current program, Agency senior managers realized that there existed a significant gap between the original inspection system and the public's expectations for food safety. Foodborne illness outbreaks over the past few years have alerted the Agency to the need for establishing fundamental change in the FSIS meat and poultry inspection program to improve food safety, reduce the risk of foodborne illness in the United States, and make better use of Agency resources. The original inspection system largely focused on organoleptic (sensory) inspection, which was appropriate for the technology available when the first major meat inspection law was passed in 1906. Since that time, changes have been made in the inspection program to reflect changes in the production of meat, poultry, and egg products and to increase the efficiency of inspection. However, the original program has been deemed inadequate to detect hazards such as pathogenic microorganisms that can cause foodborne illness. Many internal and external studies conducted during the past decade (such as those of the National Academy of Sciences, the General Accounting Office, the National Advisory Committee on Microbiological Criteria for Foods, industry, producers, and consumer groups) called for change in the original inspection system to address microbial pathogens and make it more prevention-oriented. With implementation of the final rule on Pathogen Reduction and HACCP, there are additional opportunities to improve the way the Agency carries out inspection activities, to improve both food safety and allocation of resources. The Agency is developing microbial standards for each species which will form a scientific basis for program results management. Internally, the FSIS reorganization has centralized many of the policy, administrative, and program development components of the Agency which will provide much greater consistency and accountability. Mr. Skeen. How are managers held accountable for implementing the Results Act and improving performance? Response. The Agency's approach to creating its initial Annual Performance Plan (APP) began with senior managers establishing initial objectives for each strategic goal. Managers will then identify supporting activities, tasks, and their outcomes, which show what must be done to execute the objectives. Next, they will negotiate timeframes and resource requirements and establish performance measures for outcomes in collaboration with line managers. Finally, they will prepare an evaluation plan displaying this information, and this plan will be tied to manager performance evaluations. Mr. Skeen. How is the agency using Results Act performance goals and information to drive daily operations? Response. Following the requirements of the Results Act, FSIS will include performance indicators consistent with the Strategic Plan in its budget submissions beginning with the fiscal year 1999 budget. The Agency will therefore act to ensure that appropriate indicators which can be measured are chosen for its program operations. Performance goals will be very important in guiding the Agency's operations to achieve the strategic goals of implementing HACCP, efficiently using resources, and achieving a farm-to-table food safety strategy. president's food safety initiative Mr. Nethercutt. Which federal agencies are participating in the Food Safety Initiative and what are there respective budgets for the program for FY 1998? Response. The fiscal year 1998 President's Budget requests a total of $43 million for the Food Safety Initiative. Of this total, $24 million is included for the Food and Drug Administration (FDA), $10 million is for the Centers for Disease Control and Prevention (CDC), and $9.2 million is for the United States Department of Agriculture (USDA). Of the $9.2 million proposed for USDA food safety initiatives, $1.1 million is for FSIS; $0.5 million for the Early Warning System and $0.6 million for HACCP training of State and local food regulatory offices. In addition, the Agricultural Research Service has proposed food safety initiatives of $4.1 million for Preharvest and Postharvest food safety research; and the Cooperative State Research, Education and Extension Service has proposed $4 million in food safety initiatives for a special research grant, and food safety education and extension activities. Mr. Nethercutt. Which agency has the lead? Response. No one agency has the lead in this initiative. This is a collaborative effort among FDA, CDC, and USDA. Each agency would fulfill an integral part of the proposed initiative, the sum of which would provide for a strengthened system for responding to the incidence of foodborne illness and disease, and ensuring the safety of the Nation's food supply. ratite inspection Mr. Fazio. Does USDA possess the regulatory authority to include emus, ostriches or other ratites under the definition of poultry for purposes of FSIS inspection? Response. FSIS' statutory mandate is to inspect ``domesticated'' poultry. Poultry is defined in the regulations to include chickens, turkeys, ducks, geese, or guineas. Mr. Fazio. If not, what action would be required? Response. Changes to that definition to include ratites under the regulations could be made by public rulemaking. Mr. Fazio. What criteria does USDA use in determining a species is a game animal not subject to inspection? Response. FSIS does not use the criterion of whether a species is a game animal to determine the requirement for inspection. FSIS determines this requirement based solely on whether the animal is one for which inspection is required under either the Federal Meat Inspection Act (FMIA) or the Poultry Products Inspection Act (PPIA). If an animal does not fall under the coverage of either Act, then responsibility for food safety falls under the Federal Food, Drug, and Cosmetic Act. However, some animals, including species often considered to be game animals such as elk, deer, antelope, or migratory water fowl may be inspected under the authority of the Agricultural Marketing Act (AMA). The AMA permits FSIS to provide voluntary, fee-for-service inspection of animals not subject to mandatory inspection under the FMIA or the PPIA. Mr. Fazio. Describe the process required for producers of meat from animals currently defined as game animals to be classified as meat subject to FSIS inspection? Response. FSIS determines if inspection of meat from an animal is required based on the authority of the FMIA or the PPIA as described above. The FMIA requires inspection only for specified species of animal and for meat from those animals. Legislation would be required to provide mandatory inspection of meat from animals not listed by the FMIA. However, anyone may petition FSIS to amend the definition of ``poultry'' to include additional species. A producer of an animal not covered by either Act may request inspection on a fee-for-service basis from the Agency. Mr. Fazio. What is the estimate of commercial emu, ostrich and/or ratite production in the U.S. today? Response. FSIS has no reliable data on ratite production. Estimates of live animal production from the various ratite associations vary widely. FSIS provides voluntary inspection for ratites upon request. However, the Agency does not record the slaughter of ratites as a separate category in its animal disposition reporting system. Mr. Fazio. What is FSIS's estimate of the cost required if this committee directed it to include emu, ostrich and other ratite production under its poultry inspection program? Response. FSIS is unable to estimate the cost of inspection due to considerable uncertainty regarding the scope and growth of the industry at this time. Anticipated costs would comprise both Agency and industry costs associated with implementing a mandatory inspection program. Agency costs may include the cost of additional inspectors; training activities; program development activities; chemical residue analysis; and microbial baseline studies. Industry costs would involve developing and implementing HACCP plans as well as meeting other regulatory requirements. Mr. Fazio. How much time would be required to implement such an inspection program? Response. Implementation of mandatory inspection for ratites would require notice and comment rulemaking. The Agency would need time to hire and train additional inspectors. It would also be necessary to phase in establishments consistent with the implementation requirements of the Pathogen Reduction and HACCP Rule. Mr. Fazio. How does USDA intend to respond to the emerging specialty meat production industry in ensuring a safe food supply for American consumers? Response. If the specialty meat is from species covered under the FMIA or PPIA, a grant of inspection is required prior to production, otherwise the product is regulated under the Federal Food, Drug and Cosmetic Act. natural sausage casings Ms. Lowey. I understand that you have been working with several outside groups to address an export problem regarding natural sausage casings. The USDA has indicated to me in a letter dated February 12 that FSIS agrees with the natural casing industry that form 9060-7 is inadequate and is working to change that form. Could you update us on the status of this effort? Response. The North American Natural Casings Association (NANCA) has indicated a need for an additional export certificate for natural casings to be issued for those countries that do not require that all of the conditions stated on FSIS Form 9060-7 have been met. For example, according to NANCA, several countries require that casings are of U.S. origin, come from animals that passed antemortem and postmortem inspection, and disease free and have been handled in a sanitary manner, but do not require that the casings remain in the U.S. throughout the cleaning, sorting and grading process. The FSIS 9060-7 includes all of these statements, including a phrase that the casing remained in the U.S. This prohibits casings that are shipped to Mexico for sorting an grading, and then are returned to the U.S., from being exported to a third country with an FSIS 9060-7. As a result of this specific situation, FSIS is working with the Animal and Plant Health Inspection Service (APHIS) and NANCA to develop a protocol and create a new certificate that would allow U.S. casings to go to Mexico, return to the U.S. and subsequently be exported to a third country. The new certificate will indicate U.S. origin, autemortem and postmortem inspection, disease free, and sanitary conditions statements, but will not indicate that the casing remained in the U.S. APHIS will conduct periodic audits of the Mexican facilities to assure that they have controls in place to assure that identification and segregation requirements and sanitary conditions are met in those facilities so that only U.S. origin casings handled under sanitary conditions are returned to the U.S. Based on the APHIS audits and shipment by shipment certification from Mexican authorities, FSIS can issue a new certificate to those third countries that allow entry of casings under those conditions. An initial visit to the Mexican facilities by a joint FSIS/APHIS team is scheduled for May. After FSIS is assured that appropriate controls are in place, FSIS will contact the inspection officials of third countries that NANCA believes will accept the new certificate and confirm the acceptability of such a protocol and certificate. Upon official acceptance of the protocol by the importing countries, FSIS will begin issuing the new certificate. It is important to recognize that FSIS Form 9060-7 is a necessary certificate for several countries and that it will continue to be issued for casings that comply with the conditions stated on the certificate. It is not inadequate this situation. Our efforts with NANCA and APHIS are directed at developing controls that allows the creation of an additional certificate that meets the needs of the industry and the receiving countries. [Pages 863 - 946--The official Committee record contains additional material here.] W I T N E S S E S ---------- Page Ackerman, K.D.................................................... 1 Billy, T.J....................................................... 667 Buntrock, G.B.................................................... 1 Dewhurst, S.B....................................................1, 667 Goldthwait, C.E.................................................. 1 Hollingsworth, Jill.............................................. 667 Reed, Craig...................................................... 667 Rogers, Len...................................................... 1 Schumacher, August, Jr........................................... 1 Smith, D.R....................................................... 1 Stolfa, Pat...................................................... 667 Wachsmuth, Kaye.................................................. 667 West, William.................................................... 667 I N D E X ---------- Farm Service Agency Page ADP/IRM: CCC Budget Request........................................... 106 Effect of Limiting Spending...............................8, 40, 41 Expenditures..............................................6, 19, 33 Administrative Support: State and County Office Leases............................... 50 Tobacco Program.............................................. 77 Agricultural Conservation Program: Unobligated Balance.......................................... 50 Water Quality Incentive Projects............................. 50 Biographical Sketches: Dallas Smith................................................. 319 Grant Buntrock............................................... 320 Civil rights..................................................... 102 Commodity Credit Corporation: Conservation Programs........................................ 41 Expenditures............................................. 43 Flood Risk Reduction Program............................. 48 Technical Assistance Costs............................... 48 Donations and Sales.......................................... 68 Export Credit Guarantees.................................64, 74, 77 Interest Rate................................................ 66 Inventory.................................................... 66 TEFAP Donations.............................................. 70 Conservation Reserve Program....................................50, 109 Administrative Costs......................................... 60 Cover........................................................ 56 Extensions................................................... 99 Signup....................................................... 99 Signups and Eligibility Criteria............................. 56 Technical Assistance......................................... 60 Unobligated Balance.......................................... 61 County Committees................................................ 25 County Offices: Closures................................................15, 25, 109 Employment................................................... 74 Dairy Indemnity Program.......................................... 61 Emergency Conservation Program: Expenditures.................................................61, 63 Practices.................................................... 63 Employment....................................................... 37 County Offices............................................... 74 Reductions.........................................17, 35, 105, 107 Equipment Purchases.............................................. 38 Explanatory Notes: FSA.......................................................... 400 CCC.......................................................... 509 Farm Credit Programs: Acquired Property: Credit Sales............................................. 93 Inventory................................................ 80 Authority to Forgive Loans................................... 99 Debt Write-Off............................................... 77 Delinquencies................................................ 11 Effect of Private Lenders.................................... 99 Emergency Disaster Loans..................................... 87 Farm Operating Loans.....................................77, 78, 84 Farm Ownership Loans......................................... 84 Rescheduling............................................. 78 Indian Tribe Land Acquisition Loan Program................... 97 Loans to FSA Employees....................................... 100 Food Security Commodity Reserve.................................. 102 Government Performance and Results Act........................... 103 Hazardous Waste Management Program............................... 76 Information Resources Management Expenditures.................6, 19, 33 Management Studies..............................................18, 106 Object Classes: 25 and 31.................................................... 107 41........................................................... 63 Opening Statement, Acting Under Secretary, Farm and Foreign Agricultural Services.......................................... 1 Operating Expenses............................................... 18 Outreach for Socially Disadvantaged Farmers...................... 95 Production Flexibility Contracts................................. 15 Increased Planting Flexibility Proposal...................... 109 Questions Submitted for the Record: Mr. Skeen.................................................... 37 Mr. Latham................................................... 105 Mr. Fazio.................................................... 109 Mr. Rogers................................................... 109 Staffing......................................................... 37 State Mediation Grant Program.................................... 9, 89 Tobacco Program Administrative Costs............................. 77 Work Measurement System.........................................23, 111 Workload......................................................... 24 Foreign Agricultural Service Credit Guarantee Program: Claims Recovered by CCC...................................... 174 Countries in Arrears......................................... 173 Criteria for Write Offs...................................... 175 Efforts to Collect Arreages.................................. 175 Enforcing U.S. Contents Requirements......................... 170 Facilities Credit Program Activity Fiscal Year 1995/1996..... 170 GSM 102 Sales in Fiscal Year 1996............................ 156 GSM 103 Sales in Fiscal Year 1996............................ 168 Guarantees to the Former Soviet Union........................ 129 Mexico's Credit Worthiness................................... 117 Number of False Certifications............................... 170 Operation of Supplier Credit Program......................... 124 Total CCC/P.L. 480 Arreages.................................. 175 Total Debts Written Off 1995/1996............................ 175 Biographical Sketch: August Schumacher............................................ 321 Christopher Goldthwart....................................... 322 DEIP/SOAP/COAP: COAP Activities in Fiscal Year 1996.......................... 239 DEIP Costs Fiscal Year 1995-1998............................. 235 DEIP Country Participation in Fiscal Year 1996............... 236 DEIP Program Operations...................................... 235 DEIP Statutory Authority..................................... 235 SOAP Activities in Fiscal Year 1996.......................... 239 SOAP Activities Planned for Fiscal Year 1998................. 239 Export Enhancement Program: Bonuses Awarded by Country................................... 141 Fiscal Year 1996 Actual and Projected Fiscal Year 1997 Use... 135 Justification for $400 Million Increase...................... 262 Program Changes in 1997...................................... 142 Sales to China............................................... 135 Total Bonuses Awarded........................................ 136 Use During Fiscal Year 1997.................................. 22 Fiscal Year 1998 FAS Budget: Activities Previously Funded by CCC.......................... 253 Advance Appropriation........................................ 266 Beneficiaries of MBAI........................................ 267 Breakdown of Increases....................................... 253 Criteria for Domestic Field Offices.......................... 267 Domestic Staff Assignments................................... 267 Examples of Emerging Markets Program......................... 267 Explanatory Notes............................................ 566 Funds Available for Two Years................................ 266 Market Barrier Access Identification (MBAI) costs............ 266 Object Class 25.2............................................ 266 Object Class 31.............................................. 266 Reductions to Absorb Computer Costs.......................... 253 Reimbursements to the Department of State.................... 268 Representation Allowance..................................... 245 Trade Show Fees.............................................. 239 Trade Show Sponsored......................................... 239 Vehicle Replacement.......................................... 266 Witness Statement, August Schumacher, Jr..................... 365 Food AID: China Food AID to North Korea................................ 32 Food AID to Africa........................................... 31 Food AID to North Korea...................................... 30 Ocean Freight Differential 1992-1996......................... 253 Section 416(b) Activity in Fiscal Year 1996.................. 234 Section 416(b) Commodity Acquisition......................... 234 Section 416(b) Donations 1987 to Date........................ 238 Section 416(b) Terms and Conditions.......................... 234 USDA/AID Restrictions........................................ 125 Foreign Market Development Program: Allowable Expenses........................................... 256 Carryover Authority.......................................... 256 Carryover Funds.............................................. 20 Competitive Award Process.................................... 117 FMD/MAP Participants......................................... 260 Historical Table............................................. 255 Participant Locations and Contribution Levels................ 257 General Export Issues: Assistance in Promotion of Alcoholic Products................ 125 Impact of Wage and Price Inflation on Export Levels.......... 114 Main Export to the Former Soviet Union....................... 131 Percent Commercial vs. Government Involved Sales to the Former Soviet Union........................................ 133 Restriction on Exports to Libya and Iran..................... 124 Sales to China in Fiscal Year 1996/1997...................... 135 Size of Export Market in the Former Soviet Union............. 130 U.S.-Chilean Exports/Imports................................. 263 Government Results and Performance Act: Accountability of Managers................................... 273 Assumptions Made in Strategic Plan........................... 271 Changes Made to Become More Results Oriented................. 273 Conflicting Goals............................................ 271 Congressional Consultations.................................. 272 Lessons Learned From Pilot Phase............................. 272 Linkage Between Strategic Plan and Annual Performance Plan... 271 Need to Modify Activity Structure............................ 271 Primary Stakeholders......................................... 272 Progress in Defining Results Oriented Measures............... 272 Progress in Developing Strategic Plan........................ 271 Steps to Avoid Duplication................................... 272 Use in Daily Operations...................................... 273 Market Access Program: Changes Made to Improve MAP.................................. 277 Combating Corporate Welfare Charge........................... 26 Difference Between MAP and EIP............................... 155 Fiscal Year 1996 Participants................................ 126 Foreign Entity Participation................................. 113 New Program Participants--Fiscal Year 1996................... 126 MAP Return on Investment..................................... 277 Participant Selection Criteria............................... 125 Private Brand Promotions--Fiscal Year 1996................... 142 Program Benefits............................................. 129 Small and Medium Size Participants........................... 129 US Wheat Office in Moscow.................................... 125 Middle Income Training Program: Number of Students by Country--Fiscal Year 1996.............. 251 Program by Object Class...................................... 251 Program Carryover............................................ 251 Status of Fiscal Year 1997 Program........................... 251 Miscellaneous: BARD Research Grants......................................... 252 FAS Conferences Held in Fiscal Year 1996..................... 243 FAS Employee Retreats........................................ 244 LANDSAT Program.............................................. 241 LANDSAT Program Funding From CCC............................. 242 LANDSAT Program Total Costs.................................. 242 Language Training Costs Fiscal Years 1996-1997............... 242 Language Training--Location and Average Cost................. 243 Language Training Participants Fiscal Years 1996-1997........ 242 Large FAS Training Sessions.................................. 244 Long-Term Agricultural Trade Strategy........................ 268 Model Farm in Russia......................................... 33 OIG Report................................................... 270 Opening Remarks--Mr. Rogers, AID............................. 29 PECC Conference.............................................. 242 Reimbursements From AID--Fiscal Years 1997-1998.............. 251 Surplus Foreign Currencies................................... 253 US Agricultural Imports--Top 10 Commodities.................. 244 US Agricultural Imports--Top 10 Countries.................... 244 Public Law 480: Agreements Under Title III--Fiscal Year 1996................. 233 Allowable External Transportation Costs...................... 232 Determining Allowable Internal Transportation Costs.......... 232 External Transportation Costs................................ 232 Fiscal Year 1998 Funding Request............................. 23 Food-AID to North Korea...................................... 270 Food for Peace/Food for Progress............................. 233 Food for Progress Commodity Purchases--Fiscal Year 1996...... 233 Food Security Commodity Reserves............................. 273 Great Lakes Proposed Rule.................................... 270 Internal Transportation Costs--1997.......................... 232 Monetization of Title II..................................... 232 Non-Emergency Use of Title II................................ 275 Number of Title II Agreements................................ 176 Ocean Freight Differential--Fiscal Year 1995-1996............ 181 Phase Out of USAID in Sub-Saharan Africa..................... 275 Post Fiscal Year 1997 Rescission Allocation--Title I......... 178 Program Levels 1995-1996-1997................................ 269 PVO Program Proposals........................................ 273 Reductions in Title I........................................ 270 School Lunch Program......................................... 232 Standard Commercial Terms.................................... 181 Title II Program by Country/Commodity Fiscal Year 1996....... 182 USAID Decentralization....................................... 276 Use of Title III--Fiscal Year 1996........................... 233 Overseas Offices: ATO Expansion................................................ 113 Location of ATO's............................................ 241 Questions Submitted for the Record: Mr. Skeen.................................................... 113 Mr. Walsh.................................................... 273 Mr. Kingston................................................. 276 Mr. Fazio.................................................... 277 New Offices on Mexican Border................................ 117 Trade Issues: Canadian Trade Barriers...................................... 265 Chilean Trade Barriers....................................... 265 Chiles NAFTA Access.......................................... 262 China Accession to WTO....................................... 135 EU Beef Hormone Dispute...................................... 113 Key Countries With Unfair Trade barriers..................... 114 Raw Cane Sugar TRQ........................................... 276 Reduction in Export Programs From GATT/WTO Agreements........ 115 Status of Report on Trade Barriers........................... 278 US-Mexico Trade Forecast..................................... 117 WTO Budget................................................... 129 Risk Management Agency--Federal Crop Insurance Corporation Crop Insurance Program: Buy-Up Coverage.............................................. 280 Catastrophic Coverage Availability........................... 311 De-Linkage................................................... 280 Delivery of Crop Insurance Policies.......................... 283 Group Risk Plan (GRP) [List of 1997 GRP counties/crop programs held in Committee files].......................... 284 Loss Ratios for GRP vs. Other Programs....................... 285 Nonstandard Classification System (NCS)...................... 285 Options Pilot Program........................................ 283 Program Indicators........................................... 300 Revenue Insurance............................................ 310 Underserved Counties......................................... 283 Crops: Insured Crops................................................ 296 Principal Crops Participation Rates.......................... 299 Government Performance and Results Act (GPRA): GPRA Cross-Cutting Areas..................................... 304 Implementation of GPRA....................................... 302 Miscellaneous: Biographical Sketch--Kenneth D. Ackerman..................... 323 Blazy Report [Report too lengthy--retained in Committee files]..................................................... 278 Computer and Software Spending............................... 281 Explanatory Notes, 1998...................................... 627 Marketing Expenditures....................................... 296 Object Class 23.3, Communications............................ 281 Object Class 25.2, Other Services............................ 281 Opening Remarks--Mr. Skeen, Chairman......................... 1 Opening Statement--Mr. Smith, Acting Under Secretary......... 1 Statement of Kenneth D. Ackerman............................. 386 Witnesses.................................................... 1 Reinsured Companies: Distribution of Profits and Losses........................... 287 FCIC/Reinsurance Experience.................................. 294 Ratio of Losses for RMA/Reinsured Companies.................. 291 Reimbursements to Reinsured Companies........................ 289 Reinsured Companies--Gain/Loss Position...................... 289 Sales Commissions of Agents.................................. 219 Questions Submitted For the Record: Mr. Skeen.................................................... 278 Mr. Kingston................................................. 310 Mr. Fazio.................................................... 311 RMA/FCIC Financial Condition: Administrative and Operating Expense Obligations............. 291 Administrative and Operating Expense Specific Activities..... 293 CCC and Treasury Borrowings.................................. 297 Excess Losses................................................ 280 FCIC Fund Specific Activities................................ 292 Funding of Delivery Expenses................................. 279 Staffing: Explanation of FTE Increase.................................. 36 Funding for Additional Compliance............................ 279 Public Law 480 AID Missions in Sub-Sahara Africa................................ 317 Biographical Sketch of Leonard Rogers............................ 324 Chinese Food Aid to North Korea.................................. 32 Cooperating Sponsors............................................. 311 Developing U.S. Agricultural Export Markets...................... 318 Estimating Commodity Budget...................................... 312 External Transportation Costs.................................... 313 Food Aid in Africa............................................... 31 Food Aid to Africa and North Korea............................... 31 Food Aid to North Korea.......................................... 30 Food Security Commodity Reserve.................................. 315 Internal Transportation Costs.................................... 313 Model Farm Project in Russia..................................... 33 Monetization of Title II Commodities............................. 313 Processed, Blended, and Fortified Foods.......................... 312 Public Law 480--Titles II and III Food Aid....................... 29 Public Law 480--Explanatory Statement............................ 652 Public Law 480--Reductions....................................... 23 Public Law 480--Title II Food Aid for Non-Emergency Programs..... 316 Public Law 480--Title II NGO Proposals........................... 315 Public Law 480--Title II Program................................. 313 Public Law 480--Title III Agreements............................. 314 Questions Submitted for the Record: Mr. Skeen.................................................... 311 Mr. Walsh.................................................... 315 Mr. Fazio.................................................... 318 School Lunch Program............................................. 313 Written Statement of Leonard Rogers.............................. 393 Food Safety and Inspection Service 1998 Budget Request............................................670, 830 Advanced Meat Recovery........................................... 735 Agency Committees and Working Groups............................. 815 Agency Employment................................................ 769 Agency Staff Years............................................... 852 Animal Production Food Safety Program............................ 853 Appropriations Transfers......................................... 805 Biographical Sketches............................................ 863 Thomas Billy................................................. 863 Patricia Stolfa.............................................. 864 Craig Reed................................................... 865 I. Kaye Wachsmuth............................................ 866 Jill Hollingsworth........................................... 867 Changes in Inspection............................................ 732 Civll Penalties.................................................. 765 Codex Alimentarius Commission.................................... 825 Communication with Stakeholders.................................. 678 Condemned Products............................................... 798 Disposition Difference Between Meat and Poultry.................. 804 Donald L. Houston Training Center................................ 821 Early Retirement Response........................................ 800 Early Warning System............................................. 759 Egg Products Inspection.......................................... 832 Emphasis on Public Health........................................ 669 Enforcement Activities........................................... 819 Ergonomically Designed Poultry Inspection........................ 851 Explanatory Notes................................................ 901 Export Certification Information System.......................... 851 Exporting Countries.............................................. 806 Exporting Procedures............................................. 850 Farm-to-Table Strategy........................................... 734 Fast Antimicrobial Screen Test................................... 814 Field Automation and Information Management....................798, 856 Field Management Consolidation................................... 793 Field Office Closures............................................ 794 Field Offices.................................................... 796 Food Safety Research............................................. 814 Food Safety Risks................................................ 734 Food Safety Training............................................. 733 FSIS Reorganization.............................................. 668 Government Performance and Results Act (GPRA).................... 856 Grant of Inspection............................................764, 799 Grants to States................................................. 817 HACCP Impact on Foreign Countries................................ 854 HACCP............................668, 669, 677, 754, 800, 804, 852, 854 Hepatitis A....................................................676, 761 Illegal and Unapproved Chemicals and Drugs....................... 853 Incidence of Foodborne Illness.......................672, 735, 758, 764 Inspected Establishments......................................... 797 Inspection Exemptions............................................ 805 Inspection of Exotic Species..................................... 673 Inspection System Guide.......................................... 852 Inspector Vacancies.............................................. 767 Interstate Shipment.............................................. 672 Labeling Program................................................. 823 Laboratory Accreditations........................................ 805 Laboratory Recognition Program................................... 854 Library of Foreign Country Requirements.......................... 814 Meat and Poultry Exports......................................... 825 Meat and Poultry Hotline.......................................736, 851 Microbiological Test Kits........................................ 806 Natural Sausage Casings.......................................... 861 Object Classification Increases.................................. 855 Office of the Under Secretary.................................... 804 On-Farm Investigations........................................... 852 Opening Remarks.................................................. 667 Opening Statement................................................ 667 Organic Foods Production Act..................................... 825 Pathogen Reduction.............................................668, 804 Pennsylvania District Office Location............................ 854 Performance Based Inspection System.............................. 805 Pilot Programs................................................... 770 Plant Violations................................................. 765 Poultry Enhancement Program...................................... 804 President's Food Safety Initiative........................669, 758, 860 Progressive Enforcement Action................................... 799 Questions Submitted for the Record: Chairman Skeen............................................... 767 Mr. Nethercutt............................................... 860 Mr. Fazio.................................................... 861 Mrs. Lowey................................................... 861 Ratite Inspection..............................................797, 860 Redeployment and Streamlining.................................... 753 Regulatory Reform..............................................669, 678 Relocation Benefits.............................................. 856 Rendering........................................................ 766 Report on Foodborne Illness...................................... 775 Research Projects................................................ 797 Residue Test (SOS, STOP, FAST)................................... 815 Salmonella Enteritidis........................................... 832 Sanitary and Phytosanitary Cooperative Efforts................... 797 Sentinel Site Survey...........................................732, 855 Species Covered by Poultry Regulations........................... 675 State Equivalency................................................ 798 Statement of Thomas J. Billy..................................... 868 Technology....................................................... 764 User Fee Proposal...............................670, 671, 676, 753, 762 Volume and Cost of Product Inspected......................819, 822, 825 Voluntary Inspection............................................. 815